Chapter 3: The influence over the economy by the value-capital
When the value-capital is donated, consumption and investment will increase. On the other hand, money supply increases and the fear of inflation (demand-pull inflation) could be thought of. However, if there is production to match the increase of consumption, the inflation doesn't occur. Will the inflation be avoided? We review the general possibility of increasing production.
- Capital exists sufficiently in Japan, the value-capital changes to capital and it means the supply of capital.
- And also infrastructures are sufficiently maintained.
- Laborsaving is possible by the mechanization of workforce. There is technology which can make the laborsaving, too. Also, the increase in efficiency of the labor is thought of.
- As for raw material, it is possible to save if proceeding with recycling. Also, as possibility, we can get it from the universe, too. It is possible to expect the discovery of new material, new resources, too.
- Technology to increase the production are ready.It is possible to solve the environment problems by technology and recycling and so on for protecting the environment.
- Production facilities are ready and as for production goods, as above examination, it is clear that increasing the production is possible.
- In addition to above, at present, Japan is under the depression, idle capital exists with unemployed persons and it can mobilize them for increasing the production.
At present, generally, civilization has the surplus power for production and is under the status that increasing production is possible.
Also, even if the value-capital with which we can buy basic needs is donated, it is difficult to think the consumption of basic needs increase explosively. Because at present the basic needs are prevailing to satisfying degree. Using the value-capital for the purchase of the basic needs and saving your money, you can expect to buy more luxurious articles (electronics, durable consumer goods and so on) and pay for more hobbies and amusements by the income. On the other hand, the powerful industries in Japan will be able to supply sufficiently.
Then, as four of main think tanks in Japan estimate the deflation gap is from 4 to 6 %, the possibility of inflation by the donation of the value-capital which fills the deflation gap with 5 % is low.
As for the anxiety of the inflation, as the donation of the value capital is phenomenally similar to undertaking of deficit-covering bonds by the Bank of Japan, the question whether or not the donation is against the drift of the financial law 5 article arises.
However, there is little fear of vicious inflation by the donation of the value-capital. Because the object of stimulation is not government's demand nor munitions, but private demand and more consumption goods will be produced according to it. That is, there is no fear that the private demand is oppressed by the government's demand and the munitions, we lack in consumption goods, and general prices take a jump and inflation progresses. Also, there is no fear of growing budget deficits of the nation because the financial outlay of the nation does not increase and only the consumption outlay of the people increases. Because there will be competition to win cash by consumption of the value-capital, it doesn't have bad influence on efficiency of the country and companies. Because public loans aren't left later, anxiety to the future isn't left, too.
Therefore, the donation of the value-capital does not go against the financial law article 5 substantially.
Since the autumn in 1992, Prof. IWATA Kikuo claimed they should raise the elongation percentage of money supply by supplying much more high-powered money as an antirecession policy. On the other hand, the Bank of Japan says "Mechanism to control money supply through a different route from interest rate policy at the same time to increase quantity of high-powered money does not come into effect". (From " the Bank of Japan " written by KAWAKITA Takao, published as Iwanami Shinsho)
Surely, if they increase money supply by the present measure, this will be true. However, if they increase cash in the form of the value-capital, they can control money supply. Because, it is possible for the Bank of Japan to absorb the value-capital donated directly to the people through banks and the market after the consumption of the people in the new economic system. The entrance and the exit of the value-capital are separated.
In this new economic system by the Bank of Japan's suppressing money supply, anti-inflationary measures become possible in addition to the reinforcement of production. Donating the value-capital doesn't contradict at all even if the Bank of Japan carry out selling operations, raise of deposit reserve requirement ratio and so on. Of course, they should carry out interest rate raise, too.
Besides, I will describe the feared issue of cheap yen rate which increasing the supply of currency may bring about. It is difficult for cheap yen rate to occur because Japanese economy is recovered by the new economic system and it is strengthened. Also, the Bank of Japan could raise interest rate as a countermeasure.
Well, what about cost-push inflation?
First, generally speaking, as the value-capital is not the income distributed from profit, naturally, it does not shift to product price and it never becomes cost-push inflation.
Also, the criticism against Keynesian policy which is gross demand policy like my economic policy doesn't apply to the value-capital.
Monetarists say if carrying out Keynesian policy, as real wage shrinks, the labor demands high nominal wage, companies shift it to product prices, cost-push inflation proceeds, and the inflation impair the effect of the Keynesian policy. But in case of donating the value-capital, the rise of wage can be suppressed because we can get much more supplement than loss of wage. And if it arises, the inflation itself will be quiet. And they can increase the value-capital according to the inflation. The monetarists' criticism doesn't apply to my new system, not to speak of the criticism against Keynesian policy.
Moreover, rational expectationists criticize Keynesian policy that it does not have effect as entrepreneurs expect inflation and doesn't increase production. This criticism apparently doesn't apply to the value-capital, too. Because we can expect rationally entrepreneurs increase supply at a constant price level in answer to actual increases by demand of private consumption, and proportional to them, it is rational to expect that the rise of prices is quiet.
As for my economic policy above mentioned, anxiety to the future doesn't remain because we have little fear of inflation and need no fiscal resources. I think the effect is big.
When the new system is introduced in the near future, business condition recovers, and economic growth rate increases naturally by the donation of the value-capital with 5 %, they will freeze the total sum of the value-capital. It will be enough to increase the sum matching the rate of inflation for supporting business condition.
When business condition is overheated, generally speaking, they should do measures (the conventional economic policy of rise in interest rate and so on) except cut down of the value-capital. Because the donation of the value-capital is people's right and the realization of the right to live. If cutting down the value-capital, anxiety to the future occur to the people.
Business condition has the way of increasing the value-capital and making economy grow compulsorily when the low condition of growth rate continues even if business condition recovers.
The way of economic boom to last long is opened if not making a big mistake in the economic policy.