How Stimulus-Zilla Killed Japan, And Why We'll Probably Suffer A Similar Fate
Originally published in September 2009 - Nothing has changed.
---
Keynesians, listen up. Krugman, pay attention. Stimulus without structural reform (public and private sector cuts and restructuring) is doomed to fail. Look no further than Japan where government debt is an astonishing 200% of GDP. The brilliant former Morgan Stanley chief economist, Andy Xie, makes a convincing case that we are headed for the same.
Andy Xie
Anyone who doesn't believe in the harm of a financial bubble but does believe in Keynesian stimulus magic should visit Japan. A likely dip for the Anglo-Saxon economies next year will underscore these truths. The same goes for anyone who thinks China's latest real estate bubble, asset borrowing and shadow banking system are worthwhile substitutes for real economic growth.
We can learn much from Japan's experience. The global economy -- mainly the Anglo-Saxon economy -- is facing the consequences of a massive credit bubble. The remedies most governments have embraced are to keep interest rates low and fiscal deficits high. These are the same policies Japan pursued after its bubble burst nearly two decades ago. How today's bubble economies are treating bankruptcies and bad debt is shockingly similar to what was seen in Japan. The United States and others have suspended mark-to-market accounting rules to let banks stay afloat despite large amounts of toxic assets. It's the same "let them earn their way back" strategy that Japan pursued. The strategy fails to work because it keeps an economy weak, limiting the earning power of financial institutions.
As the global economy is again showing signs of growth in the third quarter, most governments are celebrating the effectiveness of their policies. Yet Japan's experience forces us to pause: Its economy experienced many such growth bounces over the past two decades, but was unable to sustain any of them. The problem was Japan only used stimulus, not restructuring, to cope with the bursting of its bubble. After the demise of any big bubble, serious structural problems that hamper economic growth remain. Stimulus can only provide short-term support that makes structural reform possible. When policymakers celebrate the short-term impact of stimulus and forget structural reforms, economies slump again. I think the Anglo-Saxon economies will dip again next year.
---
DB here. The nature of the problem here as well as Japan is political, which makes it all the more frustrating considering the sheer insanity of politics and partisan bickering.
The solution is simple, except few in the public sector are brave enough (the private sector does not have this problem except for the banking industry, and well, it's not a private industry) to advance the restrucuring and reform that is essential for a positive economic outcome.
Politicians have huge egos, bankrupt souls, and don't care much about anything beyond re-election. They hate recessions ultimately because they fear a voter backlash and the possibility of being sent back home from cozy Washington. So they are generally prepared to do anything to avoid/prevent/mitigate the process. Such is why they will vote to spend money whether they have it or not. Throw trillions in cash at the problem, shy away from fixing the structural issues, and maybe it can be held together long enough to be re-elected for another term.
Too bad the trillions are coming from you and your kids (and grandkids) and they never asked for your permission.
Sep 21, 2011 at 10:23 PM
Reader Comments (35)
http://dailybail.com/display/Search?searchQuery=stimulus&moduleId=4521698
The solution is simple, except few in the public sector are brave enough (the private sector does not have this problem except for the banking industry, and well, it's not a private industry) to advance the restrucuring and reform that is essential for a positive economic outcome.
Politicians have huge egos, bankrupt souls, and the only care about getting re-elected. They hate recessions ultimately because they fear a voter backlash and the possibility of being sent back home from cozy Washington. So they are generally prepared to do anything to avoid/prevent/mitigate the process. Such is why they will vote to spend money whether they have it or not. Throw trillions in cash at the problem, shy away from fixing the structural issues, and maybe it can be held together long enough to be re-elected for another term.
Too bad the trillions are coming from you and your kids (and grandkids) and they never asked for your permission. Throw the bums out in 2010. That is our best only option."
I agree 100%, but even this is temporary, if we cannot fix the systemic issues that allowed us to get this screwed up to begin with. And if a candidate is running unopposed, don't vote at all on that spot, let him win by his own vote. That will get them worrying about the election after this one. Fear is a powerful motivator.
http://www.youtube.com/watch?v=TukdxAuTmao
I am only quoting a famous man, no need to delete such insight.
(CBS)First Lady Michelle Obama made the case Friday morning that health care reform is a women's issue and called on female activists to support President Obama's reform plan.
You go girl!!!!
We know that statement above can't be yours, you have made your position clear about your views towards women with your wife and kids at home, and hookers on their backs statement. As well as a few other choice statements you have made.
I've been trying to figure out what the essence of this is for many months now. Some days I would agree with your assessment 100%. Some days I think it cannot be simple desire for money (there are easier ways to make money, after all) nor is it all about power. I believe it is simply elitism. Whether for egotistical or charitable purposes, they just think they know better than everyone else. And this supposedly superior knowledge justifies forcing their ideas on us. The elitist attitude also helps explain many of the unfounded charges of racism (Maureen Dowd, Jimmy Carter, Joe Klein). They are here to enlighten us because We The People cannot possibly improve ourselves or learn anything valuable on our own.
