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Are we really worse than Japan?
Topic Started: 1 Nov 2014, 08:11 PM (889 Views)
Emmanuel
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I thought this was particularly interesting and would love to hear your comments.

For almost two decades, Japan has been held up as a cautionary tale, an object lesson on how not to run an advanced economy. After all, the island nation is the rising superpower that stumbled. One day, it seemed, it was on the road to high-tech domination of the world economy; the next it was suffering from seemingly endless stagnation and deflation. And Western economists were scathing in their criticisms of Japanese policy.

I was one of those critics; Ben Bernanke, who went on to become chairman of the Federal Reserve, was another. And these days, I often find myself thinking that we ought to apologize.


Now, I’m not saying that our economic analysis was wrong. The paper I published in 1998 about Japan’s “liquidity trap,” or the paper Mr. Bernanke published in 2000 urging Japanese policy makers to show “Rooseveltian resolve” in confronting their problems, have aged fairly well. In fact, in some ways they look more relevant than ever now that much of the West has fallen into a prolonged slump very similar to Japan’s experience.

The point, however, is that the West has, in fact, fallen into a slump similar to Japan’s — but worse. And that wasn’t supposed to happen. In the 1990s, we assumed that if the United States or Western Europe found themselves facing anything like Japan’s problems, we would respond much more effectively than the Japanese had. But we didn’t, even though we had Japan’s experience to guide us. On the contrary, Western policies since 2008 have been so inadequate if not actively counterproductive that Japan’s failings seem minor in comparison. And Western workers have experienced a level of suffering that Japan has managed to avoid.


What policy failures am I talking about? Start with government spending. Everyone knows that in the early 1990s Japan tried to boost its economy with a surge in public investment; it’s less well-known that public investment fell rapidly after 1996 even as the government raised taxes, undermining progress toward recovery. This was a big mistake, but it pales by comparison with Europe’s hugely destructive austerity policies, or the collapse in infrastructure spending in the United States after 2010. Japanese fiscal policy didn’t do enough to help growth; Western fiscal policy actively destroyed growth.

Or consider monetary policy. The Bank of Japan, Japan’s equivalent of the Federal Reserve, has received a lot of criticism for reacting too slowly to the slide into deflation, and then for being too eager to raise interest rates at the first hint of recovery. That criticism is fair, but Japan’s central bank never did anything as wrongheaded as the European Central Bank’s decision to raise rates in 2011, helping to send Europe back into recession. And even that mistake is trivial compared with the awesomely wrongheaded behavior of the Riksbank, Sweden’s central bank, which raised rates despite below-target inflation and relatively high unemployment, and appears, at this point, to have pushed Sweden into outright deflation.

The Swedish case is especially striking because the Riksbank chose to ignore one of its own deputy governors: Lars Svensson, a world-class monetary economist who had worked extensively on Japan, and who had warned his colleagues that premature rate increases would have exactly the effects they did, in fact, have.

So there are really two questions here. First, why has everyone seemed to get this so wrong? Second, why has the West, with all its famous economists — not to mention the ability to learn from Japan’s woe — made an even worse mess than Japan did?

The answer to the first question, I think, is that responding effectively to depression conditions requires abandoning conventional respectability. Policies that would ordinarily be prudent and virtuous, like balancing the budget or taking a firm stand against inflation, become recipes for a deeper slump. And it’s very hard to persuade influential people to make that adjustment — just look at the Washington establishment’s inability to give up on its deficit obsession.

As for why the West has done even worse than Japan, I suspect that it’s about the deep divisions within our societies. In America, conservatives have blocked efforts to fight unemployment out of a general hostility to government, especially a government that does anything to help Those People. In Europe, Germany has insisted on hard money and austerity largely because the German public is intensely hostile to anything that could be called a bailout of southern Europe.

I’ll be writing more soon about what’s happening in Japan now, and the new lessons the West should be learning. For now, here’s what you should know: Japan used to be a cautionary tale, but the rest of us have messed up so badly that it almost looks like a role model instead.

http://www.nytimes.com/2014/10/31/opinion/paul-krugman-apologizing-to-japan.html?_r=0
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Surely you would just dismiss such doom and gloom as complete nonsense Emmanuel, and then head for the nearest sandpit.

To be honest, I just thought you were another bull sock, from skamy. As your responses often dismiss much reality and just acknowlegde silly bull comments.
As somebody mentioned earlier, a bull fluffer.

But now you have me thinking. Normally I know you would ignore such reality.

But to start a thread , showing such reality that you would normally dismiss as rubbish, shows me that perhaps you are awakening to the bigger picture.

Is this the case Emmanuel ?

Have your eyes been opened by things you have seen here recently ?

Answer those and I will answer any questions you like.



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Emmanuel
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1 Nov 2014, 09:25 PM
Surely you would just dismiss such doom and gloom as complete nonsense Emmanuel, and then head for the nearest sandpit.

