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  • The Coming Euro Crash [View article]
    ["Greece and the other Club Med countries should know by now that they won't get any real help from the north. Thus, time to take matters in their own hands, n'est ce pas?"]

    But what does "taking matters in their own hands" actually means? Within EMU, there is not a whole lot they can do:
    - They can't lower interest rates
    - They can't embark on unconventional monetary policy
    - They can't devalue
    - They can't reflate by fiscal means

    They only go the 'internal devaluation' route. Which is what Greece just did. It crashed a quarter of their economy, produced sky high unemployment and deflation, and severely compromised the prospects of a whole generation.

    And guess what, these efforts have actually increased, not decreased, their debt burden, despite a substantial restructuring.
    Jan 12, 2015. 06:45 PM | 1 Like Like |Link to Comment
  • Japan, A Failed Keynesian State? [View article]
    Yes, fair enough, but only now has monetary policy woken up to the debt-deflation threat. What I'm saying is that they should have done what they're doing now much earlier, say 15 years earlier.

    The situation would have been much easier to manage.

    And even now, while Abeconomics gets a lot of bad rap in some quarters, but:
    1) There really isn't much of an alternative
    2) It's build on a previous successful example from 1932.
    Jan 12, 2015. 06:29 PM | 2 Likes Like |Link to Comment
  • Japan, A Failed Keynesian State? [View article]
    Manufacturing is declining almost everywhere and the reason isn't a mystery either, productivity in manufacturing is growing faster than in other sectors.

    Capital formation/GDP went from the mid 20s to the low 20s (%) but only after the 2008 crisis, so there isn't an enormous downward trend here.
    Jan 12, 2015. 06:22 PM | 1 Like Like |Link to Comment
  • Japan, A Failed Keynesian State? [View article]
    ["Why would Japan raise taxes while waiting for QE to work? Crazy."]

    It's a good question, I think the thinking behind that was something like:
    - The were hoping economy would have achieved escape velocity by April and could digest such a tax hike
    - It's necessary to maintain credibility in the bond markets.

    Anyway, it's a setback, but a one-off effect, the economy will recover from this
    Jan 12, 2015. 03:26 PM | Likes Like |Link to Comment
  • Japan, A Failed Keynesian State? [View article]
    Thanks for that Herb
    Jan 12, 2015. 03:23 PM | Likes Like |Link to Comment
  • Japan, A Failed Keynesian State? [View article]
    ["You insinuated that Zerohedge didn't actually know what Krugman had advised or not advised Abe on, with regard to Abenomics"]

    No, I said they were disingenuous. I still stand by that. I also argue it wouldn't be the first time they were disingenuous. I already provided another example in the article. Here it is, in case you missed it:

    http://seekingalpha.co...
    Jan 12, 2015. 03:20 PM | 1 Like Like |Link to Comment
  • Japan, A Failed Keynesian State? [View article]
    Industry is still 25% of GDP in Japan, that's much higher than many, probably most advance nations, so I have to disagree here.
    Jan 12, 2015. 03:17 PM | Likes Like |Link to Comment
  • Japan, A Failed Keynesian State? [View article]
    I don't really know what the net effect is, so I can't answer that.
    Jan 12, 2015. 02:36 PM | Likes Like |Link to Comment
  • Japan, A Failed Keynesian State? [View article]
    No, not really. Things can have more than one effect simultaneously. I don't know which is the more important effect, to be honest.
    Jan 12, 2015. 02:30 PM | Likes Like |Link to Comment
  • The Coming Euro Crash [View article]
    ["only central planners adjusting exchange rates can be considered"]

    Sigh.

    1) It's simply an empirical fact that internal devaluation is several orders of magnitude more difficult and expensive (in terms of lost output) than a simple depreciation.

    2) Who said we need central planners? There are these wonderful things called currency markets that can depreciate currencies all by themselves..
    Jan 12, 2015. 02:26 PM | 3 Likes Like |Link to Comment
  • Japan, A Failed Keynesian State? [View article]
    ["I understand. Even accounting for Japans deflation and US inflation, the GDP per capita of the US over the last 25 years is nearly double Japan."]

    No you don't understand. You make a new argument out of this every time the previous one turns out to be nonsense.

    ["Government deficit spending is not real economic growth, nor sustainable. Well, ok maybe, sustainable for about 25 years and 200% of GDP in debt to show for it."]

    25 years is a pretty long time and your view depends entirely on a prediction which hasn't materialized.

    I've already acknowledged that the debt/GDP ratio is very high and unsustainable. However, I also argued a couple of other things:
    - Alternative courses of actions would have savaged the economy and not improved the debt dynamics by all that much
    - Japan made serious errors in letting deflation creep in. That greatly worsened their debt dynamics. If they would have prevented that from happening, their debt/GDP ratio would have been less than half.
    Jan 12, 2015. 02:21 PM | Likes Like |Link to Comment
  • The Coming Euro Crash [View article]
    ["Supply side economics is a winner."]

    http://seekingalpha.co...
    Jan 12, 2015. 02:07 PM | Likes Like |Link to Comment
  • Japan, A Failed Keynesian State? [View article]
    ["This finally became intolerable in the mid 1980's , which led to the Plaza accords , which forced the yen to more realistic levels. The boom busted."]

    The Plaza accords was to stem the rise in the dollar (not only versus the yen). It didn't mean the boom bursted, in fact, it accelerated. The second half of the 1980s was when Japan really was on the proverbial roll.

    ["The center of Japan's Abenomics - this is the same LPD that has failed Japan for 30 years - is a return to the undervalued yen."]

    While a cheaper yen would certainly help, more important is to get out of deflation and get nominal GDP on a 5% growth path.

    The model for Abeconomics is actually Takahashi, the finance minister who successfully reflated Japan in the 1930s.
    Jan 12, 2015. 01:51 PM | 1 Like Like |Link to Comment
  • Japan, A Failed Keynesian State? [View article]
    ["Wouldn't a dependency ratio problem present as rising wages?"]

    To the best of my knowledge, not so far. I would have to delve into the details of the Japanese pension system to provide a more informed answer.

    Per capita GDP usually matters more than aggregate GDP, although Japan, in order to stabilize its debt dynamics, does need to grow the latter as well.

    The pension funds are selling their bonds but I don't think it's related to demographics, but to the existence of a willing buyer and a clear policy goal of getting inflation to 2%.

    ["Is the demographic problem in fact a fall in demand as people die off rather than a decline in productive capacity as people age?"]

    Why not both?
    Jan 12, 2015. 01:45 PM | Likes Like |Link to Comment
  • Japan, A Failed Keynesian State? [View article]
    Well, as interesting as it is in and by itself, the causes of these Japanese asset bubbles are hardly relevant for the main argument of the article, which departs from the consequences of a bust bubble and the various policy reactions to that. It isn't trying to explain why there are bubbles in the first place, however interesting that debate might be (perhaps for another article..)
    Jan 12, 2015. 01:23 PM | 1 Like Like |Link to Comment
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