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Wtf Krugman?

Cermank
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5/29/2013 12:35:13 PM
Posted: 3 years ago
http://www.nytimes.com...;

So this article aims at explaining why Japan is going to turn around and herald this decade and stuff. Is it just me, or does he just confirm his bias throughout the article without providing any legit source of his belief in Japan? Dismissing the facts that don't support his hypothesis, proclaiming the facts which do, and bashing Abenomists?(whatever that is. Keynesians, by the looks of it.)
wrichcirw
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5/29/2013 2:56:24 PM
Posted: 3 years ago
At 5/29/2013 12:35:13 PM, Cermank wrote:
http://www.nytimes.com...;

So this article aims at explaining why Japan is going to turn around and herald this decade and stuff. Is it just me, or does he just confirm his bias throughout the article without providing any legit source of his belief in Japan? Dismissing the facts that don't support his hypothesis, proclaiming the facts which do, and bashing Abenomists?(whatever that is. Keynesians, by the looks of it.)

He's not bashing Abenomics, he's actually embracing them, because they conform to his core belief in Keynesian stimulation.

What I see in this article is Japan leading the "race to the bottom" in regards to currency devaluation, which if carried to its logical conclusion (debt relief), would mean that we are not far behind.

My only question would be "why didn't Japan do this sooner", to which my answer would be geopolitical...the US did not want Japanese exports to be "too competitive" and so we kept Japan bottled until now. Now, the whole Japan/China deal is front page, so it would be much more kosher to have Japan win that fight, even if it makes our products a bit less competitive vis a vis Japan. That and of course Japan's debt is a ticking time bomb that needs to be diffused, and inflation/currency debasement is the best way going forward, IMHO.
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
sadolite
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5/29/2013 3:50:25 PM
Posted: 3 years ago
At 5/29/2013 2:56:24 PM, wrichcirw wrote:
At 5/29/2013 12:35:13 PM, Cermank wrote:
http://www.nytimes.com...;

So this article aims at explaining why Japan is going to turn around and herald this decade and stuff. Is it just me, or does he just confirm his bias throughout the article without providing any legit source of his belief in Japan? Dismissing the facts that don't support his hypothesis, proclaiming the facts which do, and bashing Abenomists?(whatever that is. Keynesians, by the looks of it.)

He's not bashing Abenomics, he's actually embracing them, because they conform to his core belief in Keynesian stimulation.

What I see in this article is Japan leading the "race to the bottom" in regards to currency devaluation, which if carried to its logical conclusion (debt relief), would mean that we are not far behind.

My only question would be "why didn't Japan do this sooner", to which my answer would be geopolitical...the US did not want Japanese exports to be "too competitive" and so we kept Japan bottled until now. Now, the whole Japan/China deal is front page, so it would be much more kosher to have Japan win that fight, even if it makes our products a bit less competitive vis a vis Japan. That and of course Japan's debt is a ticking time bomb that needs to be diffused, and inflation/currency debasement is the best way going forward, IMHO.

Spot on and finacial history repeats itself.
It's not your views that divide us, it's what you think my views should be that divides us.

If you think I will give up my rights and forsake social etiquette to make you "FEEL" better you are sadly mistaken

If liberal democrats would just stop shooting people gun violence would drop by 90%
Cermank
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5/31/2013 11:13:25 AM
Posted: 3 years ago
At 5/29/2013 2:56:24 PM, wrichcirw wrote:
At 5/29/2013 12:35:13 PM, Cermank wrote:
http://www.nytimes.com...;

So this article aims at explaining why Japan is going to turn around and herald this decade and stuff. Is it just me, or does he just confirm his bias throughout the article without providing any legit source of his belief in Japan? Dismissing the facts that don't support his hypothesis, proclaiming the facts which do, and bashing Abenomists?(whatever that is. Keynesians, by the looks of it.)

He's not bashing Abenomics, he's actually embracing them, because they conform to his core belief in Keynesian stimulation.

/:O I don't know how I got that out of the article. It was late at night, that can be the only, albeit weak, defence.

What I see in this article is Japan leading the "race to the bottom" in regards to currency devaluation, which if carried to its logical conclusion (debt relief), would mean that we are not far behind.

My only question would be "why didn't Japan do this sooner", to which my answer would be geopolitical...the US did not want Japanese exports to be "too competitive" and so we kept Japan bottled until now. Now, the whole Japan/China deal is front page, so it would be much more kosher to have Japan win that fight, even if it makes our products a bit less competitive vis a vis Japan. That and of course Japan's debt is a ticking time bomb that needs to be diffused, and inflation/currency debasement is the best way going forward, IMHO.

I actually don't agree with that, which is why I was kind of let down by the article. Japanese investors are used to deflation. Their 1% nominal return equaled a 3% real return on government bonds, (assuming 2% deflation). With an inflation centric policy, now they'd ask for a larger nominal return, to maintain the same level of real return. This'd push up the cost of government bonds, and lead to larger and larger amount of tax revenues being used solely to meet the increasing interest payments. Pushing up the government debt burden.

I thought Krugman would address that, but throughout the article, he merely built up on his premise. A good growth in the first quarter isn't really an evidence. He didn't even address the weak investor sentiment, that is an important yardstick for economic health, isn't it?

[But yeah, true about the Japan/ China deal. It's actually good for us, since India is actually getting the sweet end of the political tension, with Japan investing in India as opposed to China. Yay India. :P]
darkkermit
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5/31/2013 11:20:38 AM
Posted: 3 years ago
I generally don't like his NY times articles. He's generally putting on a show for progressives and wants to confirm their biases and hate-monger to get more views.

Krugman has an archives of articles he's written from MIT before he wrote for the NY times. While none of the articles are too technical (like an article in a peer-review journal), the average person who isn't super-interested in economics would find them better quality. But for someone like me, I actually prefer his articles he wrote at MIT than to what he writes now.
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Cermank
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5/31/2013 11:35:57 AM
Posted: 3 years ago
At 5/31/2013 11:20:38 AM, darkkermit wrote:
I generally don't like his NY times articles. He's generally putting on a show for progressives and wants to confirm their biases and hate-monger to get more views.

Krugman has an archives of articles he's written from MIT before he wrote for the NY times. While none of the articles are too technical (like an article in a peer-review journal), the average person who isn't super-interested in economics would find them better quality. But for someone like me, I actually prefer his articles he wrote at MIT than to what he writes now.

This was actually the first of his article I've read. I thought he was really well respected and stuff, I've heard his name in the 'economists you like' thread somewhere around here, so I was a little confused.

