Richard Werner said...
I believe I am the originator of the phrase 'Quantitative easing'. The original Japanese expression is 'ryoteki kinyu kanwa' or 'ryoteki kanwa' for short. Both are, literally translated, 'quantitative easing'. Thank you Cassandra for your most wonderful description of the English translation.
I used the expression prominently in my articles in the Japanese press in 1995, 1996, 1997, 1998 (Nikkei, Japanese Economist, Toyo Keizai, Japanese Newsweek, etc.) to suggest the necessary and sufficient policy response to end the recession (I had predicted the Japanese banking collapse in 1991; in print see Discussion Paper 129, Oxford Institute of Economics and Statistics). I had already argued then that interest rate reductions, even to zero, won't help. What was needed was to stimulate the economy through the quantity, not the price of money - correctly done. I wanted to avoid expressions such as the figurative 'printing money' and the common 'expanding the money supply', not only because they would unnecessarily alarm Japanese lay readers, but also because these are traditional monetarist prescriptions, which I argued would not work (as the monetarists argued for an expansion of bank reserves). At the time I was chief economist at Jardine Fleming Securities (Asia) Ltd. and Assistant Professor at Tokyo's Sophia University and known as the BoJ's fiercest critic. The Bank of Japan adopted my expression in 2001 as its official policy. The BoJ used exactly my Japanese phrase, and in its English-language press statement literally translated it.
However, and this is a predictable irony of central bank behaviour, they used it is a cover, because they did not adopt true quantitative easing, and instead implemented simple monetarist expansion of bank reserves. As I had predicted, this could not work. Next year Japan will basically be in its 20th year of recession. One further comment: In my English-language articles and interviews that I gave I used the expressions 'credit expansion', 'liquidity expansion' or 'credit creation' (the latter being the most accurate description) instead of 'ryoteki kanwa', as the audience in the financial markets would then understand me more or less correctly. Anyway, shame I'm not getting license fees each time a central bank talks about 'QE'.
Professor Richard A. Werner, D.Phil. (Oxon), Chair in International Banking, Director of the Center for Banking, Finance and Sustainable Development, School of Management, University of Southampton. firstname.lastname@example.org
9:00 AM, May 14, 2009
Tuesday, May 19, 2009
In my post, The Perfection of Quantitative Easing, I ruminated upon the linguistic perfection of the phrase, wondering aloud who might have conjured such a wonder. The answer has revealed itself in this kind note below that was too illuminating to leave buried in the comments section of the post...