Posted on the Huffington Post today:
The disaster in Japan is almost beyond comprehension. Without minimizing the scale of the humanitarian tragedy, it is already possible to discern the emerging economic debate.
Stock markets immediately anticipated the potential benefits to Japan’s construction industries and their suppliers. Policy makers in the U.K. and Europe, who are busy implementing austerity measures to curb budget deficits, should take note.
The valuable argument coming from the ashes of this crisis is simple: Japan can afford to rebuild.
The Bank of Japan is clear about this. In asserting this point, and calming markets with massive liquidity injections, the central bank is basing its Keynesian policy on a wholly different analysis from that of economists and politicians promoting austerity measures in Europe and the U.S.
The economic possibilities of nations don’t depend on financial resources, but rather on human, technological and organizational power. The banking industry relies on these productive resources. The stability of banks hinges on lending for projects that will generate revenue streams for their own repayment.
Power of Banking
Japan is replete with all the human ingenuity and dedication that reconstruction and rebirth demands. The power of modern banking can enable Japanese society to deploy all of these resources, irrespective of the condition of Japanese public finances. The domestic banking system can circumvent the naysayers of international finance in a manner that should be understood by all financial authorities and economists.
Japan can address this natural and man-made disaster without handing a begging bowl around to other nations.