WASHINGTON (Reuters) – The biggest change in U.S. higher education finance in 35 years was approved on Thursday by the House of Representatives, handing a defeat to major banks and student loan giant Sallie Mae.
Lawmakers voted 253-171 in favor of legislation that would cut the banks and Sallie Mae out of a large slice of the $92 billion college student loan business, shifting most lending into a program run by the U.S. Education Department.
MUST-WATCH VIDEO: Celente: Revolution Next For US (16/9/09)
http://www.youtube.com/watch?v=JhaEc_4zuFI&feature=player_embedded#t=292
The President has no Constitutional authority to do most of the things they claim they can do. They can only ask the Congress to do what they want. The Congress could have stopped everything that's happening; the wars, the Wall Street takeover, the TRILLION DOLLAR defense budget they just passed. Our so-called representatives have sold us out so many times it makes my head spin and what do we all do? We not only let them keep their jobs, but you watch, they will most likely give themselves a raise, like they always do, for the fine job of screwing us they've done over the last two years. The way we hold our representatives accountable is to let them keep their $174,000 a year jobs so they can stick it to us for another two years! In case you're wondering, that's $14,500 a month, which includes another $4,700.00 raise they just gave themselves.
Consider the limits on government interventions we take for granted that the constitution obviously forbids. Consider any government program in light of the constitution; most of what the national government does is in violation of constitutional principles. It should be no surprise to anyone who understands the genius of the constitution that our country is collapsing under the weight of the bloated and corrupt government we have created. Republicrat of Demopublican doesn't make any difference; we will dramatically reduce the size, power and cost of government or we will see the end of our country; and, I think, fairly soon.
Laissez faire capitalism has been reviled by the, "government will give us all we want, and it will be paid for by someone else" crowd so long that I feel silly recommending it as the fairest and most productive system ever developed, but that is what it is. In an era of "hopey-changey" nonsense I suspect the people would rather go on believing foolishness that will end our civilization than go against their training and the feelings their training generates in them. I spend as little time as possible feeling bad about the inevitable but, I must admit, the United States was a great place to live, and my family and I will hate to see it go
Econoranter.
Must watch this videos
Dr. Ron Paul revolution is must:
Global Systemic Crisis: In Pursuit Of The Impossible Recovery (18/9/09)
http://futurefastforward.com/images/stories/featurearticles/Global_Systemic_Crisis.pdf
Senator Sanders Unfiltered: Ripping Off America
http://www.youtube.com/watch?v=dANmTKOO1oY&feature=player_embedded#t=144
http://sandersunfiltered.com/
'Save America! US on slippery slope to economic collapse'
http://www.youtube.com/watch?v=d-UUBTASHHU&feature=player_embedded
No , debates but a Ask your self: how to unite take our Nation back from Banker terrorists?
Falling dollar in 2009 depression will be worst than 1929 ; madoff fraud
http://www.youtube.com/watch?v=CkG81PKny8Y&NR=1
http://www.americanrevt.blogspot.com
http://www.youtube.com/watch?v=WbUfGpzjNaA
Ratigan also wonders whether this obvious, clearly understandable anger isn't being manipulated for a partisan "power play" (nobody would do that, would they?). Good stuff. Good focus on the bailouts and stealing from the taxpayer.
http://www.youtube.com/watch?v=3n1fjJXnN_c
Ratigan: "America watches the banks continue a massive, multi-trillion dollar taxpayer-funded systemic theft -- which really pisses people off, and then they watch the govt advance into a variety of other theaters, health care being the most obvious one. What do you think people can do with the emotion that is represented here, or channelled through people [like] myself...?"
I hope Ratigan still reads The Daily Bail from time to time because he should know that we feel his pain. We know exactly what it's like. To want to bring every political conversation back to the fact that the "banking oligarchy" (Ratigan's phrase), as well as the corn, oil and health care oligarchies OWN THIS COUNTRY. Or at least our representatives in Congress. How many aneurisms have been brought on from listening to people bicker about left and right, D's and R's, conservative and liberal -- when TRILLIONS of dollars of wealth are being transferred from the Too Little To Be Heard to the Too Well Connected To Fail. It's infuriating. It's maddening. It's bad for our health. At least we have Dylan Ratigan.
http://www.youtube.com/watch?v=BSjQS6hf5Bo
Gold now has an ACTIVE head and shoulders bottom pattern in place which TARGETS $1,350. A flight to REAL money has begun. The Chinese government is ACTIVELY pushing their citizens to buy gold and silver and they have the ability to STAND up to the manipulators and protect their people. THEY WILL DO SO and defend the value of their peoples’ gold and silver. Call it a BEIJING Put. The manipulators have never had to deal with someone holding over 2 TRILLION dollars on the bid and would be more than happy to TAKE DELIVERY.
