Illustrating the Grondona System in Operation

While working in Japan during the 1990s, one of the authors took the opportunity to collect data on past Japanese commodity imports and recent commodity market prices and to use them to simulate how a CRD would have operated over the decade 1987 – 1996 using a computer spreadsheet. The graphs showing the results are easy to understand: the CRD would have bought reserves when Yen prices were falling and sold them when Yen prices were rising, thereby exerting a stabilizing influence on the prices and quantities of these imported commodities. In parallel, by expanding and contracting the money supply counter-cyclically, the system would have helped to stabilize the overall economy.