Where can I find his MIT articles?
darkkermit
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5/31/2013 12:38:42 PM
Posted: 3 years ago
At 5/31/2013 11:35:57 AM, Cermank wrote:
At 5/31/2013 11:20:38 AM, darkkermit wrote:
I generally don't like his NY times articles. He's generally putting on a show for progressives and wants to confirm their biases and hate-monger to get more views.

Krugman has an archives of articles he's written from MIT before he wrote for the NY times. While none of the articles are too technical (like an article in a peer-review journal), the average person who isn't super-interested in economics would find them better quality. But for someone like me, I actually prefer his articles he wrote at MIT than to what he writes now.

This was actually the first of his article I've read. I thought he was really well respected and stuff, I've heard his name in the 'economists you like' thread somewhere around here, so I was a little confused.

Where can I find his MIT articles?

Here:

http://web.mit.edu...

Paul Krugman is a really good economist, for he has published a lot of important works in economics. He won his nobel prize in New Trade Theory, a theory you might be interested in.

I also think he can make good insights. But yes, most of his articles are confirmation bias along with hate-mongering.

In the Marginal Revolution course, "Developmental economics", they pretty much said that Krugman gets a bad rep for his partisan liberalism, but he actually has contributed quite a bit in economic thought and if you look at some selected work of his you can learn quite a bit from him.
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darkkermit
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5/31/2013 12:43:56 PM
Posted: 3 years ago
"A lot Paul Krugman later writings they concern politics and they're very controversial. There are a lot of people that like him a lot of people don't like him at all. The important thing is to put those feelings and dispute aside and focus of Krugmans subsidence contribution to economics. The problem is that there are so much things on him on google it can be tough to cut through that mass and get to the best stuff"

http://mruniversity.com...
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Cermank
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5/31/2013 12:59:01 PM
Posted: 3 years ago
Thanks :-)

I think that makes sense, Id all but written him off based on that one article. The mit articles are a different breed aLltogether. The Japan ones are really in depth, although old.
darkkermit
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5/31/2013 1:03:42 PM
Posted: 3 years ago
At 5/31/2013 12:59:01 PM, Cermank wrote:
Thanks :-)

I think that makes sense, Id all but written him off based on that one article. The mit articles are a different breed aLltogether. The Japan ones are really in depth, although old.

Exactly. People that write Krugman off usually only see Krugman the political rhetorist rather than the economist. He does act on incentives, and he can make more money writing in the manner he does for the New york times than the ones he wrote at MIT. I figured you'd like his MIT articles though.
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wrichcirw
Posts: 11,196
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5/31/2013 5:50:33 PM
Posted: 3 years ago
At 5/31/2013 11:13:25 AM, Cermank wrote:
At 5/29/2013 2:56:24 PM, wrichcirw wrote:
At 5/29/2013 12:35:13 PM, Cermank wrote:
http://www.nytimes.com...;

So this article aims at explaining why Japan is going to turn around and herald this decade and stuff. Is it just me, or does he just confirm his bias throughout the article without providing any legit source of his belief in Japan? Dismissing the facts that don't support his hypothesis, proclaiming the facts which do, and bashing Abenomists?(whatever that is. Keynesians, by the looks of it.)

He's not bashing Abenomics, he's actually embracing them, because they conform to his core belief in Keynesian stimulation.

/:O I don't know how I got that out of the article. It was late at night, that can be the only, albeit weak, defence.

What I see in this article is Japan leading the "race to the bottom" in regards to currency devaluation, which if carried to its logical conclusion (debt relief), would mean that we are not far behind.

My only question would be "why didn't Japan do this sooner", to which my answer would be geopolitical...the US did not want Japanese exports to be "too competitive" and so we kept Japan bottled until now. Now, the whole Japan/China deal is front page, so it would be much more kosher to have Japan win that fight, even if it makes our products a bit less competitive vis a vis Japan. That and of course Japan's debt is a ticking time bomb that needs to be diffused, and inflation/currency debasement is the best way going forward, IMHO.

I actually don't agree with that, which is why I was kind of let down by the article. Japanese investors are used to deflation. Their 1% nominal return equaled a 3% real return on government bonds, 1) (assuming 2% deflation). With an inflation centric policy, now they'd ask for a larger nominal return, to maintain the same level of real return. 2) This'd push up the cost of government bonds, and lead to 3) larger and larger amount of tax revenues being used solely to meet the increasing interest payments. Pushing up the government debt burden.

1) Invalid assumption, at least if extrapolated to a term longer than one or two years. It's been mostly neutral.

2) My understanding is that most of Japanese debt is long term, rate locked. Yep, confirmed:
http://www.mof.go.jp...

3) At least a quarter of Japan's budget goes towards interest payments already. I learned this from Krugman himself actually a while back.

I thought Krugman would address that, but throughout the article, he merely built up on his premise. A good growth in the first quarter isn't really an evidence. He didn't even address the weak investor sentiment, that is an important yardstick for economic health, isn't it?

That can be fixed through debasement.
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
Cermank
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5/31/2013 9:15:53 PM
Posted: 3 years ago
At 5/31/2013 5:50:33 PM, wrichcirw wrote:
At 5/31/2013 11:13:25 AM, Cermank wrote:
At 5/29/2013 2:56:24 PM, wrichcirw wrote:
At 5/29/2013 12:35:13 PM, Cermank wrote:
http://www.nytimes.com...;

I actually don't agree with that, which is why I was kind of let down by the article. Japanese investors are used to deflation. Their 1% nominal return equaled a 3% real return on government bonds, 1) (assuming 2% deflation). With an inflation centric policy, now they'd ask for a larger nominal return, to maintain the same level of real return. 2) This'd push up the cost of government bonds, and lead to 3) larger and larger amount of tax revenues being used solely to meet the increasing interest payments. Pushing up the government debt burden.

1) Invalid assumption, at least if extrapolated to a term longer than one or two years. It's been mostly neutral.

http://www.tradingeconomics.com...

The mean inflation rate is negative. The rate of deflation doesn't really matter, the assumption would hold even if its -0.2%. We are concerned with the effects of the changing policy n the interest rate, and consequently on the debt portfolio.

2) My understanding is that most of Japanese debt is long term, rate locked. Yep, confirmed:
http://www.mof.go.jp...

That really doesn't matter. The locked roi is for the loans already taken. We are concerned with the new loans Japan would have to take, the new IOUs it would bring out. It would have to, considering low level of household savings because of the ageing population. The rate of increasing debt would rise further.

3) At least a quarter of Japan's budget goes towards interest payments already. I learned this from Krugman himself actually a while back.

