Your anti-weekend thread
Jan 31, 2009 by libjpn
With the plethora of open threads, I'm beginning to thing that the mothership is looking at our niche. What did Tessio say to Michael Coreleone as he was being taken away to be executed? Unfortunately, the line doesn't work when you are being told that as you are being taken away...
Still, we are all about redefining ourselves here at TiO, so I thought that I would collect some links for the lost decade for your reading pleasure, especially since OC is using it to argue for the mistake of government stimulus.
I like this AEI report as an overall discussion of the forces. Unfortunately, the perpection of the crisis is colored by the Tokyo centric nature of reporting. The land prices were the highest in Tokyo (some areas had a million dollar per square meter price tag) so the bubble burst most spectacularly there and in outlying areas, it wasn't quite as bad. But because Japanese governance has always been centered around Tokyo (at least post war), there was an inability to look at decentralization as an approach.
Interestingly, the bubble burst resulted in the consolidation of the banking industry, which seems to be the opposite of what is being suggested in the US. However, with the interest rate dropping to near zero, the banks in Japan were reallyin bad shape, with some opting to take money available for loans and deposit in a rival bank in order to get the benefit of the minimal interest rather than loan the money for ventures that had little chance of returning the money.
The problem was exacerbated by the links that banks had with companies (the keiretsu system) which meant that banks tended to prop up zombie companies within the keiretsu. As the companies in the keiretsu cut back on their hiring of tenured employees (in Japan, 'tenure' is a feature of employment law, not something restricted to university contexts), you had large numbers of young people working as 'freeta', a porte-manteau meaning 'free arbeit', a person working in the equivalent of a part time job as a full time worker. This had the effect of shrinking the tax base, creating a vicious circle. (The link paints a rather dark picture, I do think that the economy could adapt itself in ways that make the picture less bleak)
I'm still not convinced that all the problems have been aired, and there is not a lot of economic activity, which makes the japanese economy rather listless. I can live with that, I've never had really overwhelming desires, and the so-called 'stealth recovery' offers a lot for someone like me, but it worries me for my daughters, who will have less opportunities. And more worryingly, some observers are suggesting that Japan is not the outlier, but the shape of the world in the future, post capitalism.
And, of course, I have to highlight a quote that the above Yves Smith post makes from a Bloomburg article.
Oddly, one of Asia's potential failures is democracy, Chan says. It simply isn't proving to be the panacea that leaders in the U.S. and Europe promised. Poverty rates remain stubbornly high in many Asian democracies, and so does corruption. The former is often a result of the latter.
It's certainly not that democracy is bad. Yet there's something to be said about what Chan calls ``premature democratization'' in Asia.
Elections matter only when nations build strong institutions such as independent courts, ministries, a free press, credible central banks and ample systems of checks and balances. Their absence means many governments don't operate as transparently or successfully as expected.
My inflammatory liberal side wants to suggest that we have seen the same set of circumstances occur in the US of A. The liberal me thinks that reestablishing those strong institutions are at the basis of the recovery rather than how much money goes into column A or column B.
Jan 31, 2009, 11:10:03 tgott wrote:
lj: I am too stimulus-ed out to add anything halfway decent at the moment, but will try later and wanted to thank you for your efforts.
Jan 31, 2009, 22:04:05 OCSteve wrote:
I understand that it’s not a perfect analogy, but I think its close enough that we can examine what Japan tried and what worked and didn’t work.
They didn’t cut interest rates soon enough, we’ve already done that. I think that’s great.
But it’s also pretty clear that the massive stimulus packages (6% of GDP?) – government spending on useless public works projects - did not help at all, or at best had minimal impact.
Jan 31, 2009, 23:21:58 libjpn wrote:
Did you read the AEI link? It said
[i]Japan's sharp interest rate reductions and sizeable public works programs did help to boost the economy mid-decade. The real growth rate reached nearly 4 per-cent in 1996 and early 1997.[/i]
later, the report points to the biggest problem
[i]Japan's biggest policy mistake came in 1997 when the government raised its consumption tax from 3 to 5 percent. The aim was to help compensate for the large run-up in Japanese debt that resulted from the series of unproductive fiscal stimulus packages expended largely on wasteful public works projects. The combination of higher consumption taxes, the continued fall in land prices that persisted in preventing Japan's banks from operating as financial intermediaries because of their heavy exposure to real estate losses, and a rapid return to deflation in 1998 resulted in a virtual collapse of the Japanese economy.
