Japan's Minister Calls for More Inflationism to Stem Global Market Crash

Here we go again. Crashing markets has prompted policymakers to make “assurances” to the public.

From Bloomberg, (bold emphasis mine)

The G-7 needs “very close cooperation in coming weeks,” Japanese Finance Minister Yoshihiko Noda said in Tokyo, where the Topix index fell to a two-year low. Hong Kong financial official K.C. Chan urged investors to “stay calm” and not be “spooked by the market,” as the Hang Seng index slumped 2.4 percent. In Beijing, Vice President Xi Jinping said his nation will avoid an economic hard landing.

Plunging equity markets are crushing consumer and business confidence, worsening the outlook for a global economy already hampered by the debt burdens of developed nations. Speculation that European banks may have insufficient capital and signs of weakness in the U.S. economy are helping to drive a stock rout that returned to Asia today…

It’s sad to see how logic works for politicians. Investors don’t get spooked by the markets. Instead, investors sell the markets down for certain reasons, particularly the unresolved problems or uncertainty from the continuing debt crisis that plagues the Eurozone and the US. Such frenetic selling has been vented on the markets. The effects are not the cause.

So what steps will they assure investors?

Again from the same article, (bold emphasis mine)

Asked how policy makers should respond to market turmoil, Noda referred reporters to an Aug. 8 pledge by G-7 finance ministers and central bank governors to “take all necessary measures to support financial stability and growth.” He didn’t specify any likely next step.

A past example of joint action is the intervention that temporarily weakened Japan’s currency after the nation’s March earthquake. Major developed nations are hampered in further stimulating their economies because of their debt burdens, and have limited or no room for interest-rate cuts after reductions that countered the financial crisis of 2008.

Their proclivity is to implement the very same set of actions that has created this problem in the first place, where more inflationism translates to greater volatility via the boom bust cycles.

It isn’t that governments don’t learn, rather governments prefer to adapt actions that have short term beneficial effects but with long term untoward costs. It’s a vicious cycle.