Following up on Rick Katz.

> From: Ron Dore (rdore@alinet.it)
> Date: 2012/03/07
>
>
> Thanks to Richard Katz for engaging.
> Never having taken Public Finance 201 I'm genuinely
puzzled by these
> things.
> Surely there must be a dfference between:
> (a)the government running a fiscal deficit -- i.e.
> giving a fiscal stumulus which as you say is the key
thing -- and
> auctioning an equaivalent amount of JGBs which sell
close to whatever
> yields a miniscule interest rate, which auction in
effect adds nothing
> to the JGBs in circulation because BoJ takes a
similar quantity of
> them out of circulation in the name of qualtitative
easing, sticks
> them on its balance sheet, with equilibrium
maintained by anincrease
> in the cash deposits of the banks with BoJ

Whether you pay people with direct deposits or with cash makes little different. Both end up in a bank. And the BOJ can play with its balance sheet...

> (b) MoF simply paying its bills with yen it orders
BoJ to print,
> holding no auctions, raising public sector salaries,
financing new
> hospitals and schools and
> saying: what the hell, we know this will cause
inflation, so what? We
> are going on doing this until our models show that in
a few weeks or
> months inflation will be running at 5%.
>

But this is fiscal policy when it's used to directly create new jobs / new demand. Irrelevant whether it pays its bills with yen printed by ... whatever the department is that does that .. or pays its bills with direct deposits financed by issuing bonds purchased by the Bank of Japan.

> Surely, surely, the anouncement effect would
overwhelm any
> fiscal-stimulus/aggregate consumer demand effect in
unleashing animal
> spirits. And Shiller and Akerloff are really right
about their
> importance.

Announcements in Japan probably are greeted with cynicism at this point. Real money creating real jobs...

Finally, Japan has extraordinarily complex budgeting, local government accounts don't get consolidated until almost 2 years after the fact, they apparently don't have to keep books real-time and file quarterly reports. There are lots of intragovernment transfers and on and on. FILP. Supplemental budgets. Etc. It really is very hard to tell what the net fiscal stance is. So I find it frustrating to try pulling things apart, including such to me basic things as how much is being spent on healthcare. Robby Feldman at Morgan Stanley has written about this, it's been noted in various reports on national accounts, and on and on. I have no reason to think that MOF can piece things together either, because the data just aren't generated. But obscurity may nevertheless be something it can use to its internal benefit.

Sorry for the rant / digression, but perhaps others who watch particular parts of the government can chime in, this seemed like one place to do that.

mike smitka=