Wrathful gods bear down on sinful global economy


‘W rath of Gods” is the title of an award-winning documentary directed by Jon Gustafsson, the Iceland-born filmmaker. It could equally be the title of a documentary about the state of the global economy as it stands in November 2008.

There are at present basically three gods whose wrath the economic world has incurred. I hereby christen them Fu-Jin (god of wind), Rai-Jin (god of thunder) and Dai-Majin (the great god of catastrophe).

Fu-Jin and Rai-Jin are well-established figures of Japanese mythology. They appear as a pair on a painted Japanese folding screen that more or less all Japanese people come across as an image at some point in their lifetime. It is the work of Tawaraya Sotatsu, one of Japan’s most well-known painters of the 17th century.

Dai-Majin is a much more modern-day figment of the film-making imagination. The Dai-Majin series was a hugely successful special-effects extravaganza of 1960s Japan, and the gigantic stone monument-turned-super hero has a cult following to this day. Erstwhile major league baseball player Kazuhiro Sasaki enjoyed the privilege of being nicknamed after the deity because of his square torso and destructive pitching powers.

The three gods of economic wrath certainly do not want for destructive power.

Fu-Jin, also known as inflation, had seemed like a distant memory until quite recently. Now it is looming large on the horizon everywhere, hitting everything from oil to soy beans to coffee to cling film.

Young and growing economies like China and India are hungry for everything, but what was once food is now fuel as ethanol attempts to become the silver bullet everyone hopes will save us from an impending energy crisis.

And there is yet another factor at work stoking Fu-jin’s anger. That is excess liquidity. Money has been swishing around the globe like never before at very cheap interest rates. With money had for the asking, it is no wonder that prices have been on the rise for all manner of goods and assets.

Rai-Jin, aka interest rates, is turning out to be a most tricky god indeed. Interest rates have been a mischievous god from time immemorial anyway, but this time around the degree and nature of their potential effect on the global economy are especially difficult to fathom.

In the face of the still evolving subprime-mortgage-loan crisis, major central banks are in either rate-cutting or rate-holding mode.

This seems inevitable, given the threat posed by a credit crunch that is still alive and kicking. Yet continuing low interest rates will only feed the excess liquidity that fuels inflation and encourages investment in high-return but high-risk assets. This is not very sensible from a longer-term perspective.

Moreover, it is becoming increasingly questionable whether central banks will actually be able to hold interest rates down, given the credit rationing and cash hoarding that panicky banks are resorting to these days.

All this Fu-Jin hot air and Rai-Jin turmoil have combined to finally awaken Dai-Majin, the global economy’s sleeping giant.

Dai-Majin, aka exchange rates, is now on the move. And when this big guy starts to move, everything everywhere gets shoved around with fiendish force.

Gods of wrath do not take kindly to ditherers and deceivers. Now is not the time to pretend that the subprime-loan crisis will not deepen or inflation will not get more serious.

Those who are prepared to think the worst are often spared by the most wrathful of the gods of wrath. Gustafsson’s film is a case in point.

Noriko Hama is an economist and a professor at Doshisha University Graduate School of Business.