neutrino23

China: Exactly Where Japan Was in the 1980s?

Of course, it can be instructive to compare any two economies, but Japan and China are so different that you have to be extremely careful in doing so.

Japan is, and has been for decades, a well regulated, homogenous, consensus based culture. It is also an incredibly wealthy nation. Yes the last 20 years or so have not been great, but that has been a loss of growth, not a slide into dire poverty.

China is a totally different beast. China suffered unimaginable chaos after the war during the cultural revolution. Poverty in many areas is still horrible. Environmental restrictions in many areas are almost unknown. Toxic chemicals of all sorts are dumped in the air, land and water. There is usually little recourse if one develops a debilitating disease from this.

China is huge and consists of many disparate cultures. Some areas of China, particularly the coastal areas, have seen enormous economic growth. The disparity between places like Shanghai and the poorer provinces is enormous. I can barely imagine the tensions that exist between the different elements of their society.

My take is that China is still working to build the nation. It is still working to supply basic necessities to many segments of the population. If farm productivity increases they can still bring more of the population into the manufacturing base.

Someone mentioned above about the Walkman being made in Japan and now similar products are made in China. The Walkman was a breakthrough product designed and made in Japan. It brought great wealth to SONY.

Apple computers are made in China but they are designed in Cupertino. China has yet to design and produce their own world changing product. If an Apple laptop brings ~$1,200 retail how much of that goes to China? $20? $40? Intel makes many of the chips. Other components come from Taiwan, Korea and Japan.

How does that affect their economic future? I don't know. I see it as too chaotic to easily make a prediction. There are many upsides, but the disease causing pollution and waste and lack of worker rights, lack of human rights, lack of civil rights, the corruption all take their toll. I suspect they need two generations to instill a sense of stability and normality into their population and to find their way as a society.

Disclosure: I lived in Japan for nine years between 1984 and 2002 and visited China a dozen times or so during that time on business. I road trains and buses to the small towns where I provided training at universities and institutes.

Interest Rates Cannot Go Lower Than Zero

Just a theoretical point but why can't rates go lower than zero? Instead of a contract to repay principal plus alpha after some period of time you write a contract to repay principal minus alpha after some period of time. Basically you pay people to borrow money.

Let's Give Inflation a Chance

"what gas shortage? just make it from coal."

Yes, to some extent. The problem is the energy cost of converting coal to methane. That combined with the decreasing energy content of the coal being mined.