Prompt policy interest rate reductions by the central bank and some fiscal relief for households and firms are [b]necessary but not sufficient[/b] conditions to return the economy to health.
Japan's poorly timed attempt to redress its large budget deficit and rapidly rising public debt provided a compelling reminder of the lessons that John Maynard Keynes taught in the General Theory of Employment, Interest, and Money. Fiscal stringency in the form of a tax on consumption in an economy weakened by massive wealth losses and an erosion of confidence that results in a virtual liquidity trap is an extraordinarily harmful policy. Japan's nominal GDP growth rate was below zero for most of the five years after 1997, with most of its positive real growth resulting from the technical application of GDP deflators averaging about -1.5 percent. In a deflationary economy, it is important to watch nominal, not real, GDP growth. [/i]
This means that anyone who is arguing that we shouldn't do the stimulus because we can't afford it ought to be dismissed outright.
The things that make the US different from Japan
-low amount of spending on current public works so a stimulus would stimulate
-a very weak dollar which will not exacerbate money flow
It's interesting, I've not heard the word deflation, and I'm wondering what exactly is happening. If housing prices are dropping, how can deflation be far behind?
Feb 01, 2009, 03:13:19 tgott wrote:
I think one of the reasons I am all stimulus-ed out is the von-gary war wore me out. von certainly seems to get on gary's last nerve.
I was watching something this morning about the recession and how spending needs to increase to get us out of it. And the economist made a good point: People need to spend, but ideally, he noted, they need to draw down their debt after years of overspending -- and consumers seem to have finally figured this out (or, worse, they just don't have the means to spend). Hence our Recession That Has No End In Sight.
Feb 01, 2009, 08:26:10 libjpn wrote:
[i]I think one of the reasons I am all stimulus-ed out is the von-gary war wore me out. von certainly seems to get on gary's last nerve.[/i]
That's very true, though that underestimates the number of nerves present on both sides.
With perfect hindsight, I'd suggest that the whole thing started with von accusing Kevin Drum of lying in his post and then blowing off Gary's stated concerns. The back and forths between the two have raised the temp so that you had Hilzoy conduct an intervention and you now have Gary bitching at Publius for not adhering to an unwritten rule of not deleting comments that Publius is probably totally unaware of along with von making another front page post that seems to be basically a restatement of the previous posts. This is not going to end well.
I say that not simply because of the personalities involved, but from my opinion, formed thru experiencing recessions on 3 continents, that the key has always seemed to be not the financial component, but the zeitgeist. I think the only reason that the US economy has not collapsed into a blubbering mass is because of the perception of Obama's election. This is not to ascribe messiah like qualities to Obama himself, but the fact that the hope that comes along with him has kept the US economy from crashing.
I admit that there is a confirmation bias here, but one of the reasons I take the aspirational dimension of recovery so seriously is that despite my loathing of Reagan, I admit that it was his presence and rhetoric (and really nothing else) that was key. In fact, Reagan had a lot easier time of it, because the deregulatory policies that permitted the economy to move forward were initiated by Carter. I also acknowledge my belief that the Clinton turnaround was more aspirational than policy based.
So arguing over how much goes to what area is missing the forest for the trees. It is not about finding the best possible option, it is doing something, anything. As I tell my students, dawdling is doom.