Yeah. 23% to be exact. The rate of return on government bonds is around 1% now. For the entire tax revenue to be spent entirely on the interest paynments, it needs to rise to 4%. Something which can be easily seen as happening in an inflation centric economy.

I thought Krugman would address that, but throughout the article, he merely built up on his premise. A good growth in the first quarter isn't really an evidence. He didn't even address the weak investor sentiment, that is an important yardstick for economic health, isn't it?

That can be fixed through debasement.

Debasement is what would lead to higher inflation, increasing debt cost.
wrichcirw
Posts: 11,196
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5/31/2013 9:49:54 PM
Posted: 3 years ago
At 5/31/2013 9:15:53 PM, Cermank wrote:
At 5/31/2013 5:50:33 PM, wrichcirw wrote:
At 5/31/2013 11:13:25 AM, Cermank wrote:
At 5/29/2013 2:56:24 PM, wrichcirw wrote:
At 5/29/2013 12:35:13 PM, Cermank wrote:
http://www.nytimes.com...;

I actually don't agree with that, which is why I was kind of let down by the article. Japanese investors are used to deflation. Their 1% nominal return equaled a 3% real return on government bonds, 1) (assuming 2% deflation). With an inflation centric policy, now they'd ask for a larger nominal return, to maintain the same level of real return. 2) This'd push up the cost of government bonds, and lead to 3) larger and larger amount of tax revenues being used solely to meet the increasing interest payments. Pushing up the government debt burden.

1) Invalid assumption, at least if extrapolated to a term longer than one or two years. It's been mostly neutral.

http://www.tradingeconomics.com...

The mean inflation rate is negative. The rate of deflation doesn't really matter, the assumption would hold even if its -0.2%. We are concerned with the effects of the changing policy n the interest rate, and consequently on the debt portfolio.

It matters because instead of a 3% real return, you have a 1.2% real return. This would imply that the Japanese have a high pain tolerance, at least higher than us, and would accept lower real yields going forward.

2) My understanding is that most of Japanese debt is long term, rate locked. Yep, confirmed:
http://www.mof.go.jp...

That really doesn't matter. The locked roi is for the loans already taken. We are concerned with the new loans Japan would have to take, the new IOUs it would bring out. It would have to, considering low level of household savings because of the ageing population. The rate of increasing debt would rise further.

Debt already taken is the main problem. Future deficits, even with the retirement problems you cite, would be a consequence of future fiscal policy, and is not a given. Current debt IS a given.

3) At least a quarter of Japan's budget goes towards interest payments already. I learned this from Krugman himself actually a while back.

Yeah. 23% to be exact. The rate of return on government bonds is around 1% now. For the entire tax revenue to be spent entirely on the interest paynments, it needs to rise to 4%. Something which can be easily seen as happening in an inflation centric economy.

Again, it cannot happen if rates are locked for the long term. Bernanke has been swapping short term debt for long term debt since QE3 for this reason IMHO along with all the other stated reasons, the "Operation Twist".

I thought Krugman would address that, but throughout the article, he merely built up on his premise. A good growth in the first quarter isn't really an evidence. He didn't even address the weak investor sentiment, that is an important yardstick for economic health, isn't it?

That can be fixed through debasement.

Debasement is what would lead to higher inflation, increasing debt cost.

Debasement is the solution going forward. Debt cost would not increase if rates are locked for the long term at a low yield. Yes it will lead to inflation, which if spending does not keep up (i.e. stealth tax via inflation to counteract "sticky wages") will mitigate both current and future debt.

You have a point that future short term debt may be an issue. It would all come down to how much the government decides to screw the retiring generation. I think they won't have much of a choice but to do so, and we will follow suit. An inflationary policy with whatever they're using for CPI not keeping pace would hit seniors on both ends...erode personal savings and decrease retirement benefits. However, it would save the country by keeping costs low, devaluing long term debt, and minimizing the creation of new debt.
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
Cermank
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5/31/2013 11:46:07 PM
Posted: 3 years ago
At 5/31/2013 9:49:54 PM, wrichcirw wrote:
At 5/31/2013 9:15:53 PM, Cermank wrote:
At 5/31/2013 5:50:33 PM, wrichcirw wrote:
At 5/31/2013 11:13:25 AM, Cermank wrote:
At 5/29/2013 2:56:24 PM, wrichcirw wrote:
At 5/29/2013 12:35:13 PM, Cermank wrote:
http://www.nytimes.com...;

I actually don't agree with that, which is why I was kind of let down by the article. Japanese investors are used to deflation. Their 1% nominal return equaled a 3% real return on government bonds, 1) (assuming 2% deflation). With an inflation centric policy, now they'd ask for a larger nominal return, to maintain the same level of real return. 2) This'd push up the cost of government bonds, and lead to 3) larger and larger amount of tax revenues being used solely to meet the increasing interest payments. Pushing up the government debt burden.

1) Invalid assumption, at least if extrapolated to a term longer than one or two years. It's been mostly neutral.

http://www.tradingeconomics.com...

The mean inflation rate is negative. The rate of deflation doesn't really matter, the assumption would hold even if its -0.2%. We are concerned with the effects of the changing policy n the interest rate, and consequently on the debt portfolio.

It matters because instead of a 3% real return, you have a 1.2% real return. This would imply that the Japanese have a high pain tolerance, at least higher than us, and would accept lower real yields going forward.

My understanding was that the real return of return on US treasury bonds is around 1.7%, so its kind of similar, isn't it? Correct me if I'm wrong though, I'm not very sure about the figure.

2) My understanding is that most of Japanese debt is long term, rate locked. Yep, confirmed:
http://www.mof.go.jp...

That really doesn't matter. The locked roi is for the loans already taken. We are concerned with the new loans Japan would have to take, the new IOUs it would bring out. It would have to, considering low level of household savings because of the ageing population. The rate of increasing debt would rise further.

Debt already taken is the main problem. Future deficits, even with the retirement problems you cite, would be a consequence of future fiscal policy, and is not a given. Current debt IS a given.

The problem is, the policy proposals would lead to rising future debts. The current debt is already over 200% of the GDP, so resolution of that is almost impossible. Adopting policy measures leading to increasing future debt is catastrophic. Even though the economic growth strengthened in the first quarter, is it really sustainable? IF the interest rates rose as a result of expansionary monetary policy, the business investments would lower further, further bottoming out the investor confidence I know the governer of BOJ said that the long tern IR wouldn't rise, but I really don't see how. I remains to be seen, I guess.

3) At least a quarter of Japan's budget goes towards interest payments already. I learned this from Krugman himself actually a while back.

