This page has been archived and commenting is disabled.
Krugman And The Keynesian Chorus Are Lying: Japan's "Lost Decade" Is A Myth
Submitted by Peter St.Ongs (of Mises.org) via Contra Corner blog,
One of the great economic myths of our time is Japan’s “lost decades.” As Japan doubles-down on inflationary stimulus, it’s worth reviewing the facts.
The truth is that the Japanese and US economies have performed in lock-step since 2000, and their performances have matched each other going as far back as 1980.
Either Japan’s not in crisis, or the US has been in crisis for a good thirty-five years. You can’t have it both ways.
Here’s a chart of per capita real GDP for both Japan and the US from 2000 to 2011. Per capita real GDP is the GDP measure that best answers the question: “is the typical person getting richer?”
The two curves look like they came from the same country:
Next, we can go back to 1980, to see where the myth came from. Japan was just entering its “bubble” decade:
We can see what happened here: Japan had a boom in the 1980s, then Japan busted while the Americans had their turn at a boom. By 2000 the US caught up, and Japan and the US synched up and shadowed each other, reflecting boom followed by the inevitable bust.
The only way you can get to the “lost decades” story is if you start your chart exactly when Japan was busting and America booming. Unsurprisingly, this is standard practice of the “lost decades” storytellers.
Of course, this would be like timing two runners, and starting the clock when one of them is on break. It’s absurd, but it gives the answer they want.
Things get worse when you include the artificial effects of inflation and population. Higher inflation and population growth both make the economy appear bigger without making people richer. If America annexed Mexico tomorrow, the US economy would grow by 30 percent. But that’s not going to make the average American 30 percent richer.
Adjusting for inflation and population is Macro 101. It’s so basic, in fact, that we might wonder if the “lost decades” macroeconomists are being intentionally forgetful. Why on earth would they do that?
Who Benefits from the “Lost Decades” Myth?
Who promotes the “lost decades” myth? Are the storytellers trying to make Japan look bad, or the US look good?
I suspect it’s a little of both: politicians in Japan need the sense of crisis to push their vote-buying schemes. It’s a lot easier to sell harmful policies if you can just convince the voters that everything’s already fallen apart. They’ve got nothing to lose at that point. In a crisis we are all socialists.
This cynical PR campaign is bearing fruit already, as Japanese voters accept inflationary policies from their new prime minister. In the name of reviving an economy that’s supposedly on its death-bed. Hard-working Japanese are losing their savings through low rates and inflation, but honor demands sacrifice so long as the future of the children supposedly hangs in the balance.
In reality, the re-telling of Japan’s myth reminds one of a doctor who lies to a patient so he can sell a cure that harms the patient.
On the American side, the myth of Japan’s “lost decades” is similarly useful: it makes our economic overlords seem like they actually know what they’re doing. And it serves to warn the naysayers: the “lost decades” myth is a bogeyman waiting to pounce if we ever falter from our bail-outs and vote-buying stimulus.
The truth, hidden in plain view, is that Japan’s not bad enough to be a battering ram for Japan’s Keynesian vote-buyers, and the US economy isn’t good enough for our home-grown vote-buyers to keep their jobs.
»
- 20518 reads
- Printer-friendly version
- Send to friend
- advertisements -
Blankfein and Fink say they are doing just fine... Not lost.
OT -
have been investing in turkey's real estate
if china can build an apartment complex for each human on the planet, why can't everybody do the same
winner
@Safely
Keep your socialist communist clap trap to yourself here. If you don't love America move to China.
America and Japan are two great ecomonies. the two charts only show how great central banks can sustain growth and prosperity in free markets where ingenuity and common sense business prevails.
The author fails to take Government Spending into account. Remember that it adds directly to GDP.
What did the Japanese do after the 1989 implosion? They spent TONS of money on bridges to nowhere and went deeply into debt. That's why their Debt/GDP ratio is now 240%!
Remove Government Spending from the equation, and the "Lost Decades" will come clearly into focus...
The Author's premise is bogus...