Feb 01, 2009, 10:04:00 OCSteve wrote:
LJ: [i] Did you read the AEI link?[/]
And I can give you ten links that says it did not… OK – what would be neutral ground here? What cite would we both accept? Let’s start there…
[i]This means that anyone who is arguing that we shouldn't do the stimulus because we can't afford it ought to be dismissed outright.[/i]
We can afford it? We have the cash? Or are we printing money? [i]Your[/i] children are going to get this bill, not me. We are totally screwing the next 2-3 generations for an easy out now. Well, we hope it is easy…
Feb 01, 2009, 12:11:51 tgott wrote:
lj: Your recap summed up things rather well and, after reading it, made me kind of think of the whole thing as some sort of ObWi dramedy. (BTW, I did not mean for hilzoy to conduct an intervention: I sort of arrived at the scene of accident and then, shit, my mind is at a loss to finish the analogy.) Also: When I was at work today and saw von's Stimulus 4, I couldn't help but laugh and think, "Oh, no." My first reaction was "Groundhog Day" -- the second reaction being, "I hope Gary takes 10 deep breathes."
More importantly: If anyone has a faster way of contacting hilzoy, Eric or publius (than the ObWi email, which I just used) I would greatly appreciate it if you would ask them on behalf of bedtimeforbonzo (tony gott) if they'd break that unwritten rule and delete my 10:15 and 10:18 pm comments in Eric's Open Thread: Click on my moniker and you will see why -- being the techno twit that I am I URLed a college friend's Facebook address instead of my own; still can't figure out how I did that and, needless to say, I am afraid to try this URL thing again.
Finally: This damn recession is like a self-fulfilling prophecy. CNN, CNBC, etc. run round-the-clock reports and specials on it and I think the mind starts to think it is even worse than it is.
Feb 01, 2009, 12:16:30 libjpn wrote:
Well, dueling cites is always a problem, but having lived thru it, things seemed to be picking up and the consumption tax and the Kobe earthquake were the twin shots that seemed to be push the boulder back down the mountain.
And invoking my kids is not the way to make this argument, at least to me. Sometimes, the cost of not doing anything is much greater than the cost of doing something. I've never been someone who has used the cost of the Iraq intervention as an argument against it, (my objections are more moral rather than economic) so I'm not really swayed by your claim. I've always felt that the US, because it makes outsize claims about leading the free world, has to put its money where its mouth is. If that means paying for the profligacy that the US consumer, encouraged by easy money, puts a burden on the country, that's life.
Feb 01, 2009, 12:19:49 libjpn wrote:
I just sent up a flare, btfb.
Feb 01, 2009, 12:37:31 tgott wrote:
Feb 01, 2009, 20:02:36 OCSteve wrote:
[i]And invoking my kids is not the way to make this argument, at least to me.[/i]
Well, I meant the general [i]you[/i], as in any of you reading this who have children. But apologies anyway.
[i]The real growth rate reached nearly 4 per-cent in 1996 and early 1997.[/i]
And then? Everything I have read says that was a temporary blip. But I certainly admit to my own confirmation bias. That’s why I’m wondering if there is some source that we can both admit is unbiased.
Everything I have read says you ended up with unsightly concrete lined rivers and it did not help.
Feb 01, 2009, 20:15:14 OCSteve wrote:
[i]concrete lined rivers[/i]
And to clarify – I don’t believe that spending on infrastructure will be wasted here – we need it badly. There are two bridges I cross regularly where I hold my breath until I get to the other side…
But infrastructure spending is a small percentage of this monstrosity. Check this out (via H/A):
[i]So how big is the resulting $1.2 trillion spending package? Big enough to dwarf any government program in history, even after adjusting for inflation. It's bigger than the New Deal and the Iraq War combined. The interest alone will be costlier than the Louisiana Purchase or going to the moon. The $18 billion in bonuses paid legally by private Wall Street firms in 2008 - decried by the President as "shameful" - is vanishingly small in comparison (smaller even than the bill's incremental food stamps expenditures).
The only relatively modest component of the spending bonanza is the money tagged for infrastructure and energy efficiency (the ostensibly stimulative part), which accounts for less than 14% of the total.[/i]
Feb 01, 2009, 21:00:43 libjpn wrote:
[i]That’s why I’m wondering if there is some source that we can both admit is unbiased.[/i]
Where would be the fun in that?
