Explain Japan

If fiscal stimulus is so effective in spurring economic growth, explain Japan.

18 comments… add one

  • Why they did not do enough fiscal stimulus. Duh. Should have gone for 300-400% debt to GDP ratio! Then everything would be just awesome.

  • Icepick

    Steve V. beat me to it.

  • jan

    When a lesson doesn’t ideologically fit into the social progressive’s primer, they simply skip over it and don’t include it in why they support such a policy.

  • jan,

    Actually no. Krugman did take this one on. His argument was precisely as I have stated it. They did not do enough fiscal stimulus. Never mind that even po-dunk towns in Japan often have large international airports now, and a good chunk of the country has been paved.

  • BTW, I joked about this kind of nonsense over at OTB awhile ago.

    Of course, I got slapped with the partisan tag immediately and we had the mantra of shovel ready jobs (even President Obama admitted this one was not true).

    Spend, baby spend!

  • jan

    Thanks for the correction, Steve.

    Ah, Paul Krugman, what a joke of an economist! He would assert that vinegar is sweet-tasting too, if it would help augment his ideological economic stances.

    Of course, I got slapped with the partisan tag immediately and we had the mantra of shovel ready jobs (even President Obama admitted this one was not true).

    Over at OTB it is imperative that one’s posts fit their assumptions and political philosophies. Otherwise, you are treated as a door mat.

  • jan

    He would assert that vinegar is sweet-tasting too…

    As an aside, I’m not referring to rice vinegar, just the apple cider variety.

  • Drew

    I’m guessing Steve V got about 25 thumbs down. I know he is emotionally crushed.

    Little known: Krugman’s primary work (and Prize) was in international economics. Reputed to be good work. Now he’s just a garden variety, NYT paid, crazed Keynsian salivating to spend. Do you think he knows better? If so, what does that say about his politics and character? If not….oh, my.

  • steve

    “Actually no. Krugman did take this one on. His argument was precisely as I have stated it. They did not do enough fiscal stimulus.”

    Actually sort of, no need to misrepresent his arguments. He initially argued for stimulus. He has more recently said that he does not believe fiscal stimulus will do much. He is supporting , pretty much like Sumner, a long term commitment to higher rates of inflation. I think he understates the structural problems facing Japan. Their banks are still zombies. Their demographics suck and they are pretty intolerant of immigrants. Their industry is rigid and fixated on the past (Sony is fading).

    Last of all, the economic ascent of the other Asian countries has hurt them, even beyond the actual economics. Many Chinese and South Koreans still hate the Japanese at a visceral level I dont think many of us appreciate. Kind of like the Tea PArty nuts all hate Obama because he is a socialist, Kenyan, Muslim something. Maybe even worse.

    Steve

  • Actually sort of, no need to misrepresent his arguments. He initially argued for stimulus. He has more recently said that he does not believe fiscal stimulus will do much.

    Geez steve, do you need to misrepresent Krugman’s position(s)?

    See what I did there.

    Krugman has argued:

    1. Stimulus spending.
    2. Stimulus spending, but the right kind.
    3. More money.

    And I’m sure he has advocated high colonics if one were to look hard enough.

    BTW, the failure of stimulus spending on the part of Japan does not bode well for additional spending here in the U.S. Maybe if we had a lower debt level. Maybe if we didn’t have the infrastructure we already have. Maybe if we didn’t have as educated a populace as we already have. Maybe if we didn’t have the demographics we have. Maybe if we didn’t have the level of rent seeking we already have. Then yeah, some stimulus spending might jump start the economy.

    That is alot of maybes, though. And look, lots of them are one’s you brought up in another thread. Going to back away from them now?

  • Oh and by the way, did you fail English? You did note the past tense in my comment. Krugman did advocated stimulus. He did argue they the Japanese didn’t do enough and didn’t do it “right”.

    His opponents said pretty much the same thing, yet Krugman’s response has generally be very nasty.

    The guy is a bat shit crazy asshole.

  • Icepick

    The guy is a bat shit crazy asshole.

    There you go being charitable again.

  • Drew

    “He is supporting , pretty much like Sumner, a long term commitment to higher rates of inflation.”

    This, my friends, says it all. Its the point I’ve been making for some time. Screw those who saved and lived within their means. Let’s inflate away grotesque fiscal irresponsibility – public and private.

    That steve is defending it tells you all you need to know about steves financial acumen and worldview. Scary beyond all belief. Not to mention Krugman. Batshit crazy indeed.

