Evaporating Economy

[2triky]

[IparryU]

Same thing happening to my in-laws. they own a small business, used to buy all their kids the best cloths, spoil the hell out of their mago, etc. but now they are not doing good at all.

What is sad is that in these cases people are really dependent on that lifestyle and cannot step it down in time to save their capital... discipline goes a long way wid monies.

[2triky]

Same thing happening to my in-laws. they own a small business, used to buy all their kids the best cloths, spoil the hell out of their mago, etc. but now they are not doing good at all.

What is sad is that in these cases people are really dependent on that lifestyle and cannot step it down in time to save their capital... discipline goes a long way wid monies.

I think the article does a good job summarizing the current predicament many Japanese find themselves in today. The one glaringly absent component to the discussion seems to be an effective strategy to ameliorate the current economic malaise and propel the economy to renewed prosperity, even a prosperity of modest proportions.

[Mulboyne]

Fallows objects and cites Fingleton's rebuttal.

I don't think Fackler makes his case very well. A guy who took on debt to buy a condo overseas is neither a good example of the bubble's success stories nor its later victims. Citing a trend in microhousing as a sign of tighter purse strings is also mad. Most microhouses are commissioned by the landowner who fancies having something custom-built on a small plot. They aren't a class of people pressed for money.

[Ketou]

Funny how deflation is considered evil and inflation good....the world is upside down.

[2triky]

I think the broader point about dwindling consumption is more representative of a larger demographic.

[Fullback]

Strategy by whom? Strategy by bureaucrats? Elected minions? Are you saying that you think it is possible to make some grand economic strategy that will create renewed prosperity?

The "prosperity" of the bubble was a facade, a false prosperity. That's why it collapsed. You can create temporary, false prosperity through creating bubbles, but they always collapse.

Governments and central banks can only assist in creating monetary conditions for false bubbles. That's it. Printing money does not create an economy.

The only strategy governments can do is create wars to create spending on materiel for wars. Japan doesn't have a war industry, so spending on goods for war wouldn't offer any economic benefit to Japan. It would have to invest in creating another domestic war-making industry. That would take a generation or more, in addition to ginning up a new generation of nationalistic, flag wavers.

You have to be careful of what you ask for. War is the long-term economic strategy of choice by politicians.

[maraboutslim]

...and yet the Yen is strong.

[Yokohammer]

Does anyone, even the most expert experts, really understand this? I sure as heck don't. It seems that there are experts espousing every angle imaginable, from the-end-is-nigh pessimism to ebullient optimism. So who's right?

Or is it closer to the truth to say that nobody really knows, and economies have a life of their own and are actually totally unpredictable. That would be a bit a bit scary, but if it were the truth at least we could stop wasting time listening to all these financial gurus with opposing ideas.

I, for one, am utterly confused.

[Fullback]

...and yet the Yen is strong.

The yen isn't strong, the US dollar is weak.

[Fullback]

@ Yokohammer:

The "expert" talking (and writing) heads have a reason for their views. It's self interest, just like all people and peoples act out of self interest.

One thing that is true about the last 20 years is that the rich have gotten richer and everyone else has not.

[2triky]

Strategy by whom? Strategy by bureaucrats? Elected minions? Are you saying that you think it is possible to make some grand economic strategy that will create renewed prosperity?

Governments can and do choose to pursue specific models of economic growth or at the very least try to strategically influence economic development. The post WWII growth of Japan was to at least some extent dictated by a conscious industrial policy, not some laissez-faire miracle of capitalism.

It's a facile argument to imply just because there isn't some magical grand architecture to prosperity that governments don't have the ability to influence economics. One can debate the efficacy of fiscal policy but that's not to say government should resign itself to a grim reality.

[2triky]

Fallows objects and cites Fingleton's rebuttal.

I don't think Fackler makes his case very well. A guy who took on debt to buy a condo overseas is neither a good example of the bubble's success stories nor its later victims. Citing a trend in microhousing as a sign of tighter purse strings is also mad. Most microhouses are commissioned by the landowner who fancies having something custom-built on a small plot. They aren't a class of people pressed for money.

Thanks for the links.

