Monday, November 02, 2009

Look East to the Future?

Ritholtz notes that the Japanese Keynesians have just about done that country in.

Japan’s terrible errors are by now well known. It failed to jettison its mercantilist export model in time. It resisted the feminist revolution, leading to a baby strike by young women. It acquiesced in a mad investment bubble (like China now) in the 1980s, stealing growth from the future.

It wasted its immense fiscal firepower, scattering money for 20 years on half-baked spending projects to keep the economy afloat. QE was too little, too late, and this is the lesson for the West. We must cut borrowing drastically over the next decade, and offset this with ultra-easy monetary policy.

Does Downing Street understand this? Does the White House? Does the European Central Bank? Clearly not.” ---quoting A. Evans-Pritchard

There are a few significant differences--first being that the US is not xenophobic about immigration (to say the least) and next, that the US does not have a birth-dearth as does Japan.

But to make up for that we have monomaniacal Keynesians. OK, you can forget the 'mono-' part of that adjective.......

1 comment:

J. Strupp said...

I believe Japan has a bit more of a problem with deflation than we do right now wouldn't you say? Actually, Japan's stimulus packages trickled out at a snails pace for a decade while deflation came down like a hammer on the country. They also decided to let their banking system try and earn their way out of insolvency for the better part of the 1990's (sound familiar) which has compounded the problems over there. Yet guys like Ritholtz are still worried about Japanese debtload. Yet Japanese treasuries are a whopping 1.5% (approx.) and their CDS spreads are in line with all of those shakey northern European countries.

There's more than meets the eye here. Bottom line: Japan should have fixed their banking system FIRST and spent like crazy at the same time.