Many people throughout the world attend sporting events. Many sporting events have systems in place to declare a winner. In the U.S. there is a series of playoff games that leads to a final clash of the two greatest teams. The NFL has a Superbowl where the winner is ” crowned ” as the best team of the year.
In 2015, there will be a clash between two competing economic ideas. The event will occur in Japan between the economic ideas of John Maynard Keynes and Friedrich von Hayek.
In 1944, an Austrian emigre living in England published a book that became one of the great classics of economic literature. In a book titled ” Road To Serfdom, ” Hayek argued that the extention of central planning by a government is the start of growth constraints on individual liberty and will eventually lead to either a fascist or communist tyranny.
While Keynes and Hayek were friends, the writings of Hayek contradicted the writings of Keynes. Supporters of Keynes believe that Keynesian economics brought an end to The Great Depression in the U.S. Supporters of Hayek dispute this assumption.
Today in Japan there begins a clash between the ideas of Keynes and Hayek. Japan is an archipelago of 6,852 islands. The four largest islands are: 1) Honshu, 2) Hokkaido, 3) Kyushu, and 4) Shikoku. Japan has the world’s tenth largest population in excess of 125 million people. Until very recently Japan had the world’s second largest economy and was second only to the U.S. The economy of Japan has had some problems. Just as the U.S. has the Federal Reserve System to act as our Central Bank, Japan also has a Central Banking System.
Japan has a massive amount of debt. Japan’s debt is excessive in terms of the per capita debt level and also in terms of debt in relation to the Gross Domestic Product of Japan. The Central Bank of Japan and the Japanese government took economic action. Clearly there was a choice between the economic ideas of Keynes and the economic ideas of Hayek. The Bank of Japan (BOJ) clearly made a decision to follow the ideas of Keynes and increased their debt and began to print money that was not backed by real GDP growth.
If at the end of 2015, Japan is economically strong, this will prove beyond a reasonable doubt that the ideas of Keynes were correct. At the end of 2015, if Japan is bankrupt or in an economic crisis, this will prove beyond a reasonable doubt that the ideas of Hayek were correct. The fight may be observed by observing the net gain or loss of individual wealth in Japan. Also, the fight may be observed by looking closely at how the Japanese currency moves on the international money markets. If the Japanese Yen increases in value against most of the other currencies of the world, score points for John Maynard Keynes. If the Japanese Yen decreases in value against most of the other currencies of the world, score points for Hayek.
There can be only one winner. The Japanese people and the BOJ have their money on Keynes. The international markets and the shifts in wealth are yet to be determined. May the best idea win. Will it be Keynes or Hayek?
R. Van Conoley