To be honest, I just thought you were another bull sock, from skamy. As your responses often dismiss much reality and just acknowlegde silly bull comments.
As somebody mentioned earlier, a bull fluffer.

But now you have me thinking. Normally I know you would ignore such reality.

But to start a thread , showing such reality that you would normally dismiss as rubbish, shows me that perhaps you are awakening to the bigger picture.

Is this the case Emmanuel ?

Have your eyes been opened by things you have seen here recently ?

Answer those and I will answer any questions you like.



Yes, I know what you are saying but why is this doom being penned by Paul Krugman? I would have expected something better than this. Also, I am not convinced that Australia belongs in the definition of the term 'West." We have developed into something different altogether. While we share the same heritage as the West, it is quite possible that we have constructed a society that is superior in how we deal with economic matters. And that is reflected in our superior asset prices, lack of recession, etc. I'm sure my animal collective--Skamy, etc--will agree with me. In fact, I think they would get quite excited about the idea. And I can fully understand why.
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Ex BP Golly
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Emmanuel
1 Nov 2014, 08:11 PM
Now, I’m not saying that our economic analysis was wrong. The paper I published in 1998 about Japan’s “liquidity trap,” or the paper Mr. Bernanke published in 2000 urging Japanese policy makers to show “Rooseveltian resolve” in confronting their problems, have aged fairly well. In fact, in some ways they look more relevant than ever now that much of the West has fallen into a prolonged slump very similar to Japan’s experience.

The point, however, is that the West has, in fact, fallen into a slump similar to Japan’s — but worse. And that wasn’t supposed to happen. In the 1990s, we assumed that if the United States or Western Europe found themselves facing anything like Japan’s problems, we would respond much more effectively than the Japanese had. But we didn’t, even though we had Japan’s experience to guide us. On the contrary, Western policies since 2008 have been so inadequate if not actively counterproductive that Japan’s failings seem minor in comparison.
The problem is that you guys don't understand what downturns are all about.

Downturns are required to flush out inefficiencies, such as corruption, redundant sectors, bad decision making, greed etc etc.

Economists fiddling around the edges trying to make everything shiny invariably makes things worse.

The ecomony isnt here to keep everything just the way you envision it should be.

WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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newjez
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Emmanuel
1 Nov 2014, 08:11 PM
I thought this was particularly interesting and would love to hear your comments.

For almost two decades, Japan has been held up as a cautionary tale, an object lesson on how not to run an advanced economy. After all, the island nation is the rising superpower that stumbled. One day, it seemed, it was on the road to high-tech domination of the world economy; the next it was suffering from seemingly endless stagnation and deflation. And Western economists were scathing in their criticisms of Japanese policy.

I was one of those critics; Ben Bernanke, who went on to become chairman of the Federal Reserve, was another. And these days, I often find myself thinking that we ought to apologize.


Now, I’m not saying that our economic analysis was wrong. The paper I published in 1998 about Japan’s “liquidity trap,” or the paper Mr. Bernanke published in 2000 urging Japanese policy makers to show “Rooseveltian resolve” in confronting their problems, have aged fairly well. In fact, in some ways they look more relevant than ever now that much of the West has fallen into a prolonged slump very similar to Japan’s experience.

The point, however, is that the West has, in fact, fallen into a slump similar to Japan’s — but worse. And that wasn’t supposed to happen. In the 1990s, we assumed that if the United States or Western Europe found themselves facing anything like Japan’s problems, we would respond much more effectively than the Japanese had. But we didn’t, even though we had Japan’s experience to guide us. On the contrary, Western policies since 2008 have been so inadequate if not actively counterproductive that Japan’s failings seem minor in comparison. And Western workers have experienced a level of suffering that Japan has managed to avoid.


What policy failures am I talking about? Start with government spending. Everyone knows that in the early 1990s Japan tried to boost its economy with a surge in public investment; it’s less well-known that public investment fell rapidly after 1996 even as the government raised taxes, undermining progress toward recovery. This was a big mistake, but it pales by comparison with Europe’s hugely destructive austerity policies, or the collapse in infrastructure spending in the United States after 2010. Japanese fiscal policy didn’t do enough to help growth; Western fiscal policy actively destroyed growth.

Or consider monetary policy. The Bank of Japan, Japan’s equivalent of the Federal Reserve, has received a lot of criticism for reacting too slowly to the slide into deflation, and then for being too eager to raise interest rates at the first hint of recovery. That criticism is fair, but Japan’s central bank never did anything as wrongheaded as the European Central Bank’s decision to raise rates in 2011, helping to send Europe back into recession. And even that mistake is trivial compared with the awesomely wrongheaded behavior of the Riksbank, Sweden’s central bank, which raised rates despite below-target inflation and relatively high unemployment, and appears, at this point, to have pushed Sweden into outright deflation.

