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Japan Falls into Recession

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Re: Japan Falls into Recession

#111

Post by dimitar »

hudibras wrote: post #83
dimitar wrote: post #43

Here is the common ground and controversy between most economists on the situation, I think it is interesting how much common ground there is: The common ground: * The government of Japan faces budget constraints; it cannot tax more than a certain amount and that includes seigniorage (taxing using inflation). * Right now Japan doesn't seem to be immediately close to those constraints since interest rates and inflatio…

There's so much about your post which is incorrect that I don't have time to debunk it all. So let me just hit the biggest error, so that others don't have to waste their time: It's literally impossible for Japan to default on their debts, which are almost completely in Japanese currency.

This a really strong statement and is either a misunderstanding or exaggeration. The received wisdom is either that a country issuing debt in its own currency cannot be forced to default or that it is not as vulnerable to sudden stops of confidence in its debt. There are various levels of conviction in these statements.

This definitely doesn't mean that it is impossible; at a minimum, a country might choose to do it. In fact as others have pointed out, default is sometimes preferable to hyperinflation and extreme devaluation. After all, all countries, Japan included, rely on imports to get at least some essential goods (think about food, fuel, medicine and tools); autarky is possible, but very inefficient and painful.

Re: Japan Falls into Recession

#112

Post by gw »

guelo wrote: post #71
gw wrote: post #66

Earlier quoted context omitted.

> You only have to look at the US and Euro economies post 2008 to see the real world benefits of QE. You cannot isolate variables in two separate economies; any conclusions assuming you can are bogus.

Then we can never look at any real world examples for guidance because there are always too many variables. That leaves us with untested partisan theories pushed by ideologues. I mean, how can it be that all the American conservative economists that have been predicting massive inflation since 2008 have not changed their theories at all?

> Then we can never look at any real world examples for guidance because there are always too many variables.

Agreed.

> That leaves us with untested partisan theories pushed by ideologues.

The theory I responded to was not "tested" either. What double-blind study did the citizens of the U.S. and Europe take part in?

Re: Japan Falls into Recession

#113

Post by shit_parade »

brc wrote: post #63
efjhewjfnkew wrote: post #8

Earlier quoted context omitted.

I didn't mean for it to be interpreted too literally. Since QE increases the value of the stock market at the expense of a currency's value, it is actually eating away at the wealth and savings of individuals and redistributing it to stockholders. These stockholders tend to already be quite wealthy themselves. Herein lies the problem. Very wealthy individuals tend to spend a much smaller fraction of their accumulated…

You're right that QE erodes the savings and income of not-rich people - the middle class and the poor. You're wrong in your theory that accumulated wealth does nothing. In a QE world, the very rich don't sit on cash - that would mean losing money through currency decreases. There is no such thing as 'wasted capital' - rich people store their wealth in a variety of vehicles - whether in banks (where it is re-lent out…

When the ECB introduces such things as negative interest rates then yes, sometimes large amounts of capital does essentially sit and do nothing but be savings (in a healthy real-market economy this would naturally reduce interest rates), large institutional wealth is often as interested in capital preservation as it is in capital growth -- this pretty much what the bond market is all about.

Re: Japan Falls into Recession

#114

Post by forgingahead »

gear54rus wrote: post #61
kristofferR wrote: post #35

Earlier quoted context omitted.

Yeah, this trick works for most paywalled articles out there. Googling the URL/title of the paywalled article will almost always give you access the full article (or at least a copy somewhere else).

What I don't really get is how people on this tech-savvy resource still submit links to sources which go against the very idea of free information. Can't we just look this up somewhere else instead of encouraging this bullshit paywall behavior? Or is the quality of information that different?

The quality is night and day. The BBC has unfortunately lost the plot in recent months (go to their homepage and see how many stories are headlined with quotations), and every other free source needs to pander to the clicks-for-advertisers market, so stories are rushed, content is emotional, and quantity is prized over quality.

The WSJ is the last remaining quality paper. They increase their prices every year, but I still pay for it. I highly recommend that you do too.

Re: Japan Falls into Recession

#115

Post by mc32 »

xorcist wrote: post #110
mc32 wrote: post #86

Earlier quoted context omitted.

I think because while average prices for individual devices go down, you make up for that with volume in an expanding market. Once you saturate the market, then you have to diversify, create new markets or consolidate (buy more market share).

A computer manufacturer doesn't need to increase their market share to keep the same profit when a process technology matures and therefore gets cheaper. It is trivially possible to keep making money selling computers even if the total market share doesn't expand.

As an entity, yes, but overall as an economy this does not work. How will you be able to afford giving employees raises? Cut the workforce, and then what happens when everyone 'cuts the workforce'? what happens to total buying power?

Re: Japan Falls into Recession

#116

Post by nandemo »

hudibras wrote: post #83
dimitar wrote: post #43

Here is the common ground and controversy between most economists on the situation, I think it is interesting how much common ground there is: The common ground: * The government of Japan faces budget constraints; it cannot tax more than a certain amount and that includes seigniorage (taxing using inflation). * Right now Japan doesn't seem to be immediately close to those constraints since interest rates and inflatio…

There's so much about your post which is incorrect that I don't have time to debunk it all. So let me just hit the biggest error, so that others don't have to waste their time: It's literally impossible for Japan to default on their debts, which are almost completely in Japanese currency.