Yeah. 23% to be exact. The rate of return on government bonds is around 1% now. For the entire tax revenue to be spent entirely on the interest paynments, it needs to rise to 4%. Something which can be easily seen as happening in an inflation centric economy.

Again, it cannot happen if rates are locked for the long term. Bernanke has been swapping short term debt for long term debt since QE3 for this reason IMHO along with all the other stated reasons, the "Operation Twist".

I don't see why not. Are you saying that the rate f return will not need to rise in the near future, or that given the present conditions, it would not rise in the future? Because I kind of disagree on both counts.

I thought Krugman would address that, but throughout the article, he merely built up on his premise. A good growth in the first quarter isn't really an evidence. He didn't even address the weak investor sentiment, that is an important yardstick for economic health, isn't it?

That can be fixed through debasement.

Debasement is what would lead to higher inflation, increasing debt cost.

Debasement is the solution going forward. Debt cost would not increase if rates are locked for the long term at a low yield. Yes it will lead to inflation, which if spending does not keep up (i.e. stealth tax via inflation to counteract "sticky wages") will mitigate both current and future debt.

Low yield is a limited assumption though. IF it achieved, I can see this happening. Empirically, I'm not that sure. The yield did spike up recently, in Japan. And it all depends on the investor confidence anyway.

You have a point that future short term debt may be an issue. It would all come down to how much the government decides to screw the retiring generation. I think they won't have much of a choice but to do so, and we will follow suit. An inflationary policy with whatever they're using for CPI not keeping pace would hit seniors on both ends...erode personal savings and decrease retirement benefits. However, it would save the country by keeping costs low, devaluing long term debt, and minimizing the creation of new debt.

I dont think they can inflate their way out of the crisis. Especially for a country used to deflation. They are focussing on foreign investors. Foreign investors require higher yields. I don't see how they can address this gaping hole in their argument.
wrichcirw
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6/1/2013 12:53:08 AM
Posted: 3 years ago
I just want to say that this is an interesting conversation, I enjoy testing out my economic prognostications lol.

---

My understanding was that the real return of return on US treasury bonds is around 1.7%, so its kind of similar, isn't it? Correct me if I'm wrong though, I'm not very sure about the figure.

Well it fluctuates, so we can look at what it is today:

http://www.bloomberg.com...
http://www.bloomberg.com...

Japanese 10 yr at .86%
US 10 yr at 2.13%

Apparently Japanese deflation is at 0.7%, and US inflation at 1.1%, so apparently I was wrong, Japanese real rates are currently a bit higher than US rates, but not by much. I would imagine though over the past 10 years the Japanese real rate has been lower than the US real rate by a significant amount.

http://www.tradingeconomics.com...
http://www.tradingeconomics.com...

Debt already taken is the main problem. Future deficits, even with the retirement problems you cite, would be a consequence of future fiscal policy, and is not a given. Current debt IS a given.

The problem is, the policy proposals would lead to rising future debts. 1) The current debt is already over 200% of the GDP, so resolution of that is almost impossible. 2) Adopting policy measures leading to increasing future debt is catastrophic. 3) Even though the economic growth strengthened in the first quarter, is it really sustainable? 4) IF the interest rates rose as a result of expansionary monetary policy, the business investments would lower further, further bottoming out the investor confidence I know the governer of BOJ said that the long tern IR wouldn't rise, but I really don't see how. I remains to be seen, I guess.

1) Agree
2) Agree again.
3) Yup agree that one quarter of data is not really anything.
4) Correct me if I'm wrong here, but expansionary monetary policy deals with either the central bank injecting liquidity into the system by buying outstanding debt, or the central bank lowering interbank rates. Buying outstanding debt would LOWER interest rates, thus stimulating economic activity. Lowering interbanks would achieve the same effect.
Increased economic activity is what would RAISE interest rates, because of increase demand for money, that and potential tightening by the central bank to prevent rampant inflation due to increased demand for money.
5) My point #4 would explain why the MOF thinks that long term interest rates won't rise. They don't expect increased economic activity even with ridiculous amounts of stimulus. Without increased economic activity, there would be no increase in the demand for money.
This logic succinctly explains current monetary policy in the US and why QE infinity has not led to rampant inflation...the growth, and thus the increased demand for money, simply is not there.

Two reasons for #5:

i) Along with outsourcing anything and everything to the developing world, we have also outsourced growth. Japan has experienced this for decades...look up the term "hollowing out"...I've read a couple academic articles on the topic that go into this in some detail.
ii) Richard Koo's thesis on "balance sheet recessions". The private sector is still too busy paying off private debts to even think about growing.

3) At least a quarter of Japan's budget goes towards interest payments already. I learned this from Krugman himself actually a while back.

Yeah. 23% to be exact. The rate of return on government bonds is around 1% now. For the entire tax revenue to be spent entirely on the interest paynments, it needs to rise to 4%. Something which can be easily seen as happening in an inflation centric economy.

Again, it cannot happen if rates are locked for the long term. Bernanke has been swapping short term debt for long term debt since QE3 for this reason IMHO along with all the other stated reasons, the "Operation Twist".

I don't see why not. Are you saying that the rate f return will not need to rise in the near future, or that given the present conditions, it would not rise in the future? Because I kind of disagree on both counts.

If rates on the long term debt are locked, then if current rates rise, then all that will happen is that the market value of the long term debt will adjust to reflect current rates of return. So, if a $1,000 bond is locked at 1% for 30 years, and 10 years from now current rates rise to 5%...lol jesus, I don't know how to do the calculation, but the market value of that long term debt would drop dramatically.

Simpler example, if a $1,000 bond is locked at 1% for 2 years, and next year market rates are at 10%, then the market value of the 1% bond would be $900.90, I believe. $900.90 * (1.10% + 0.01%) = $1010, the one year return on a $1,000 bond at 1% plus principle at maturity.

Not sure if my market example here is fully applicable, but this is how I understand how market rates work on fixed-rate bonds. I wouldn't mind someone vouching for the math.

I thought Krugman would address that, but throughout the article, he merely built up on his premise. A good growth in the first quarter isn't really an evidence. He didn't even address the weak investor sentiment, that is an important yardstick for economic health, isn't it?

That can be fixed through debasement.

Debasement is what would lead to higher inflation, increasing debt cost.

Debasement is the solution going forward. Debt cost would not increase if rates are locked for the long term at a low yield. Yes it will lead to inflation, which if spending does not keep up (i.e. stealth tax via inflation to counteract "sticky wages") will mitigate both current and future debt.

