Writes the London Times:

Unorthodox, untried and, said one Bank of Tokyo Mitsubishi strategist, "in the realms of economic science fiction", the recommendation has nevertheless begun floating around Tokyo's corridors of power and economists have described Japan as particularly suitable as a testing ground...

Other crazy futuristic ideas include putting a tax on hard currency, and introducing a separate currency alongside the Yen. The Times explains:

All three ideas are based on a theory concerning interest rates and the concept that a nominal rate of zero - as Japan has now lived with for much of the past decade - may be too high. In Japan's case, the theory would suggest that nominal rates of -4 per cent might be closer to what is required to rescue the economy from another deflationary spiral. Having agreed that this might be necessary, the next question is how it could be imposed.

Without physical cash, a central bank can set rates exactly where it likes, runs the argument. Mr Jerram said: "At the heart of the problem of achieving negative nominal interest rates is the idea that physical currency is an anonymous bearer bond with a nominal interest rate of zero." While a central bank can impose positive or negative rates on non-physical assets, transmitting those rates to physical currency is a huge challenge. By permanently removing cash from a system, he added, policymakers are robbed of the excuse that zero is the lowest that nominal rates can go as a deflation-fighting tool.

I'm wondering if we could see a new kind of caste system emerging in the future, where only the lowest caste and underclass people carry actual hard cash instead of various monetary instruments.

I've been wondering lately if the current econom-ick could see the return of Zaibatsu capitalism, only in the U.S. this time. Zaibatsus were family-controlled vertical monopolies, which were pyramid shaped: at the top, you have a holding company. And then below, you have a wholly-owned banking subsidiary, and then several industrial conglomerates which borrow from your bank. No money ever has to leave the company, because you own the bank as well as the industrial firms. These monolithic mega-corps rose up after World War I and helped to spur Japan's expansionist policies, because of their hunger for natural resources. When the U.S. government occupied Japan after World War II, the Zaibatsus were reformed and broken up, although some of them survive to this day in modified form.

So now that we've deregulated our banking system so heavily, and companies are so desperate for capital, could we see the rise of Zaibatsus in the U.S.? Could industrial firms merge with banks under limited ownership (if not actually one family) and create vertically integrated super-corps? I decided to ask Randall Morck, a business professor at University of Alberta, who's the co-author of the Zaibatsu classic A Frog In A Well Knows Nothing Of The Ocean, plus the author of A History Of Corporate Governance Around The World.

Here's what he said:

I don't think zaibatsu capitalism would make sense for the US. The Americans had such structures until the 1930s (they were called "pyramids" instead of "zaibatsu", but were precisely the same thing). A major part of FDR's New Deal was about forcing their breakup into numerous independent firms. The main factors that would prevent this are:
1. The double taxation of intercorporate dividends in the US was deliberately set up to make business groups tax disadvantaged
2. The Investment Companies Act regulates US firms whose assets are too much shares in other companies and too little PP&E as investment funds, not ordinary corporations.
3. The Public Utilities Holding Companies Act restricts intercorporate ownership in a long list of "public utilities" sectors in the US.

The zaibatsu model was used in most countries in the early 20th century, and is still used in many. It's main problems are:
1. Huge economic, and therefore political, power for the small number of families that controlled the pyramids (FDR and his New Dealers did not like such concentrated power, and I suspect Americans still don't)
2. The IRS worried that pyramid member firms could engage in phony transactions with each other to hide taxable income (the pyramids almost certainly did this).
3. The FTC worried that opaque control chains let one pyramid control seemingly competing firms and thereby run concealed monopolies (the evidence that this was a genuine concern is less clear).

Zaibatsu capitalism remains the main form of corporate governance throughout Latin America, India, Indonesia, Pakistan, the Arab World, Russia, Thailand, etc. and seems to generate poor results overall. A
few zaibatsu capitalism systems - Canada, Korea, Hong Kong, Italy, Singapore, Sweden, ... - work passably well, but the concentration of power is controversial in all of them.

So there you have it. Even if we see corporations gaining more power, we'll never see the kind of vertically integrated powerhouses taking over in the U.S. again, unless we repeal several laws designed to stymie them. But that doesn't mean our Megacorp-dominated future is averted... possibly just taking a different form. Illustration from Tekken, which features the Mitsui Zaibatsu.