[Fullback]

The industrial "policy" was conceived and formulated by Japanese industry leaders, not by bureaucrats. Bureaucrats have no experience in business, therefore have no business or industrial know how.

They do love to take credit for things, though.

[Greji]

Fallows objects and cites Fingleton's rebuttal.

I don't think Fackler makes his case very well. A guy who took on debt to buy a condo overseas is neither a good example of the bubble's success stories nor its later victims. Citing a trend in microhousing as a sign of tighter purse strings is also mad. Most microhouses are commissioned by the landowner who fancies having something custom-built on a small plot. They aren't a class of people pressed for money.

I would tend to go against what Fingleton recommends. Eamonn's a good enough bloke to have the occasional pint with, but his predictions leave a lot to be desired. "Blindsides" was in fact a hit because it was predicting what a lot of people were saying at the time. But, it was seriously panned by a lot of other economists at the time and they later proved to be spot on when the bubble burst.

[Mulboyne]

I would tend to go against what Fingleton recommends.

I'm no fan either. He's heavily invested in one view of Japan and selects those facts about the country which seem to fit it rather than questioning his own paradigm. He's basically right about some of the problems with Fackler's article, however.

One problem in using a pre-bubble and post-bubble framing is that the bubble burst twenty years ago. Countries change a good deal in such a time frame and its not appropriate to pin all trends on that dichotomy. Fingleton celebrates Japan's spending on luxury goods while Fackler says people are going for Uniqlo now. The truth is, Japan's luxury spending boomed for years after the bubble burst - hence Fingleton's numbers - but now seems to have hit a brick wall - which fits Fackler's stance. It's not a post-bubble malaise which has seen sales drop. It's a combination of fallout from the global meltdown, market saturation, and, possibly, greater consumer awareness.

Japan seems to be in a bad place in many respects but I take some of the doomsday scenarios with a pinch of salt. I've mentioned here before how the international press wrote Britain off in the 70s. We aren't in great shape now but many of our most acute problems either worked out, or at least didn't lead to the direst consequences predicted. When your perspective on a country is "it's in the shit", then everything seems to be a sign of just how bad things are.

[nottu]

[2triky]

The industrial "policy" was conceived and formulated by Japanese industry leaders, not by bureaucrats. Bureaucrats have no experience in business, therefore have no business or industrial know how.

That's not entirely true...given the Japanese phenomenon of amakudari. Those bureaucrats all need to retire to greener pastures.

[nottu]

[Screwed Up Eyes]

Fallows objects and cites Fingleton's rebuttal.

I don't think Fackler makes his case very well. A guy who took on debt to buy a condo overseas is neither a good example of the bubble's success stories nor its later victims. Citing a trend in microhousing as a sign of tighter purse strings is also mad. Most microhouses are commissioned by the landowner who fancies having something custom-built on a small plot. They aren't a class of people pressed for money.

Eamonn, an e sin bheireadh tu chreidsinn orm?
The Paddy Factor meets the Japanese economy. While I don't think Fackler is close to the mark, Eamonn's fucking kidding himself if he is truly as upbeat about the economy of Crapan as he claims to be. The outlook aint too bright, with deflation bringing little positive effects, massive public debt and even more on the horizon as everybody gets old and nobody is replacing them. And don't forget Japan has throughout the modern era always been a net food importer. It's not exactly making inroads in the diplomatic sphere, either, except for shoddy regimes in third world backwaters who, in the same way as randy young men will pay 250 yen to toothless grandmas for a BJ, will accept ODA and other government bribes using our money in return for supporting whaling and other noble Japanese pursuits.
Japan's economic outlook over the next couple to few decades at least is fucked with a capital PH.

[2triky]

Others chime in...

===========================

Deflating the Japanese Horror Story

Sunday, 17 October 2010

The NYT devoted a lengthy piece to telling readers how bad things in Japan have been since its bubbles collapsed in 1990. It gets many things badly wrong.

First and most importantly, Japan is actually considerably wealthier on average today than it was in 1990, contrary to the implication of this article. According to the IMF, per capita income is 16.4 percent higher in Japan today than it was in 1990. This is considerably less than the 21.5 percent growth in the UK over this period or the 36.6 percent increase in the United States, but it is still a substantial gain in living standards. It is also worth noting that Japan's gain in per capita income was accompanied by a considerable shortening in the ratio of hours worked to population (shorter workweeks and more retirees).