The Swedish case is especially striking because the Riksbank chose to ignore one of its own deputy governors: Lars Svensson, a world-class monetary economist who had worked extensively on Japan, and who had warned his colleagues that premature rate increases would have exactly the effects they did, in fact, have.

So there are really two questions here. First, why has everyone seemed to get this so wrong? Second, why has the West, with all its famous economists — not to mention the ability to learn from Japan’s woe — made an even worse mess than Japan did?

The answer to the first question, I think, is that responding effectively to depression conditions requires abandoning conventional respectability. Policies that would ordinarily be prudent and virtuous, like balancing the budget or taking a firm stand against inflation, become recipes for a deeper slump. And it’s very hard to persuade influential people to make that adjustment — just look at the Washington establishment’s inability to give up on its deficit obsession.

As for why the West has done even worse than Japan, I suspect that it’s about the deep divisions within our societies. In America, conservatives have blocked efforts to fight unemployment out of a general hostility to government, especially a government that does anything to help Those People. In Europe, Germany has insisted on hard money and austerity largely because the German public is intensely hostile to anything that could be called a bailout of southern Europe.

I’ll be writing more soon about what’s happening in Japan now, and the new lessons the West should be learning. For now, here’s what you should know: Japan used to be a cautionary tale, but the rest of us have messed up so badly that it almost looks like a role model instead.

http://www.nytimes.com/2014/10/31/opinion/paul-krugman-apologizing-to-japan.html?_r=0
Christ, I thought you'd written something of interest there for a second. Very brief second.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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Emmanuel
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newjez
2 Nov 2014, 09:01 AM
Christ, I thought you'd written something of interest there for a second. Very brief second.
Well no. As like most people, I am always interested in what the experts have to say. If we don't do that, how on earth do we know which direction to take or find a bedrock of understanding? To be honest, I expected something better from Krugman.
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Ex BP Golly
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Emmanuel
2 Nov 2014, 02:39 PM
Well no. As like most people, I am always interested in what the experts have to say. If we don't do that, how on earth do we know which direction to take or find a bedrock of understanding? To be honest, I expected something better from Krugman.
Do you have any observations on the ex-spurts who have continually been shocked and surprised by the continuous flow of negative announcement since the GFC but whom regardless, keep their high paying jobs?
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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peter fraser
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It's not so much a criticism of central bankers except perhaps the lack of cohesion amongst European central banks, it's a criticism of the lack of political leadership in the implementation of government stimulus to promote jobs and a genuine rapid recovery. I would think that the real objects of his criticism are Obama and Merkel.
Any expressed market opinion is my own and is not to be taken as financial advice
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peter fraser
2 Nov 2014, 04:37 PM
It's not so much a criticism of central bankers except perhaps the lack of cohesion amongst European central banks, it's a criticism of the lack of political leadership in the implementation of government stimulus to promote jobs and a genuine rapid recovery. I would think that the real objects of his criticism are Obama and Merkel.
So what are you saying Peter, its a criticism for governments not continuing down the further path to self destruction.

It was only ever designed to be a temporary growth measure , to sustain some growth in a decline, but where there is certainty in future growth will continue in future behond these debt levels, so they are repaid and reduced for any future need. But nows it been used as the only growth measure as the real economy has failed with all of these debt levels. It doesn't work permanantly , thats when it destroys economies, just as we are still seeing over six years later.

Here is a basic example for you all , of how stimulus should be used, where it effective and then sustained and repaid for future use or needs, not to over use it or over abuse it Peter. That'sleads to all the shit we are in now. Now for the example Peter.

Suppose I was an apple farmer , well established, making good profits for years on end. I had around 100 acres and 100 workers working it all. All of a sudden my field floods and cop cyclone damage. I am not covered and need help. The government could provide stimulus in this type of economic disaster or mishap or temporary decline for whatever reason .

In this type of instance or scenario, we know that with some stimulus support this industry will be able to get back on its feet, keep all the workers and profit again, repay that stimulus and move on.

The problem is, stimulus support has been used to prop up industries and jobs that haveno hope at all in future as they cannot compete against dirt cheap asian labour.

Don't work that way Peter, that's when it becomes the complete disaster it has shown itself to be, over six years later from the previous forty years of this madness .

Wake up and smell the rosses Peter, understand where it does and can work, and then clearly understand the failure it becomes when not used properly or abused, in this case for four decades, and the last six years show the latest ten trillion over the last years is more than the forty years before it, and with rates at zero for over six it won't work.
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Emmanuel
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peter fraser
2 Nov 2014, 04:37 PM
It's not so much a criticism of central bankers except perhaps the lack of cohesion amongst European central banks, it's a criticism of the lack of political leadership in the implementation of government stimulus to promote jobs and a genuine rapid recovery. I would think that the real objects of his criticism are Obama and Merkel.
I think you've nailed that Pedro. The West should not be blanketed with the actions of a few.
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