Think of all the bullion banks that have leased gold from central banks at 1%, sold it into the markets to fund the carry trade and now must cover and suffer catastrophic losses. Can you say “gold and silver to the moon?” This is such delicious irony for these partners in crime, with the central banks and their gold suppression schemes. In the short end of the treasury markets, yields have been cut in half in 6 weeks and are approaching zero yield and the long end has rallied aggressively as well. The Zimbabwization of paper assets has begun, as you shall see.
It's time we drew a line in the sand.
it's time we courageously oust this corrupt government.
That's what our founding fathers recommend when all else fails.
We no longer have a government. We now have a club of
indictable, murderous, establishment criminals.
http://www.bloomberg.com/apps/news?pid=20601103&sid=afZhBPNaXu1o
The global economic downturn has probably hit bottom though the recovery will be “slow and painful,” said Paul Krugman, the Nobel Prize winning economist.
“The end of the world appears to have been postponed,” Krugman, a professor at Princeton University, said at a seminar in Helsinki today. The world economy “does not appear to be falling into an abyss but is still” in trouble. The outlook is “very fuzzy’ and a W-shaped recovery may become U-shaped.
Germany, France and Japan emerged from recession last quarter, adding to evidence some of the world’s biggest economies are over the worst. The U.S. recession probably ended in late July or August, Krugman said, after gross domestic product fell 1 percent in the second quarter from the prior three months.
The Nobel Laureate said ‘‘the truly extraordinary thing” has been “the collapse of world trade,” the subject for which he was awarded the prize last year, and he cast doubt on the potential for exports to lead the global recovery. He also said China’s economy isn’t big enough to serve as a growth engine.
“The problem is that this is a global financial crisis,” he said. “How can we have an export-led recovery unless we find another planet to export to?”
Chris Dodd gets serious about reform...I doubt it passes without backing from Obama...
Mr. Towns gave the bank until noon on Monday to provide answers and relevant legal documents. He said it seemed that the bank was “hiding information.” The bank replied to Mr. Towns’s committee late on Saturday, asking him to delay that request until after Tuesday, when Mr. Towns meets with Anne Finucane, the bank’s chief strategy and marketing officer, who oversees public policy at the bank. But a spokesman for Mr. Towns said on Sunday that he was sticking to the deadline.
http://www.nytimes.com/2009/09/21/business/21bank.html?hp
You clearly don't have the economic acumen of a Nobel laureate. Actually, what Krugman will say is that we should send men to the Moon and have them start digging holes THERE. Once the Moon economy has been sufficiently stimulated, THEN we can launch our goods into space and export them to the Moonians who, by that time, will be flush with Moon dollars and ready to spend, spend, spend. I mean, who needs China? First we'll have a Moon bubble, then a Mars bubble. After that, who knows! Good times will be here again!
There are a few stories out today that ABSOLUTELY shock me and no one in the blog world has yet to comment on it….. I’m hoping to find someone who is as outraged as me by this news. In my opinion this is definitely in the top 5 outrages for 2009, and worthy of some expose.
The FDIC is going to borrow $$ from the healthy banks???? First off, healthy is a matter of opinion, and I can’t say with any conviction that there are any truly healthy US banks. JPM (???), that’s a derivative packed powder keg looking for a fuse…….
"The day where capitalists were people like Thomas Edison, Henry Ford, Alexander Bell or anyone who did anything useful are long, long past. The individuals waving the capitalist banner today are just frauds, salesboys and schemers who do not add one tiny bit of value to anything. Finance capitalists just skim off the top in another form of taxation. It is time to get back to a productive economy. Time to hand the real estate salesboys, used car hucksters, bankster multi zillionaires, motivational gurus, Amway scammers and all of the other varieties of marketeering professional con artistes a shovel and a broom and make them go to work or starve. These are the clowns ruining this country; not the government, not the workers."
Good to see a kindred spirit, while it is true that the workers are innocent, the government is the personal whore to the clowns. I enjoyed your post.
He reads. He had his assistant contact us today in fact.
SNK...i don't have time to check your site..please do not hesitate when you have something you want me to publish that you've written...
And for that they got bailed out.
The banks ripped you all off. The banks and certain parts of (your) society.
And for ripping you off and lying to you, they got more money out of your wallets. With the support of your politicians, your police and the courts.
And the money in your wallets isn't enough for them.
They have your pensions.
They own your houses.
Every time your eat or shit, you pay them money.
They own the programmes they put on TV, they own the ads they for the shit they sell you.
They own the news they sell you.
They own the TV you watch all this shit on.
They own the schools and the hospitals.
They own your children and their education (or lack of it).
It is not possible to say how screwed you are. Or how biased you mainstream media is and how much it twists the "news" as all this shit goes on.
It is difficult to express in writing how doomed you are. There is no hope. It can now, only get worse.
People still do not want to see the truth.
They do not/cannot see that the people who made the mess are STILL getting paid for it and now, getting bonuses for it.
Imagine that every time a bank robber was caught, instead of putting him in jail, the robber got to keep all the money and then given a fat cheque for being industrious.
Not exactly a deterrent.
Can you see yet, how fucked you are?