Low yield is a limited assumption though. IF it achieved, I can see this happening. Empirically, I'm not that sure. The yield did spike up recently, in Japan. a) And it all depends on the investor confidence anyway.

Ok, you were right to bold that...yield is not fixed and adjusts to the market. Rates on the debt are indeed fixed.

a) Agree, but that only applies to new debt creation going forward, which is not a given. Low rates on current outstanding debt is fixed. Yield on this outstanding debt adjusts to market rates via changes in the market value of the bond as I demonstrated above. This is important. The Japanese government would love for the value of their bonds to depreciate precipitously...this makes the bonds much easier to pay off, yes?

The only question left is who is getting screwed here. The answer is the Japanese public, who is the primary holder of long-term Japanese debt.

I kept explaining this to Malcolmxy...he didn't know what to say to it...he was kind of speechless since he was so optimistic on Japan, lol. He couldn't argue for or against it.

I dont think they can inflate their way out of the crisis. Especially for a country used to deflation. They are focussing on foreign investors. Foreign investors require higher yields. I don't see how they can address this gaping hole in their argument.

You've mentioned yourself that they are in a terrible bind. I really do not see any other viable option going forward, especially because of their gigantic current debt. Deflation only makes it worse.

They are not focusing on foreign investors. Most outstanding Japanese debt is domestically held. This is why Japan has been able to stay afloat while Europe has cratered, even though Japan actually has a much larger debt load. The way Japan has done this is that they were more in control of their own destiny. European countries were not...they owed each other all kinds of debt...much of Europe's debt was not domestically held.

---

I would not mind a second or third pair of eyes to test out the logic here.
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
Cermank
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6/2/2013 2:18:24 AM
Posted: 3 years ago
At 6/1/2013 12:53:08 AM, wrichcirw wrote:

Well it fluctuates, so we can look at what it is today:

I would imagine though over the past 10 years the Japanese real rate has been lower than the US real rate by a significant amount.

It's kind of the same really. It just feels like more because of the deflation there.

http://www.tradingeconomics.com...
http://www.tradingeconomics.com...


1) Agree
2) Agree again.
3) Yup agree that one quarter of data is not really anything.
4) Correct me if I'm wrong here, but expansionary monetary policy deals with either the central bank injecting liquidity into the system by buying outstanding debt, or the central bank lowering interbank rates. Buying outstanding debt would LOWER interest rates, thus stimulating economic activity. Lowering interbanks would achieve the same effect.

Increased economic activity is what would RAISE interest rates, because of increase demand for money, that and potential tightening by the central bank to prevent rampant inflation due to increased demand for money.

Yeah, that's true. I was more concerned with the investor confidence and its impacts. I kind of overlooked the basic economics. :P

I think its kind of interesting how so many things are working in conundrum in Japan. You have expansionary Monetary policy that'd reduce the interest rate. You've growing economic activity that'd increase the interest rate. You have domestic investors that'd push up the interest rates because of the inflation. You have foreign investors that'd further push up the interest rates because the level of return they're used to are higher than Japan has to offer.

Japan is interesting.

5) My point #4 would explain why the MOF thinks that long term interest rates won't rise. They don't expect increased economic activity even with ridiculous amounts of stimulus. Without increased economic activity, there would be no increase in the demand for money.
This logic succinctly explains current monetary policy in the US and why QE infinity has not led to rampant inflation...the growth, and thus the increased demand for money, simply is not there.

But without economic growth, there's no point to their infusion, isn't it ? The whole point is to kickstart the economy, they want production backed inflation, not virtual (?) inflation. They won't, true- and that's why their plan sucks.

Two reasons for #5:

i) Along with outsourcing anything and everything to the developing world, we have also outsourced growth. Japan has experienced this for decades...look up the term "hollowing out"...I've read a couple academic articles on the topic that go into this in some detail.

Yeah, that is an interesting concept I've been pondering on lately. Do you have any interesting paper on this, conceptual papers, particularly?

ii) Richard Koo's thesis on "balance sheet recessions". The private sector is still too busy paying off private debts to even think about growing.

Exactly.

I don't see why not. Are you saying that the rate f return will not need to rise in the near future, or that given the present conditions, it would not rise in the future? Because I kind of disagree on both counts.

If rates on the long term debt are locked, then if current rates rise, then all that will happen is that the market value of the long term debt will adjust to reflect current rates of return. So, if a $1,000 bond is locked at 1% for 30 years, and 10 years from now current rates rise to 5%...lol jesus, I don't know how to do the calculation, but the market value of that long term debt would drop dramatically.

Simpler example, if a $1,000 bond is locked at 1% for 2 years, and next year market rates are at 10%, then the market value of the 1% bond would be $900.90, I believe. $900.90 * (1.10% + 0.01%) = $1010, the one year return on a $1,000 bond at 1% plus principle at maturity.

Not sure if my market example here is fully applicable, but this is how I understand how market rates work on fixed-rate bonds. I wouldn't mind someone vouching for the math.

Yeah, basically- the present value of the loans would fall in an inflated economy. true, so that's good for Japan, and that's something Japan is focussing on. But if we look at Japan history, prices of all the commodities have been going down consistently, except the IOUs. So a large part of the investible funds are already invested. New investible funds will have to buy governments new bonds. The interest rates on them is distorting. To the economy.

The investible fund comes from households and corporations. Their savings from HHs are falling, because of the high number of old people. The corporations hadn't been making too much profit, or large enough profits to lend. This the increased reliance on foreign investors.

Ok, you were right to bold that...yield is not fixed and adjusts to the market. Rates on the debt are indeed fixed.

a) Agree, but that only applies to new debt creation going forward, which is not a given. Low rates on current outstanding debt is fixed. Yield on this outstanding debt adjusts to market rates via changes in the market value of the bond as I demonstrated above. This is important. The Japanese government would love for the value of their bonds to depreciate precipitously...this makes the bonds much easier to pay off, yes?

The only question left is who is getting screwed here. The answer is the Japanese public, who is the primary holder of long-term Japanese debt.

Yeah, but that's what the point is, no? It's easier to pay off the previous debt, but they accumulating more and more debt in the process. Plus, their public is screwed so... that's bad. Combined with the fact that's its kind of impossible to pay the previous debt off, it's suicide lol.

I kept explaining this to Malcolmxy...he didn't know what to say to it...he was kind of speechless since he was so optimistic on Japan, lol. He couldn't argue for or against it.

I dont think they can inflate their way out of the crisis. Especially for a country used to deflation. They are focussing on foreign investors. Foreign investors require higher yields. I don't see how they can address this gaping hole in their argument.