The fact that we haven't, here in Japan, been placed under the burden of debt peonage suggests that images of the a massively huge stimulus is actually missing the point. The AEI link also has this
[i]Japan's large fiscal stimulus packages, which became legendary during the 1990s, were ineffective for several reasons. First of all, the packages were not as large as advertised, often inflated by double counting as stimulus government programs that were already slated to be undertaken. More importantly, the packages were poorly directed--largely toward unproductive public works projects and credits to small businesses that were no longer economically viable.[/i]
This isn't going to be a problem for the US stimulus (though this does not rule out other problems) because we have infrastructure projects that desperately need financing, rather than the Japanese searching for things to do, and there is not any stimulus going to small businesses that are going to be made obsolete because of technical advances.
Also, you say you are arguing against this particular package, but a lot of your comments are more like any package of this size would not meet with your approval. So, if a package of this amount of money were along the lines [url=http://www.ft.com/cms/s/0/3...]Larry Summers[/url] suggests, would it be acceptable? This Atlantic blog post seems to point to the fact that most of the money is going to be used quick or sorta quick.
It seems that we need something of that size and given the politics, this is the only way to deliver that amount of spending.
Feb 01, 2009, 21:34:41 OCSteve wrote:
[i] So, if a package of this amount of money were along the lines Larry Summers suggests, would it be acceptable?[/i]
I didn’t want to register to read the whole thing so I only saw the opening paragraph.
I’m against incurring this much debt. Bush ran it up like crazy, now this… The [i]interest[/i] on this sucker is insane. And the rush to [i]do something[/i] seems misplaced when we have no proof it will help.
For a trillion bucks you could write a check for $3,333 to every man, woman, and child in America…
Feb 01, 2009, 21:38:35 john miller wrote:
I would like to see a lot more of the money go to infrastructure and other projects. It is too bad the Republicans were against that because they believe, erroneously, that tax cuts provide stimulous. But I digress.
All of us have had our comments made at ObWi and it si getting to where people believe what they believe, have the cites which, kind of, support their positions an don't want to change their minds.
Not only with Japan but with the Great Depression. See I'm OK... thread.
Perhaps we should just spend today talking football. Go Cardinals.
Feb 01, 2009, 22:08:24 OCSteve wrote:
[i] Perhaps we should just spend today talking football.[/i]
My stupid satellite reception will probably crap out just as the game starts. It’s my first experience with satellite (about a month now) and so far I am not impressed. Cable is not available where I am now and Dish, including HD, is a lot cheaper than Comcast anyway.
But jeeze – some days I see “acquiring signal” more than anything else. I’d say that the chances of sitting down to watch a show and actually seeing it all is only about 70%. They’ve tried adjusting the dish twice now.
Anyone else have experience with this? Is this common or am I just having some issues others don’t have?
Feb 02, 2009, 00:12:56 tgott wrote:
"Bush ran it up like crazy, now this . . ."
Yes, OC, but Bush ran it up spending taxpayer money like the GOP's beaten-to-death version of a drunken sailor (i.e. a Democrat); among other things, running the national debt up fighting the Iraq War -- which, whether you were for or against it, I think most will agree too much money was spent foolishly due to the lack of coherent and thorough planning.
And partly thanks to the administrations of Bush (and Clinton), lax federal regulation led to lax lending practices that led to the Capitalism of Corruption that have led to this God-awful recession.
Now Obama needs to spend money as far as the eye can see to stiumulate the economy and is in the unenviable position of coming into office just months after the first $350 billion bank bailout failed miserably, creating bailout fatigue and doubt throughout the country.
Yet I find myself even as a liberal Dem questioning where some of this money is going and to what effect it will have -- and am also troubled by the sense I get from reading some of the Obama diehards (I'm talking about a devotion that was evident in the primaries) at the mothership that, "Have trust in The O and Timothy Geithner, everything will be all right."
Well, why the hell should I trust Timothy Geithner, who fashioned the first baliout fuck-up with Henry Paulson in his capacity as chairman of the New York Fed and is yet another Wall Street/Goldman Sachs we-know-what's-best-for-America capitalist.
I'm just glad this all isn't in the hands of John "I Don't Know How Many Houses I Own" McCain and Sarah "I Can See Russia From My Doorstep" Palin.
(P.S. lj: How do I get rid of that invalid URL so it doesn't keep popping up automatically every time I go to post a comment at ObWi? I am afraid I will forget to remove it before posting.)
