We are in a situation in the US of massive deficits and increasing debt-to-GDP ratios. This is very much similar to the position Japan found itself after their real estate bubble burst in 1989. They bailed out banks and begun a multi-decade long process of quantitative easing in an effort to devalue the yen. As a result their fiscal position now stands at some 300% debt-to-GDP. Yet, they have had nothing but deflation, not inflation. How does the Austrian school of economics explain this dilema? It seems that according to Austrian economics, what the Japanese did was a classic example of hyperinflationary policies. Yet, they did not get any inflation for 2 decades. Please explain. Thanks
The relationship between money growth and and price changes in Japan reversed in 1989. There was 0 money growth and high "inflation", then high money growth and 0 "inflation". I don't see what the dilemma is.
http://mises.org/journals/qjae/pdf/qjae8_1_2.pdf
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