Sir, Adair Turner suggests some version of monetary financing is the only way to break Japan’s deflation and deal with the debt overhang (“ Print money to fund the deficit – that is the fastest way to raise rates”, Comment, November 11). This was precisely how Korekiyo Takahashi, Japanese finance minister from 1931 to 1936, broke the deflation of the 1930s. The policy was discredited because of the hyperinflation that followed.
However, the hyperinflation was not the result of the monetary financing. It was the consequence of his assassination by an expansionist military and the continuation of monetary financing when such a policy ceased to be appropriate.
The taboo, to which Lord Turner rightly refers, arises not out of the technical aspects of monetary financing but its abuse by irresponsible governments. However, in this age of central bank independence, such abuse is unlikely and the taboo is an anachronism. Monetary financing is the only tool left to combat a global deflation and Lord Turner is right to suggest that its time has come.
George S Hatjoullis
London NW11, UK
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