Feb 02, 2009, 00:20:46 tgott wrote:
A quick aside: I had wondered if things would get boring at ObWi after Obama took office and Bush left town, and after Inaugural Week's lovefest created such a sense of Kumbaya; after all, we Dems were finally in charge.
But I see -- and thanks partly to von lending his voice -- I was wrong.
Then again, what is it they say about the Democratic Party's tendency to be no party at all, loving to argue amongst ourselves?
Or something like that.
And where's Thullen to put a fine point on all of this?
Feb 02, 2009, 00:47:30 john miller wrote:
btfb, true, it has not calmed down. And even though I disagree with von about just about everything he is saying, I am glad he is posting.
I agree that I am not in love with the stimulus package, although that is a misnomer. I do think they over did it with tax cuts and not enough infrastructure spending.
But, there is also, as mentioned above, a strongpsychological aspect to this. While McCain's economic adviser was wrong to say that the recession was in our minds, there is a real psychological aspect to coming out of the recession. That being the case, if people believe this is the start of something good, they may react accordingly.
Of course, the republicans, being the optimists they are, are going around saying this will do no good and that Obama is doomed to failure. (And no, they are not literally saying the last part, but it is implicit in everything else they say.)
Fortunately, Americans are starting to realize that the last people you want to listen to when it comes to economic policy are Republicans.
OCSteve, I have never used Dish. But I do have a similar problem on the television in the kitchen which is not hooked up to cable. This is due to the digital converter box. Half the time I am working with the antenna to get a station in and the Chicago CBS station doesn't come in at all. Granted, when everything is woprking right, it is a great picture, but atleast under the old system I got every channel, even if it had a little snow with it.
Feb 02, 2009, 01:30:54 tgott wrote:
"btfb, true, it has not calmed down."
John: Thanks to Stimulus 4.
I suspect if the game becomes a blowout, soon after Springsteen's halftime show, we might see Stimulus 5 pop up.
And if von wants to take a break for daddyhood at Disney, Stiumulus 6.
Where will this end?
You are so right, JM, about the mental aspect of this Great Recession and the McCain thing -- I think this is one of the things von, and others, foolishly ignore.
In Eric's Open Thread, hairshirthedonist mentioned the prospect about he and I getting together for a Phillies game in a few months. Anyone else live in reasonably close driving distance to Philadelphia who might be interested in such an outing at lovely Citizens Bank Park? OCSteve?
Just baseball, hotdogs and fresh air. No politics.
lj could join us via sattelite from Japan.
Feb 02, 2009, 01:34:18 john miller wrote:
If they were playing the Brewers I might find a way to get there. Of course, when I get back there would probably be divorce papers waiting for me.
Good to think about baseball. And of course March Madness is about to descend.
Feb 02, 2009, 01:49:35 tgott wrote:
I'll have to check the schedule.
A very good young team, the Brewers: The left fielder -- his name escapes me at the moment -- could very well win a Triple Crown someday, which I would love. (Too young, just 5, to appreciate Yaz's Triple Crown in '67, and I think we will see a Triple Crown long before another .400 hitter.)
I was taken aback when the Brewers fired the manager with just a week or so two go last year -- a very unusual baseball move and one I would not endorse, although I really don't know everything that went into the move.
Feb 02, 2009, 01:59:29 john miller wrote:
Braun is the name you are looking for.
They fired Yost in a surprise move, but it may have been what got them into the playoffs. In fact, if Sabbathia hadn't walked the Phillie pitcher in game one, it may well be the Brewers who won the Series.
Feb 02, 2009, 02:24:10 tgott wrote:
Yes, the Brewers really caught fire at the end of the season -- maybe Yost was too low-key, or something.
Game 1 was a kind of series-turning point from the get-go, and Brett Myers became a folk legend here with his hitting exploits.
Feb 02, 2009, 12:01:14 JakeB wrote:
Well that turned out to be quite a game, I gots to say. I would have wanted Darnell Docket for MVP if the Cards had won.
And that's all I can say, since I'd rather study some more for my Tuesday midterm and do some more matlab-script-testing than contemplate the economy. Less depressing.
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