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Don't be
greedy, or a giant catfish might force you to spew out your savings...
Unlike us -
who are so smart today - ancient folk in ancient times used to believe the
oddest things about how the world worked.
The Japanese,
for instance, long thought that earthquakes were caused by a giant catfish,
shuffling and shifting whenever the great god of Kashima forgot to keep
his foot on a heavy stone which held the beast down, deep beneath the coast
of Honshu. Honoring the Kashima shrine, some 80 miles north-east of what was
then Edo (modern-day Tokyo) was therefore a good idea. Because tectonic
upheaval, causing death and destruction, was a sign that the god was
neglecting his duty.
November 1855
saw Kashima skip town, or so legend soon had it, leaving the god of fishing
in charge of the stone and the catfish. What a mistake! The Great Ansei Earthquake
killed 7,000 people at a stroke, and many more in the days and weeks after.
But it wasn't
all bad...
"Don't
be greedy!" one of the laborers urges his mates in this popular print, Mr.Moneybags launches forth his ship of treasure.
"You'll regret it if you save this money and an earthquake comes.
"Better
go and spend it at the brothels and keep it circulating."
The Kashima
shrine itself was
damaged in March 2011's catastrophe. But the poor idiots of
old-time Japan would still find a silver lining. Although some of the
hundreds of namazu-e (catfish
pictures) from 19th-century Japan show the beast captured and beaten - or
even committing hare-kiri to say sorry - he
also became a folk hero to laborers and shopkeepers, because he forced the
wealthy to spend money on repairs and rebuilding.
Think of it
as a divine take on Bastiat's "broken windows" parable. Knocking
things down is good for society (or so society says), since the glazier is
paid and then spends that money in turn. Earthquakes are great for
production, because they force cash out of locked chests into the pockets of
carpenters, plasterers, bricklayers and masons - just the right type to keep
it circulating again.
"For Edo
residents," one scholar explains, "the
earthquake of 1855 was an act of yonaoshi,
or 'world rectification'." In print after print, catfish shake or
squeeze wealthy old hoarders who vomit or shit out gold
coins, quickly scooped up by dancing laborers eager to spend it on
booze, noodles and trips to what's now known as Soap Land.
"Like
typhoon-season floods and dry-season fires," notes another 2011 look back, "earthquakes and tsunamis
were understood as corrections of temporary imbalances in the vital force
perpetually flowing through the world (known in Japanese as ki and in Chinese as qi). Periodic
eruptions of natural violence released pent-up force and kept both nature and
human society healthy by renewing them...Confucian philosophers as well as
ordinary people believed that the economy followed the same principles. Just
as ki flowed continuously in nature, money should
be kept moving in the economy too, not allowed to stagnate and foster greed.
For this reason, many people viewed capital accumulation distrustfully.
Nature, they believed, censured it."
Could anyone
hold such a medieval view of economics today? Not outside a central bank or university,
you might think. But greed is central to our depression's mythology. From
there, the attack on capital accumulation can't be far off. And it's ironic
that to help keep money moving after the terrible earthquake and tsunami
which hit Honshu this spring, Tokyo is now offering gold
coins to investors buying its reconstruction financing bonds. On the
minimum ¥10 million investment ($150,000) needed to qualify, however,
Japan's reconstruction bonds pay 0.05% per year without the coin, and a
barely less miserly 0.3% with it if gold stays at today's prices by the end
of 2014. So the net effect is still to shake down Mr.Moneybags
- otherwise known as Japan's diligent household savers today.
Anyone
calling this special half-ounce commemorative gold
coin an "incentive" might sound like they need to raise
money themselves to buy a calculator. But it's not the first promotional
effort tied to Japanese government bonds. Word reaches us here at BullionVault that special flyers -
posted by door-drop in Tokyo - have recently been advertising government debt
straight through the mailbox. As for coupons and premia,
the Nomura brokerage is already offering its retail clients free shopping vouchers if they buy JGBs
and lend to the government, too.
"The
wealth of the realm belongs to the realm," wrote Confucian scholar and
advisor Yamaga Soko - who
also developed the Samurai code of chivalry, bushido - in the mid-17th century. "It is not
the wealth of a single person. Well should it circulate."
Now compare
and contrast French politician and essayist Claude Frédéric
Bastiat writing 200 years later. "What would
become of the glaziers, if nobody ever broke windows?" he asked in his
famous parable of 1850, paraphrasing the "vulgar" mob who applaud the shards of glass on the street. Yet it is
the shopkeeper needing to get his window fixed, "the shoemaker (or some
other tradesman), whose labour suffers proportionably by the same cause...who is always kept in
the shade...who shows us how absurd it is to think we see a profit in an act
of destruction." It is also the tradesman who stands for the capitalist,
the diligent drudge minding his business. Shaken down like old Tokyo's
Moneybags, he can only watch in horror as his money - his treasure - is
launched forth to common approval.
Here in the
early 21st century, Occupy Wall Street think they know just who to choke with
a catfish. "Hey, Paulson, you can't hide, we can see your greedy
side!" chanted the self-declared 99% at the hedge-fund manager in October, little caring that his fund
has halved in value in 2011-to-date. The echo-chamber of TV news and
financial blogs reckons the entire system is run by greedy bastards anyway. No doubt they're
right, but even before the crisis blew up, Fed chairman Ben Bernanke long ago
blamed Asia's savings glut for building
imbalances in the global economy.
So how to
shake cash from the hoarders? A Tobin tax on financial transactions looks a
good start, even though retirement savers will end up paying, of course, as
their pension-fund managers pass on the cost.
Capping bank dividends only hurts savers again, because their income depends
on such yields. Setting interest rates at zero aims to scare (or at least
hurt) them for not spending money today. So too does printing more money, as
Japan's modern-day Moneybags know only too well.
"Your
key financial asset, your medium of exchange - money - is also a savings
vehicle (a store of value) and a safe asset (a unit of account),"
explains Berkeley professor Brad DeLong. So "if an excess demand
for financial assets is seen to cause a collapse in production and
employment" - especially money hoarded in money, rather than being spent
on new windows and brothels - "then it would seem immediate and obvious
that generating an excess supply of financial assets would cause a
revival."
Immediate and
obvious like a giant catfish making the rich puke gold
coins, perhaps. Forcing a revival of spending by flooding the
market with cash still hasn't worked in Japan, but it has led to door-drops
and vouchers to try and find new loans for the State. And further to DeLong's
proposal, our key financial asset and means of exchange is now something
else, too: money is first and foremost a credit, held on deposit rather than
hoarded in sock drawers at home. And being a credit, rather than tangible
property, the vast bulk of money today is already out of the savers' control.
Today's Mr.Moneybags is by definition a lender. Indeed, his
money's already been lent out with gusto. The old miser has no choice; cash
on deposit is owed to him, he does not own anything inside the bank's vaults.
On the bank's balance-sheet, his savings are deemed "liabilities",
while on the other side of the ledger sit the banks' "assets" - the
loans it has made, using Moneybags' cash. If the old miser (aka retiree or
saver) withdraws all his cash, some debtor somewhere must repay their loan.
And debt forgiveness is already being talked up - whether for governments in Europe or over-spent US consumers.
So blame
greedy hoarders if you like. Just watch for the mob gathered round your
broken windows, ready to choke you with a metaphorical catfish.
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