Monday, February 16, 2009

Land of the Rising Sun Going Our Way?

For those interested in the prosperous but no-longer fast-growing (!) country of Japan, an interesting set of posts has appeared in the Asia-Pacific Journal. The articles cover Japanese electoral and economic policies. Given the view here that the U.S. situation has a number of parallels with post-bubble Japan, it may be worthwhile to click on the above link. The related posts, one following the other, are not technical.  They relate both to the recently-passed "stimulus" bill in the U.S. and to a lesser degree to the issues related to the troubled money-center banks here.

Some of the same central planning-type thinking that is common here is debated in Japan, as the posts say:

" . . . Japanese authorities are once again stuck trying to stimulate aggregate demand."


"So wrote Paul Krugman in his 1998 analysis of Japan's prolonged economic crisis, in which he argued that to escape its liquidity trap, it was necessary for "the central bank to credibly promise to be irresponsible - to make a persuasive case that it will permit inflation to occur, thereby producing the negative real interest rates the economy needs.'"

DoctoRx here: The merchants of debt, growth at any costs crowd, and inflationistas cannot stand a slow-growth but stable, prosperous and peaceful society that Japan has been for decades.

Japan is a very prosperous country.   People live a long time there.  Unemployment has been low.  However, there is little in-migration and the population is aging.  There is no point in depleting savings in an aging society. It is arguably better to live in a country where one earns 1% year on a 10-year Government bond when prices fall 1% a year than to live in a country that lives beyond its means.

The advice from balmy Florida to the Japanese is the following:

You have had a good thing going. Don't screw it up and print more and more money to try to persuade a nation of cautious savers to emulate spendthrift Americans.

Copyright (C) Long Lake LLC 2009

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