You've mentioned yourself that they are in a terrible bind. I really do not see any other viable option going forward, especially because of their gigantic current debt. Deflation only makes it worse.

Austerity would have been my bet, but I don't see many people supporting that. Japan would be an interesting case study though, regardless of the way it develops.

They are not focusing on foreign investors. Most outstanding Japanese debt is domestically held. This is why Japan has been able to stay afloat while Europe has cratered, even though Japan actually has a much larger debt load. The way Japan has done this is that they were more in control of their own destiny. European countries were not...they owed each other all kinds of debt...much of Europe's debt was not domestically held.

91% of it is, true. Presently. But with the new policy, and an inflation centric economy, with the consumers and their savings hit hard, foreign investors would come in to 'rescue'. And that's where it would start losing it's control. The japanese past was rosy compared to the path it has taken now.
wrichcirw
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6/2/2013 8:51:09 AM
Posted: 3 years ago
At 6/2/2013 2:18:24 AM, Cermank wrote:
At 6/1/2013 12:53:08 AM, wrichcirw wrote:

Well it fluctuates, so we can look at what it is today:

I would imagine though over the past 10 years the Japanese real rate has been lower than the US real rate by a significant amount.

It's kind of the same really. It just feels like more because of the deflation there.

Hmm...do you have something for this? My understanding was that it was less, even far less, which is one factor that facilitated the yen carry trade.

Japan is interesting.

Agree.

5) My point #4 would explain why the MOF thinks that long term interest rates won't rise. They don't expect increased economic activity even with ridiculous amounts of stimulus. Without increased economic activity, there would be no increase in the demand for money.
This logic succinctly explains current monetary policy in the US and why QE infinity has not led to rampant inflation...the growth, and thus the increased demand for money, simply is not there.

But without economic growth, there's no point to their infusion, isn't it ? The whole point is to kickstart the economy, they want production backed inflation, not virtual (?) inflation. They won't, true- and that's why their plan sucks.

The infusion would then be to stem off a deflationary crisis, like what Bernanke has been doing here for several years now.

Two reasons for #5:

i) Along with outsourcing anything and everything to the developing world, we have also outsourced growth. Japan has experienced this for decades...look up the term "hollowing out"...I've read a couple academic articles on the topic that go into this in some detail.

Yeah, that is an interesting concept I've been pondering on lately. Do you have any interesting paper on this, conceptual papers, particularly?

I read this a couple years ago. I somewhat disagree with the tone of the paper which faults Japan for a "strategic crisis", but I found the reasons they cite to be very interesting. Personally I think that Japan really had no choice but to go this route...they were caught between a rock in a hard place, with developing countries on one side, and the Plaza Accords on the other side.

It's a surprisingly very readable paper.

http://www2.warwick.ac.uk...

Yeah, basically- the present value of the loans would fall in an inflated economy. true, so that's good for Japan, and that's something Japan is focussing on. But if we look at Japan history, prices of all the commodities have been going down consistently, except the IOUs. So a large part of the investible funds are already invested. New investible funds will have to buy governments new bonds. The interest rates on them is distorting. To the economy.

Ok. If I understand you correctly here, you are talking about deflation lowering the price of commodities for Japan specifically, and how the Japanese public is pretty much fully invested in Japanese debt, thus you see any new investments as necessarily being of a foreign nature.

This is what makes anaylsing Japan a bit difficult, IMHO. What you say here makes sense but I haven't seen any concrete analysis corroborating this. Granted I haven't looked as hard at Japan as I have other things.

The investible fund comes from households and corporations. Their savings from HHs are falling, because of the high number of old people. The corporations hadn't been making too much profit, or large enough profits to lend. This the increased reliance on foreign investors.

This goes back to Richard Koo. Corporations have been doing well, but their debt overhang, their "balance sheets", were so bad after the late 80s Japanese real estate crisis that Koo STILL cited that as the main reason for Japanese economic woes 20 years later. I find that believable...real estate prices in east Asia are absolutely insane and smell of a gigantic Ponzi scheme.

Ok, you were right to bold that...yield is not fixed and adjusts to the market. Rates on the debt are indeed fixed.

a) Agree, but that only applies to new debt creation going forward, which is not a given. Low rates on current outstanding debt is fixed. Yield on this outstanding debt adjusts to market rates via changes in the market value of the bond as I demonstrated above. This is important. The Japanese government would love for the value of their bonds to depreciate precipitously...this makes the bonds much easier to pay off, yes?

The only question left is who is getting screwed here. The answer is the Japanese public, who is the primary holder of long-term Japanese debt.

Yeah, but that's what the point is, no? It's easier to pay off the previous debt, but they accumulating more and more debt in the process. Plus, their public is screwed so... that's bad. Combined with the fact that's its kind of impossible to pay the previous debt off, it's suicide lol.

I'm going to ask you to substantiate that Japan necessarily will have to create significant new debt going forward. I know debt creation is commonplace for any nation, but IMHO it's all subject to future fiscal policy. What makes you so sure that Japan's future will necessitate significant new debt creation?

You've mentioned yourself that they are in a terrible bind. I really do not see any other viable option going forward, especially because of their gigantic current debt. Deflation only makes it worse.

Austerity would have been my bet, but I don't see many people supporting that. Japan would be an interesting case study though, regardless of the way it develops.

Austerity would exacerbate the deflation. That's why IMHO inflation is the most reasonable policy going forward, regardless of how potentially uncontrollable or destructive it may be.

They are not focusing on foreign investors. Most outstanding Japanese debt is domestically held. This is why Japan has been able to stay afloat while Europe has cratered, even though Japan actually has a much larger debt load. The way Japan has done this is that they were more in control of their own destiny. European countries were not...they owed each other all kinds of debt...much of Europe's debt was not domestically held.

91% of it is, true. Presently. But with the new policy, and an inflation centric economy, with the consumers and their savings hit hard, foreign investors would come in to 'rescue'. And that's where it would start losing it's control. The japanese past was rosy compared to the path it has taken now.

Are you sure it's not 92%, lol?

Can you cite something for this? I'd be interested in reading something about this "rescue".
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
Cermank
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6/2/2013 12:49:53 PM
Posted: 3 years ago
At 6/2/2013 8:51:09 AM, wrichcirw wrote:
At 6/2/2013 2:18:24 AM, Cermank wrote:
At 6/1/2013 12:53:08 AM, wrichcirw wrote:

Hmm...do you have something for this? My understanding was that it was less, even far less, which is one factor that facilitated the yen carry trade.

I tried to find numbers, but the earliest I can find are last years, and that won't help that much in proving a point. It doesn't really matter.