It is called an LBO and allows elites to fund their wealth with the assets and liabilities of the rest
Krugman forgot to include REAL inflation in GDP projections which ended up cheering Argentina. Of course they defaulted for the 3 time 2 years later....
http://krugman.blogs.nytimes.com/2012/05/03/down-argentina-way/?_php=tru...
Japan and the US both use irrelevent data to come up with their "GDP" numbers. Government spending is all waste, and shouldn't count for anything.
You need only look at the state of young people in Japan to seewhat kind of state their economy is in. Young men who live with their parents and never leave their rooms--Hikikomori, now known in the West as NEETs (Not in Employment, Education, or Training). The central banks have stolen most of the available productive capital (which is what funds young people's jobs) and given it to asset holders (at best, their parents, but mainly the ultra-wealthy).
This is neo-fuedalism, where children can't earn anything on their own, but rather whatever they have, they inherit from their parents.
This isn't a lost decade, it's a lost generation, bordering on a lost society.
Exactly, as if changes in the "average per-person GDP" show that the "average person" in either country is benefitting or not . . . as the author claims.
Income distributions by class inconveniently tell the real story of the gov-funded bubbles.
Not to mention the number of homeless has skyrocketed in Japan. When I was last there about 10 years ago, the thing that struck me the most was not their technological cities, their manufacturing, or their culture and service... no, it was the amount of homeless tarp cities that were on every river bank, park outskirts, and other vacant spaces in major cities. Didn't expect that, and suspect it has only gotten worse since then.
Spot on ... both include Debt-waste into GDP .
.. has nothingn to do with reality
.. more to do with CBs printing in lock-step.
And doesn't Japan disprove the Krugman contention that all would be well in The US if The Fed would just print MORE? Japan now has now QE'd itself to the point that official Debt/GDP is over 250% and, despite this, GDP is declining. So does Krugman maintain that even 250% of Debt/GDP is still not enough? He can't have it both ways.
How many weeks did you take to think up Zirpedge?
Answer: 20 weeks, 4 days.
Born to fiat.
Eat your imagery QE keystrokes.
01000111 01101111 00100000 01100110 01110101 01100011 01101011 00100000 01111001 01101111 01110101 01110010 01110011 01100101 01101100 01100110 00100000
:-)
When you promote "loyalty to the US", you are promoting the Useful Servant or Useful Tool/Fool culture, which disproportionately benefits the top of the pyramid hierarchy.
Note that no matter how much you may love your company or your country, neither will ever love you.
Keep your "love" for your family and friends, and keep your "Allegiance" (a temporary and mutually beneficial relationship) for your company or country.
Japan is a strong economy. Higher living standard than in USA. This is identical to the powerful brainwashing propaganda launched at Soviet Republics to convince them of their own worthlessness. Just more divide and conquer.
Almost like the central banks are connected at the hip.
But...but....but what about the sovereign debt?
<I'm gonna wash that sovereign debt right out of my hair.>
CD,
will that hair wash take out cesium 137 as well?
Read this shit it'll blow your mind
! http://money.cnn.com/2014/08/28/news/economy/japan-abenomics/index.html
"The idea was that an increase in sales would boost corporate profits and lead to higher pay for workers, who would then increase spending."
Oh, you mean the profits were not 'trickled down' below the executive level. Color me fucking shocked.
Since when does "print even more money and sell even more debt" constitute an ambitious plan...
...when your friends, family, and political benefactors are the recipients of all that freshly printed money.
Corruption. Everything else is marketing.
The End.
"One major problem is that the "virtuous cycle" promised by Abenomics supporters has been slow to materialize. The idea was that an increase in sales would boost corporate profits and lead to higher pay for workers, who would then increase spending.
Yet even with significant prodding from the government and record profits, Japanese businesses are not paying higher wages.
Haruhiko Kuroda, the Bank of Japan governor, last week called the puzzle "troublesome," and lamented a lack of mobility in Japan's labor force. Still, he said workers would be able to negotiate higher wages if they could count on sustained inflation"
Rich get richer. Same old paradigm.