    Did I get that wrong, steve? Are you not supportive? It sure comes off that you are. If you are repudiating Krugman, Sumner, Bernanke, Geitner, Obama please do tell.

  • Icepick

    What I don’t get is that wage inflation isn’t likely to happen along with price inflation, because of the lousy employment situation. So the net effect will actually be to screw anyone that has a lot of debt, too, because they’re not going to suddenly make a lot more. We’re likely to get all of the bad effects of inflation and none of the good effects.

  • steve

    “Oh and by the way, did you fail English? You did note the past tense in my comment. Krugman did advocated stimulus.”

    I wrote this.

    ” He initially argued for stimulus. He has more recently said that he does not believe fiscal stimulus will do much. He is supporting , pretty much like Sumner, a long term commitment to higher rates of inflation.”

    Who failed English? (It should be “Krugman did advocate stimulus or Krugman advocated stimulus.) :-) I clearly recognized the tense. I just dont think it is quite fair to present someone’s opinion as something that they have changed at a later time. Would it be fair to say the US hates Japanese because we put them in camps?

    Steve

  • steve

    @Drew- I ahve said before and will say again that while fiscal policy probably helped in the 30s, they entered the Depression with low levels of public debt. Our situation is different. A smallish stimulus to stop the bleeding? Ok. Continued stimulus to “fix” the economy? That has to be paid back sometime and I don’t see us having the growth to do that anytime soon.

    As to NGDP targeting, I guess I waffle. First, while inflation hurts the creditor class, deflation hurts the debtor class even more. We have explicitly favored creditors over debtors for way too long. It is part of why we are in this mess. If I have to choose, I would favor inflation. When I read Sumner, I think a lot of what he says makes sense. I dont see anything magical about price stability as opposed to job creation and economic output (the dual mandate). Really, he is talking about inflation rates lower than what we had under Reagan. But when I stop reading , it seems too much like magic. I am not sure you can just make nominal GDP whatever you want it to be. I also think we have underlying problems in our economy that need to be fixed. We need to make real products, real services. Pay down our debt. Fix small business regulations. Tax reform.

    Economists embrace these kinds of magical solutions. That goes for tax cuts too. I would prefer cleaning up our basics first. Meanwhile, inflation at 2%-3% in order to avoid deflation seems pretty reasonable also.

    Steve

  • steve.

    Don’t be an obtuse asshole. You claimed I misrepresented his views. I pointed out that Krugman did advocate stimulus and that Japan didn’t do enough of it. That is accurate. Now you point out that he has also advocated pretty much every other suggested solution as well. My only flaw is that I haven’t been reading the bat shit crazy asshole enough to see that he has been all over the map policy wise. Krugman was still advocating stimulus even after noting that they have more airports than they can possibly use and have paved most of the country.

    We have pretty much gone down the same road as the Japanese. We bailed out zombie banks that are still zombies. We’ve racked up substantial debt on top of an already substantial debt (and keep in mind that our fiscal outlook has been rather bleak for at least a decade or two). Yet Krugman was insisting that fiscal stimulus could solve our problem because it was simply lack of aggregate demand.

    You sing that song (aggregate demand) too here, or at least you did. However, as Dave and I (probably Drew as well, I’d have to go check past comments) have been saying:

    1. We over invested in housing.
    2. We over invested in the financial industry.
    3. We have invested/spend too much on health care.

    Those are structural problems. Those kinds of malinvestment mean that if there is a recession related to that malinvestment it will likely lead to an ‘L’ shaped recession. Also, the large amounts of debt can act as a drag on the economy.

    And look…we got no strong rebound from the Great Recession like many of the stimulus folks predicted we would. We have lack luster growth. Seems to fit with the “structural” problem vs. simply lack of aggregate demand. Also, when you look at PCE data it has rebounded rather quickly. Where we haven’t rebounded so quickly is in investment.

    The idea that we can add even more debt to the picture and it will get better strikes me as somewhat dubious to say the least. The idea that we can drive up PCE to an even larger percentage of GDP and get a good outcome also strikes me as dubious.

    I also would not be surprised if things have to get worse, before they’ll get better. But our ruling elites don’t want that…it is a recipe for being turned out of office…or so they fear.

  • steve

    “Where we haven’t rebounded so quickly is in investment.”

    In particular, real estate.

    “I also would not be surprised if things have to get worse, before they’ll get better.”

    I dont know about worse, but I dont see it getting a lot better soon. Neither party knows how to help increase economic growth absent the creation of new debt. Neither does our private sector. I think they used to know, but not anymore.

    Steve

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