Monetary Expansion Isn't Zero Sum

A blog about business and economics.
June 19 2013 11:24 AM

Monetary Expansion Isn't About Beggaring Thy Neighbor

Japanese Prime Minister Shinzo Abe holds a press conference in Belfast, Northern Ireland, on June 18, 2013, following the conclusion of the G8 summit.

Photo by Peter Muhly/AFP/Getty Images

Here's some Abenomics news that shouldn't surprise people but probably will. The latest Ministry of Finance trade data is up, and it shows that Japan's nominal exports have risen, but so has Japan's nominal trade deficit.

This is what happened when FDR took the United States off the gold standard and broke the back of the Great Depression in 1933. America's output went up. America's exports went up. But America's net exports did not go up. There was simply an overall increase in demand and production. Shinzo Abe is roughly trying to replicate FDR's experience of fiscal and monetary expansion, so I'm not surprised to see the pattern repeated.

But this is at odds with the conventional narrative around "currency wars" and depreciation. This conventional view tends to see monetary stimulus as a narrowly trade-focused measure focused exclusively on net exports. Once you're inside that frame, monetary stimulus becomes subject to one of two critiques. One is that it's zero-sum and the stimulating country is beggaring its neighbors. The other is that it won't work—that the same monetary stimulus that bolsters exports will also raise the price of energy imports. Both of those points contain some truth, but they miss the larger story. Monetary stimulus might raise net exports depending on what else is going on, but net exports aren't the issue. Overall demand is the issue.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



More Than Scottish Pride

Scotland’s referendum isn’t about nationalism. It’s about a system that failed, and a new generation looking to take a chance on itself. 

IOS 8 Comes Out Today. Do Not Put It on Your iPhone 4S.

Why Greenland’s “Dark Snow” Should Worry You

How Much Should You Loath NFL Commissioner Roger Goodell?

Here are the facts.

Three Talented Actresses in Three Terrible New Shows


The Human Need to Find Connections in Everything

It’s the source of creativity and delusions. It can harm us more than it helps us.


Happy Constitution Day!

Too bad it’s almost certainly unconstitutional.

The Ungodly Horror of Having a Bug Crawl Into Your Ear and Scratch Away at Your Eardrum

My Father Was James Brown. I Watched Him Beat My Mother. Then I Married Someone Like Him.

  News & Politics
The World
Sept. 17 2014 4:08 PM How Teflon Is Vladimir Putin's Popularity?
Business Insider
Sept. 17 2014 1:36 PM Nate Silver Versus Princeton Professor: Who Has the Right Models?
Sept. 17 2014 1:59 PM Ask a Homo: Secret Ally Codes 
  Double X
Sept. 17 2014 4:10 PM Can These Women Fix the NFL? Or will the NFL fix them?
  Slate Plus
Slate Fare
Sept. 17 2014 9:37 AM Is Slate Too Liberal?  A members-only open thread.
Brow Beat
Sept. 17 2014 4:07 PM Kern Your Enthusiasm: The Genius of Jenson’s Roman
Future Tense
Sept. 17 2014 12:35 PM IOS 8 Comes Out Today. Do Not Put It on Your iPhone 4S.
  Health & Science
Bad Astronomy
Sept. 17 2014 11:18 AM A Bridge Across the Sky
Sports Nut
Sept. 17 2014 3:51 PM NFL Jerk Watch: Roger Goodell How much should you loathe the pro football commissioner?