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RE: The Mathematics of Fractional Reserve Banking by sigmajin

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· @sigmajin · (edited)
$1.39
So population has increased in japan since the end of WWII... but the money supply has decreased.  are they all just getting poorer?  Or has their economy been so closely linked to the US that much of their corporate infrastructure uses dollars instead of yen, and holds them in US banks instead of japanese banks.  (its the second thing)

Japan is an interesting exception to a general rule, and it comes mostly from close ties to the US and the US economy.  In reality their money supply has grown... its just that most of that supply is in dollars.  China is actually moving toward the same problem with bitcoin right now, though itll be a long time before it gets that bad.
That said, the BOJ has a NIRP going for like 3 years now.... they understand its a problem.  THe guy who runs the BOJ would probably kill his mom to get the kind of geometric progression youre talking about.

NIRP means negative interest reserve policy.  It means that if a japanese bank has a reserve higher than the required reserve ratio, the bank actually has to pay a fee (theyre charged negative interest on the extra)  The purpose is to try to encourage japanese banks to act more aggressively in the lending market, rather than let their money sit in reserve.  The problem is japanese corporations keep borrowing from US banks, because everyone there takes dollars, and US banks offer more competitive terms.  ...
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