But without economic growth, there's no point to their infusion, isn't it ? The whole point is to kickstart the economy, they want production backed inflation, not virtual (?) inflation. They won't, true- and that's why their plan sucks.

The infusion would then be to stem off a deflationary crisis, like what Bernanke has been doing here for several years now.

That would be inflation for the sake of inflation. Money is increasing, the value in economy isn't. America, from what I gathered, has a production based inflation. Apart from a brief downfall in the Industrial production last to last quarter (?), it has been consistently increasing.


Two reasons for #5:

i) Along with outsourcing anything and everything to the developing world, we have also outsourced growth. Japan has experienced this for decades...look up the term "hollowing out"...I've read a couple academic articles on the topic that go into this in some detail.

Yeah, that is an interesting concept I've been pondering on lately. Do you have any interesting paper on this, conceptual papers, particularly?

I read this a couple years ago. I somewhat disagree with the tone of the paper which faults Japan for a "strategic crisis", but I found the reasons they cite to be very interesting. Personally I think that Japan really had no choice but to go this route...they were caught between a rock in a hard place, with developing countries on one side, and the Plaza Accords on the other side.

It's a surprisingly very readable paper.

http://www2.warwick.ac.uk...

Thanks :)


Ok. If I understand you correctly here, you are talking about deflation lowering the price of commodities for Japan specifically, and how the Japanese public is pretty much fully invested in Japanese debt, thus you see any new investments as necessarily being of a foreign nature.

Pretty much.

This is what makes anaylsing Japan a bit difficult, IMHO. What you say here makes sense but I haven't seen any concrete analysis corroborating this. Granted I haven't looked as hard at Japan as I have other things.

I had to kind of surf through the web to find a concrete analysis collaborating this. Most of my analysis comes from informal/ classroom discussions . The economist makes a similar case: http://www.economist.com...

"...Mr Abe may calculate, as many have before him, that there is no imminent threat of a debt crisis. Yields on Japanese government bonds (JGBs) are as low as ever. The market for JGBs is still dominated by loyal Japanese savers and institutions rather than by flighty foreigners who would demand higher yields...

...At some point, however, action will be needed. At over {Yen}1,000 trillion, the sheer size of the debt weighs ever more heavily. The cost of servicing it eats up over half of tax revenues. The high cost of importing energy while nearly all Japan"s nuclear plants are idled is also leading to worries that the current account could eventually slide into deficit, forcing the government to rely more on foreign money. On April 23rd the OECD, a think-tank, warned that reducing debt has to be Japan"s priority.

Japanese savers" ability to step in and reliably soak up new debt each year is expected to start dwindling in the nearish future. An ageing population means a falling savings rate as people retire and draw down income. Growing corporate cash surpluses, which get recycled into JGBs via the banks, have until now offset this trend, notes Naohiko Baba, chief economist for Goldman Sachs in Tokyo."

I know there's youtube video somewhere too. I'll link it later.

This goes back to Richard Koo. Corporations have been doing well, but their debt overhang, their "balance sheets", were so bad after the late 80s Japanese real estate crisis that Koo STILL cited that as the main reason for Japanese economic woes 20 years later. I find that believable...real estate prices in east Asia are absolutely insane and smell of a gigantic Ponzi scheme.

I'll have to look at this Richard Koo.

Yeah, but that's what the point is, no? It's easier to pay off the previous debt, but they accumulating more and more debt in the process. Plus, their public is screwed so... that's bad. Combined with the fact that's its kind of impossible to pay the previous debt off, it's suicide lol.

I'm going to ask you to substantiate that Japan necessarily will have to create significant new debt going forward. I know debt creation is commonplace for any nation, but IMHO it's all subject to future fiscal policy. What makes you so sure that Japan's future will necessitate significant new debt creation?

There is this awesome Japanese working paper that I found. I flicked through it, and it is dated 2012, but it's really well written.

The relevant portion is on page 8. Sustainability calculations.

"If the growth of private savings decelerates and government debt continues to increase, the amount of government debt will eventually exceed the amount of private savings. At that point, even if all the private sector financial assets are invested in the JGBs, leaving nothing for private sector credit, at least some JGBs must be held by foreign investors. As soon as the market sees that the current course definitely leads to such a situation, the government will have trouble selling new JGBs at low interest rates. In this paper, we call such a situation a "crisis." In a crisis, new JGBs cannot be sold at low interest rates and the interest rate would rise."

It's by T Hoshi. Named "How Long Will Japanese Government Bond Prices Remain High?"


Austerity would exacerbate the deflation. That's why IMHO inflation is the most reasonable policy going forward, regardless of how potentially uncontrollable or destructive it may be.

They have really low taxes, thus a huge room for tax increase. Incidently, the Hoshi paper argues kind of the same thing. They need more investments, productive investment.

They are not focusing on foreign investors. Most outstanding Japanese debt is domestically held. This is why Japan has been able to stay afloat while Europe has cratered, even though Japan actually has a much larger debt load. The way Japan has done this is that they were more in control of their own destiny. European countries were not...they owed each other all kinds of debt...much of Europe's debt was not domestically held.


Are you sure it's not 92%, lol?

Can you cite something for this? I'd be interested in reading something about this "rescue".

The Hoshi paper.

Incidently, a lot of my economic 'numbers' are from informal discussions, so... you know, a margin of error of 5%.
wrichcirw
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6/2/2013 3:49:04 PM
Posted: 3 years ago
At 6/2/2013 12:49:53 PM, Cermank wrote:
At 6/2/2013 8:51:09 AM, wrichcirw wrote:
At 6/2/2013 2:18:24 AM, Cermank wrote:
At 6/1/2013 12:53:08 AM, wrichcirw wrote:

The infusion would then be to stem off a deflationary crisis, like what Bernanke has been doing here for several years now.

That would be inflation for the sake of inflation. Money is increasing, the value in economy isn't. America, from what I gathered, has a production based inflation. Apart from a brief downfall in the Industrial production last to last quarter (?), it has been consistently increasing.

The value of the economy is increasing, because the value of debt is decreasing.

http://www2.warwick.ac.uk...

Thanks :)

Enjoy =)

I had to kind of surf through the web to find a concrete analysis collaborating this. Most of my analysis comes from informal/ classroom discussions . The economist makes a similar case: http://www.economist.com...

This article almost fully corroborates my perspective, that Japan will more than likely control fiscal matters to solve its problems.

"But many reckon there needs to be a fourth dart in the quiver: fiscal consolidation over the longer term to tackle the country"s vast public debt, which is expected to approach 240% of GDP next year (see chart)."