> It's literally impossible for Japan to default on their debts, which are almost completely in Japanese currency.

False.

Many countries have defaulted on debt denominated in local currency. E.g. Brazil in 1990 and Russia in '98.

In Brazil's case, part of the debt was indexed to inflation, so inflating away the debt wasn't easy.

AFAIK most of Japan's debt isn't inflation-linked. Still, a high enough rate of inflation isn't substantially different from partial default.

PS: See the table on page 30. http://www.cass.city.ac.uk/__data/assets/pdf_file/0009/21997...

Re: Japan Falls into Recession

#117

Post by yarou »

brc wrote: post #63
efjhewjfnkew wrote: post #8

Earlier quoted context omitted.

I didn't mean for it to be interpreted too literally. Since QE increases the value of the stock market at the expense of a currency's value, it is actually eating away at the wealth and savings of individuals and redistributing it to stockholders. These stockholders tend to already be quite wealthy themselves. Herein lies the problem. Very wealthy individuals tend to spend a much smaller fraction of their accumulated…

You're right that QE erodes the savings and income of not-rich people - the middle class and the poor. You're wrong in your theory that accumulated wealth does nothing. In a QE world, the very rich don't sit on cash - that would mean losing money through currency decreases. There is no such thing as 'wasted capital' - rich people store their wealth in a variety of vehicles - whether in banks (where it is re-lent out…

>You're wrong in your theory that accumulated wealth does nothing. In a QE world, the very rich don't sit on cash - that would mean losing money through currency decreases.

Correct, but they still don't spend money. The very wealthy are known to hoard money, it doesn't matter in which "vehicle" they store their money in.

>There is no such thing as 'wasted capital' - rich people store their wealth in a variety of vehicles - whether in banks (where it is re-lent out for many uses), public stock ( where it is used for company investment and operations), and private investment, such as investing in pre-IPOD start ups and private equity.

It's not wasted capital, but it doesn't stimulate the economy either. They are not contributing to investment, in the real economic sense.

>Even Apples massive cash hoard is put to good use, somewhere.

Wrong.

>It's a very cartoonish model to imagine a daddy warbucks with a big pile of cash saying 'I just don't have time to spend this'. In actual fact, there would be a team of investment managers saying 'we can't find any good places to invest, so we're letting the bank invest it for us, for the time being'.

It's still not real investment. I think you don't understand what the "I" component in GDP is. [0]

[0] http://en.wikipedia.org/wiki/Gross_private_domestic_investme...

>The answer to Japan's problems is cutting government spending and debt. This has always been the answer, this will always be the answer, whether you're an individual with 20k in debt or a country with 200b in debt. The key is to realise that there is no magic Keynes multiplier.

Wrong again. Greece cut their government spending a lot, they don't seem to be in great shape. The reality of the matter (while counterintuitive) is that deficit spending helps stimulate the economy. As long as Japan wants to devalue their currency, government spending is the last option left to stimulate their economy.

Re: Japan Falls into Recession

#118

Post by grecy »

gear54rus wrote: post #61
kristofferR wrote: post #35

Earlier quoted context omitted.

Yeah, this trick works for most paywalled articles out there. Googling the URL/title of the paywalled article will almost always give you access the full article (or at least a copy somewhere else).

What I don't really get is how people on this tech-savvy resource still submit links to sources which go against the very idea of free information. Can't we just look this up somewhere else instead of encouraging this bullshit paywall behavior? Or is the quality of information that different?

Or why can't HN detect that it's a paywalled article, and automatically change the link to the through-google one?

Re: Japan Falls into Recession

#119

Post by IndianAstronaut »

pm90 wrote: post #81
a8da6b0c91d wrote: post #37

Earlier quoted context omitted.

> the majority of the Japanese voting public don't want immigration The vast majority of the American public don't want it either, but businesses do, so it happens anyway.

American society is much more accepting of outsiders than any other, as far as I know. Its not like others are deliberately racist, but just that America's history has been one of accepting immigrants from all over the place, so I guess having people who don't look like you or have the same beliefs/culture/language is more accepted than in other countries. At least that's my theory. I've lived in America for just 3 y…

It is not just race but cultural as well. Brazillian Japanese who immigrated to Japan also face discrimination, even though they are ethnically Japanese.

Re: Japan Falls into Recession

#120

Post by deciplex »

xorcist wrote: post #108
jpatokal wrote: post #90

Earlier quoted context omitted.

It's "literally impossible" only in a very literal sense of the word. In other words, yes, Japan can indeed get out of a debt of 17 gazillion yen simply by printing 17 gazillion yen, but I'm not sure flooding the money supply like this would cause much less damage than an actual default (=the Japanese government telling its bondholders that it's not going to repay them).

You're not sure financial institutions would prefer being paid something rather than nothing . Could you please elaborate?

I'd imagine, it's that the damage caused by massive inflation does not start and stop at what financial institutions would prefer. (For that matter, financial institutions would probably prefer a haircut on their Japanese bond holdings, over the 3rd largest economy going up in smoke.)
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