However the biggest flaw in the piece is its obsession with deflation. Japan's has suffered from deflation in the last two decades, but the rate of price decline has always been very gradual. Only in 2009 did it even exceed 1.0 percent. (It is projected to be larger than 1.0 percent this year.)

It makes very little difference to an economy whether prices are falling by 0.5 percent or rising by 0.5 percent. The argument that people put off purchases because they see prices falling is just silly. If prices are declining at the rate of 0.5 percent a year, then someone considering the purchase of an $800 refrigerator can save $4 by waiting a year. It is unlikely that these sorts of savings would have much impact on even the purchase of a big ticket item; it's inconceivable that they would have any impact on the purchase of more every day items like food and clothing.

The real issue is simply that Japan's inflation rate has been too low. In this sense, a 0.5 percent deflation rate is worse than a 0.5 percent inflation rate. But a 0.5 percent inflation rate is also worse than a 1.5 percent inflation rate. A low inflation rate, whether positive or negative, keeps real interest rates higher than would be desirable in a severe downturn. It also prevents the economy from inflating away the debt burden left over from the housing bubble.

This point is important because many people wrongly believe that the United States will only be suffering from a problem of too low inflation if the inflation rate actually turns negative and we have deflation. This is not true. The inflation rate in the United States is already a level that is hampering growth. Any further drop in the inflation rate will make the situation worse but there is no importance to crossing zero.

One final point worth noting: this article implies that Japan's low birthrate is a bad thing. Actually, Japan is a very densely populated country. This is why house prices are so high. If its population declined then housing prices would fall. (This is a sophisticated economic concept known as "supply and demand.") A lower population would also mean less greenhouse gas emissions for those who care about the future of the planet. For these reasons, a low birthrate could help Japan in the future.

http://www.cepr.net/index.php/blogs/beat-the-press/deflating-the-japanese-horror-story?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+beat_the_press+%28Beat+the+Press%29&utm_content=Google+Reader

[2triky]

[Screwed Up Eyes]

OK, so the Japan apologists are coming out in force to defend their "baby." The reality remains that they are simply comparing one basket case (Japan) with another (the United States).
When you're spiraling downward on your way through the cistern and onto the S-bend, it doesn't really mean a great deal on who gets there first if you're both gonna pass through anyway. I get the feeling either or both could clog up the works for a while in the meantime...not that I know SFA about economics...

[Mike Oxlong]

Japan's economic outlook over the next couple to few decades at least is fucked with a capital PH.

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[xenomorph42]

@Fullback-
The "expert" talking (and writing) heads have a reason for their views. It's self interest, just like all people and peoples act out of self interest.

One thing that is true about the last 20 years is that the rich have gotten richer and everyone else has not.

And who's fault is that?

[wuchan]

@Fullback-
The "expert" talking (and writing) heads have a reason for their views. It's self interest, just like all people and peoples act out of self interest.

One thing that is true about the last 20 years is that the rich have gotten richer and everyone else has not.

And who's fault is that?

mine for not getting in on the action.

[Ketou]

@Fullback-
The "expert" talking (and writing) heads have a reason for their views. It's self interest, just like all people and peoples act out of self interest.

One thing that is true about the last 20 years is that the rich have gotten richer and everyone else has not.

And who's fault is that?

Them for hiding the truth and us for being stupid enough to be led like sheep.
We must get rid of the Central Bank cartel and Fractional Reserve Banking. Currency issue needs to go back to the people and be issued without debt or interest.

[xenomorph42]

Them for hiding the truth and us for being stupid enough to be led like sheep.
We must get rid of the Central Bank cartel and Fractional Reserve Banking. Currency issue needs to go back to the people and be issued without debt or interest.

Dream on! Never gonna happen!

[FG Lurker]

We must get rid of the Central Bank cartel and Fractional Reserve Banking. Currency issue needs to go back to the people and be issued without debt or interest.

So you suggest that the US Congress should directly control money supply? Yeah, cause those brainless assholes do such a good job of everything else.

The current system is far from perfect but I don't see how giving it to Congress would do anything but make things worse.