Problem with capitalism is that labor can't migrate quickly to take advantage of new growth areas. People like their homes, their communities, so they don't pick up and move to Vietnam when factories are relocated. Government can't do anything about that, nor should it. Yet TPTB promise and promise to give themselves power and money. We're all just flotsam in the economic tide,
Japan is replete with mythos
I'm pretty sure you can put this down to the altar of 'growth' that most of us have been worshipping at for the past, I dunno, 30 years at least.
If it's 'growth', it's all good, even if it carries a high social, environment and other costs, even if it's simply borrowing from the future to pay for now.
If it's not 'growth', even if it is just slowing growth, oh noes it's the end of the fucking world, somebody, anybody, fix it, FIX IT NOW.
Case in point, look at doom mongering over the 'population crisis' in Asia, MSM will have you believe that nations like China and Japan, who reached a population plateau and are gingerly rebalancing their populations to be better based on what their land is capable of supporting. Yes they are the ones who have a population 'crisis', they need to keep growing their herds until every available natural resource they have is tapped out and everyone is starved into semi-poverty just so we can have some magical GDP growth numbers.
GROWTH is necessary to cover the blank cheques POLITICS is issuing. US Voters do not control Congressional spending but have lived on global credit for decades.
US households need to pay TAXES for their spending on 14 carrier groups on F-35s and on propping up banks. If Bain Capital isn't paying taxes someone else must.
Maybe a 20% Federal Sales Tax as in UK and Germany in the answer ?
Sustainability means planning our future in a way that we do not set ourselves up to crash and burn at some future date. Long-term planning has not been something politicians excel at or are even good at. Our system is geared at getting politicians reelected and fulfilling the most pressing needs of today.
Things like profit, greed, and quenching our unrelinquishing desire for growth are placed in front of longer term issues and needs. Mapping out a logical and sustainable long-term plan requires delving into some rather hefty philosophical questions like what brings real happiness. More on this important topic in the article below.
http://brucewilds.blogspot.com/2014/04/planning-sustainable-future-for-m...
Debt vs GDP will show you how Japan is lost and the US is not far behind.
Which Which is why I apply the SAME financial analysis (of various ratios) of a country that I apply to a company.
If voters did this also, "Ploticians", would be out on their asses in no time.
"They lie , we do charity"
"A lie a day keeps the lynch mob away."
"Malice is the Chalice
Quested by the Bodyguard of Lies" ...apocraphal Arthurian
See why the Rich lie to you for your own good:
http://andreswhy.blogspot.com/2008/05/charity-and-malice.html
Don't you guys have any fact checkers, the story is BS:
From Forbes, of all places:
Paul Krugman Says It Again: Japan's Stagnation Is A Myth
http://www.forbes.com/sites/eamonnfingleton/2013/02/06/paul-krugman-says...
Or here directly from Krugman himself
["First, you should never make comments on Japanese growth or lack thereof without taking demography into account. Japan has low fertility and low immigration; this has translated into a dramatically aging population and a declining working-age population. So what does Japan’s performance look like if you calculate real GDP per working-age adult? (In the picture below I define working-age as 15-64"]
http://krugman.blogs.nytimes.com/2013/02/05/the-japan-story/
Or from other Keynesians:
["While many speak of a lost decade, or even lost decades, there is really little that warrant such a description. In fact, one can make quite a convincing case for arguing that what Japan went through is nothing less than a sort of miracle."]
http://seekingalpha.com/article/311111-the-japanese-economic-miracle
More mind-bending bullshit from the acolytes of mises.org? Shocking!
The lost decades do not refer to GDP, they refer to the people of Japan that lost a big chuck of their wealth from the real estate crash, then the stock market crash. This is why they have had interest rates of about .5% for the past 20 years. It has not affected GDP to a great extent, as corporations and banks were not allowed to go bankrupt. So yes, from a GDP standpoint, things don't look too bad, but from the standpoint of millions of people that had/have negative equity, and lost much of the wealth they might of had in investments, it's lost decades. It always amazes me that economists can look at GDP growth, but ignore the plight of the people in a country. It is about how the average person is doing, not corporations. Much the same as the wealth that was lost by Americans, either by the housing crash, or stock market crash of 2008. S
Indeed. Near 20% child poverty level, almost half the population is unemployed or working part time, Japan only produces 39% of the food it consumes, and money and people continue to flow from the rural areas to the cities.
