Posted by WARREN MOSLER on October 25th, 2012
Just when you thought they were trying to get the yen lower…
It’s still the blind leading the blind, globally.
Does a central bank need equity?
Views are split on how much importance to attach to a central bank’s losses, ie, equity impairments. BoJ Governor Shirakawa says some equity is necessary, but Gakushuin Professor Iwata maintains that the deterioration of the BoJ’s balance sheet is not a problem because a central bank, as the only supplier of high-powered money, can operate without equity. If focusing on a central bank’s “parent company” accounts, equity may not need to be over-emphasized. But considering the possibility of a decrease in the purchasing power of currency holders, it probably has some meaning.