Excessive Base Money and Global Financial Crisis in Relation to the Essence of the So-Called “Abenomics”

Abstract

After the financial crisis of 2008, we are facing possibility of a global financial crisis further. Most of the financial crises have occurred in situations when there is so much money in the financial market, but they have not often occurred in cases when the market does not have enough money. This thought, however, is not general common sense in the financial academic field. Based on general understanding, the cause of financial crisis is the lack of money with the rise of interest rates in the financial market. If the lack of money is the reason for financial crisis, then we have never met with any financial crisis, because most leading countries have much money in the financial market in nowadays. According to theory of Economics, government deficit plus current account surplus means surplus of savings in the private sector of the country. Currently, most countries with big-scale economy have big deficits in their national accounts. But there is enough money in the business sector. I focus on this aspect and then analyze the base money policy of the central bank of some countries, and analyze its effect or the meaning of excessive base money in the financial market. As a general economic rule, the excess of money in a financial market causes a low interest rate.