If quality of life is measured by the number of trains or the speed of the internet, Japan is on top. Measure it is less quantifiable human terms and it is on a long term slide.
Coopster,
I would submit that even the GDP numbers are crap. It is ridiculous that government spending/debt should count toward GDP. If you remove all of the Japanese government's 25-year borrowing/spending binge from the GDP equation, their economy has been in contraction the entire period.
Same for the US; if not for the addition of $9 trillion of federal government deficit spending since 2008, our GDP numbers would show the truth; we never left the "Great Recession", and in fact, we're in a depression.
Any 'growth' in either economy has all been smoke and mirrors...
Complete garbage! This article is wrong on so many levels, I don't even know where to start. How do you criticize nonsense?
A knowledgable person would find a way.
The only thing you need to know about krugshit is that shit comes out of his mouth and hot air comes out of his arse.
Japan had not one but three lost decades. United Stated probably performed even worse, especialy after 1995. Peace.
Both countries have lost ground in the world power race.
No wonder: The US and Japan are run by the same puppeteers.
While they claim otherwise, in many ways Bernanke and the Fed have put America on a path that mirrors the same unsuccessful path taken by Japan. A path that avoids real reform and bails out the very people that caused many of our problems.
Bernanke upped the ante by setting the bailout and money printing machines on high and flooding America and the world with QE. By selling other central bankers on this solution he has taken the lead in an experiment that is losing traction. Real momentum seems to ebb shortly after each new wave of stimulus and another fix seems to constantly be needed. More on this subject in the article below.
http://brucewilds.blogspot.com/2013/11/we-are-on-path-to-lost-decades.ht...
They have not mastered the art of the stock buyback like RadioShack to artificially boost stock prices. but as Tyler pointed out they are catching on.
Record Stock Buybacks: First In The US, Now In Japan.
When Steve Jobs called up Warren Buffett to ask him what to do with all the cash Warren said well you could buy back your own shares. Steve declined. Cook obliged.
Look at any 10 year treasury yield chart (adjusted for inflation) for the last 10 years for Canada, Germany, UK, USA and Japan. They are all completely identical.
Haha
One company, Walmart, has authorized $15 billion in stock buybacks this year, roughly equal to its 2012 net income and more than twice what the company did in buybacks in 2012. Demos did an analysis of Walmart’s 2012 buybacks and concluded that if it instead invested that money in its workforce, “these funds could be used to give Walmart’s low-paid workers a raise of $5.83 an hour, more than enough to ensure that all Walmart workers are paid a wage equivalent to at least $25,000 a year for full-time work.”
The added bonus: The workers would get that raise without Walmart having to raise the prices of its goods a single dime.
Those folks at Walmart could be taking vocational training while they work and eventually fill some of those high skill jobs that I keep reading are out there by the thousands. They are not stuck, unless they make themselves stuck. And as far as the buybacks go, these companies would be investing that money, creating new jobs, if there was anything to invest in, in this insane economy.
Care to share with us where all those thousands of high paying 'skilled' jobs you READ about are. Unless you are being sarcastic. Hard to tell these days.
You might want to hook up with the ZH scammer who offers $9,500/wk working off the Internet.
/sarc
Truly, there was at least one article (not in MSM) about businesses that would hire more highly skilled people if they could find them. I concede. I don't want to spend time looking for the article.
The problem for Walmart is that they have raised prices by well over a dime and are no longer 'your low price leader'. Without that significant advantage they are losing sales to other stores. Adjusted for inflation and price increases, actual sales volume is down.
Great idea; and how do they pay for this for every year after this?
This is government economist logic.
This upcoming carry trade Tuesday will bare the truth.
Too many people. Growth due to moar people will fail. The Petrie dish is full. Not even Capitalism will save us. The End.