It seems to suggest that increased foreign participation is only a result of short term pressures, mainly stemming from energy imports. Otherwise, long term fiscal prudence and monetary stimulus is the solution.

I'll have to look at this Richard Koo.

What I like about Koo is that he's the only prominent Japanese economist to talk about Japan (what a concept, right?) to international crowds - otherwise, you'd have to rely on guys like Krugman and Bernanke. He's head economist at Nomura I believe, and happens to be fluent in Japanese and English. I don't have anything saved by him, but he was really public in 2008-2009 and did a lot of speeches and wrote quite a few essays. It shouldn't be hard for you to find something relevant written by him. He's famous for this:
http://www.amazon.com...

Yeah, but that's what the point is, no? It's easier to pay off the previous debt, but they accumulating more and more debt in the process. Plus, their public is screwed so... that's bad. Combined with the fact that's its kind of impossible to pay the previous debt off, it's suicide lol.

I'm going to ask you to substantiate that Japan necessarily will have to create significant new debt going forward. I know debt creation is commonplace for any nation, but IMHO it's all subject to future fiscal policy. What makes you so sure that Japan's future will necessitate significant new debt creation?

There is this awesome Japanese working paper that I found. I flicked through it, and it is dated 2012, but it's really well written.

The relevant portion is on page 8. Sustainability calculations.

"If the growth of private savings decelerates and government debt continues to increase, the amount of government debt will eventually exceed the amount of private savings. At that point, even if all the private sector financial assets are invested in the JGBs, leaving nothing for private sector credit, at least some JGBs must be held by foreign investors. As soon as the market sees that the current course definitely leads to such a situation, the government will have trouble selling new JGBs at low interest rates. In this paper, we call such a situation a "crisis." In a crisis, new JGBs cannot be sold at low interest rates and the interest rate would rise."

It's by T Hoshi. Named "How Long Will Japanese Government Bond Prices Remain High?"

lol, found it. I'll look through this later, thanks. =)
http://www.indiana.edu...

Austerity would exacerbate the deflation. That's why IMHO inflation is the most reasonable policy going forward, regardless of how potentially uncontrollable or destructive it may be.

They have really low taxes, thus a huge room for tax increase. Incidently, the Hoshi paper argues kind of the same thing. They need more investments, productive investment.

Ok. Perhaps the best way to address your argument is that austerity alone would exacerbate deflation, and thus monetary stimulus combined with fiscal prudence is the most reasonable policy going forward. Perhaps what you deem "austerity" and monetary easing are not diametrically opposing policies.
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
Cermank
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6/2/2013 8:35:47 PM
Posted: 3 years ago
At 6/2/2013 3:49:04 PM, wrichcirw wrote:
At 6/2/2013 12:49:53 PM, Cermank wrote:
At 6/2/2013 8:51:09 AM, wrichcirw wrote:
At 6/2/2013 2:18:24 AM, Cermank wrote:
At 6/1/2013 12:53:08 AM, wrichcirw wrote:

Ok. Perhaps the best way to address your argument is that austerity alone would exacerbate deflation, and thus monetary stimulus combined with fiscal prudence is the most reasonable policy going forward. Perhaps what you deem "austerity" and monetary easing are not diametrically opposing policies.

I think we kind of agree here, except with the degree of monetary expansion and tax levels. I think the monetary expansion should be controlled, with a larger focus on 'real' variables, and I think that's kind of what you mean by fiscal prudence. The two percent inflation target is what concerns me, because it makes the achievement of 4% interest rate very easy. Incidently, here's the video I was talking about. http://www.youtube.com...
wrichcirw
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6/3/2013 2:06:16 PM
Posted: 3 years ago
At 6/2/2013 8:35:47 PM, Cermank wrote:
At 6/2/2013 3:49:04 PM, wrichcirw wrote:
At 6/2/2013 12:49:53 PM, Cermank wrote:
At 6/2/2013 8:51:09 AM, wrichcirw wrote:
At 6/2/2013 2:18:24 AM, Cermank wrote:
At 6/1/2013 12:53:08 AM, wrichcirw wrote:

Ok. Perhaps the best way to address your argument is that austerity alone would exacerbate deflation, and thus monetary stimulus combined with fiscal prudence is the most reasonable policy going forward. Perhaps what you deem "austerity" and monetary easing are not diametrically opposing policies.

I think we kind of agree here, except with the degree of monetary expansion and tax levels. I think the monetary expansion should be controlled, with a larger focus on 'real' variables, and I think that's kind of what you mean by fiscal prudence. The two percent inflation target is what concerns me, because it makes the achievement of 4% interest rate very easy. Incidently, here's the video I was talking about. http://www.youtube.com...

I used to think this way, but again, you have to keep in mind that all current debt is at a fixed rate. Current debt may yield 4%, but only if the principle decreases in value dramatically. This makes it much easier for the MOF to handle.

Basically, at 2% inflation and 4% market rates, the $$$ necessary to service current debt will not increase by much, because most of it is long-term debt with locked rates.

Again, this is an extremely important point. I can't make it any clearer than this.
At 8/9/2013 9:41:24 AM, wrichcirw wrote:
If you are civil with me, I will be civil to you. If you decide to bring unreasonable animosity to bear in a reasonable discussion, then what would you expect other than to get flustered?
jimtimmy2
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6/4/2013 8:19:54 AM
Posted: 3 years ago
Krugman was never a good economist. He is a smart guy, but he's always had economics wrong.

However, he isn't as dumb as his modern blog and articles would suggest. He's just putting on a show that appeals to the tribalism of rich, ignorant progressives.
Cermank
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6/12/2013 12:07:23 PM
Posted: 3 years ago
http://mises.org...

This one argues something completely different, but for the life of me I can't understand why I don't agree with it. There's this nagging feeling there's a big gap in the argument though.
llamainmypocket
Posts: 253
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6/12/2013 3:25:08 PM
Posted: 3 years ago
"Abenomics" I'm pretty sure Is just means monetary stimulus or debasing the currency to create asset inflation. Whether or not it leads to a more robust economy in Japan is somewhat a matter of opinion. It should increase asset prices denominated in yen just as the same policy of our Fed raised asset prices denominated in dollars.

Conclusion, you can be a bull on Japan if being bullish means that Japanese assets will increase in price due to currency debasement. It is not a fundamental analysis of strength in Japan. I think we can all agree that our efforts in the USA have not transformed into a satisfactory recover but it has made a sound speculative venture for generating money.

Are you looking to make money or are you looking for faith in Japan's future based upon sound fundamental analysis?