Japan Falls into Recession • Hacker News Board

Re: Japan Falls into Recession

#151

Post by bildung » Mon, Nov 17, 2014, 9:51 AM UTC

hudibras wrote: post #129

ekianjo wrote: post #51

Earlier quoted context omitted.

> Deflation tells consumers not to buy as you wait 6 months and it'll be cheaper. I live in Japan for many years and I have never seen such thing as deflation here. Prices have remained stable for most items or have increased a little bit. The idea that stuff becomes cheaper as you wait is ludicrous in Japan.

No serious economist believes the old wives tale about deflation keeping consumers on the sidelines while they wait to save 1 cent (or yen) on a can of soda next year. But it's got "truthiness" so it keeps getting brought up in these HN discussions.

> No serious economist believes the old wives tale about deflation keeping consumers on the sidelines while they wait to save 1 cent (or yen) on a can of soda next year.

A serious economist is able to differentiate between goods that can (and will) be delayed an a consumable like a can of soda. Cars are an example of a consumer good where consumption observably is affected by deflation.

Re: Japan Falls into Recession

#152

Post by tomp » Mon, Nov 17, 2014, 9:53 AM UTC

azernik wrote: post #92

akg_67 wrote: post #76

We have been traveling in Japan for past 4 weeks (another 2 weeks to go). Talking to regular folks, there seems to be divergence between what regular folks thinks need to be done compared to government. The regular folks want to see Dollar-Yen parity. As Yen drops, things become more expensive and regular folks cut back more on spending. I am not sure why increasing cost of imports doesn't show up as inflation. Thing…

> These folks don't believe dropping Yen is the solution as majority of investment by Japanese companies is outside Japan and weaker Yen just reduces that investment, in turn less profit flow back in the country. The more expected result would be a change of investment patterns so that more is invested inside Japan; investments abroad bring back only a relatively small amount of money back into the domestic economy a…

> > The expectation of deflation is deeply rooted in regular folks. Everyone is waiting to spend on large items, just not right now. > And this is exactly why some inflation (caused by QE and a falling yen) would be a good thing - delays in consumer spending are a classic pitfall of deflation.

Waiting until house prices fall isn't a sign of deflation - it's a sign of overpriced housing. Especially compared with the rent yields, vs. rent yields elsewhere in the world (grandparent compared them to Seattle). And it's definitely a good thing - I'm part of the millennial generation, and one of our main issues is that we simply don't have the money to buy property (even to live in), because older people have more money saved up, so they can bid more, hence a bubble (this is what happened in Europe, I assume it's similar in Japan).

Re: Japan Falls into Recession

#153

Post by grey-area » Mon, Nov 17, 2014, 9:58 AM UTC

hudibras wrote: post #127

dimitar wrote: post #111

Earlier quoted context omitted.

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.…

A country defaults when it can no longer service the interest on its debt. Japan's interest on the public debt is around $250B/year, or around 5% of GDP. 5% is a higher percentage than most countries (U.S. is around 2.5%) but less than, say, Greece at the height of their crisis. And Greece ended up not defaulting and not devaluing their currency (obviously, being in the Eurozone). $250B is around 25% of the annual go…

In summary, Japan is in absolutely no danger of defaulting under current conditions, without even taking the additional step of "printing more money" to pay its future debts.

That statement is far more reasonable than 'It's literally impossible for Japan to default on their debts', which is false. Japan could default on debts if it chose to (many countries have in the past).

Re: Japan Falls into Recession

#154

Post by bildung » Mon, Nov 17, 2014, 9:59 AM UTC

ekianjo wrote: post #150

bildung wrote: post #147

Earlier quoted context omitted.

> What do you mean by "delay in consumer spending" ? Oh, you mean like in the US when people buy everything at credit so that they don't have to wait, and have zero savings and huge debts as they go ? Is that the model you recommend ? In the context of macro economics, delay in consumer spending actually means just that: They'll spend money later. You fancy a new car, but actually your current one still runs fine? Yo…

That does not mean it hurts the economy as a whole. Capitalism never predicts that growth should be skyrocketing every single year. When there are reasons for the consumption to decrease, it does and that's when new market opportunities arise for companies to grab new consumers, either by providing more affordable products, competing on features, or providing new payment options to make easier for consumers to scale…

> That does not mean it hurts the economy as a whole.

The only way for that not to hurt the economy would be finding a way to persuade the consumer to put all the money saved by delaying this specific consumption into goods that cannot be delayed. If I just saved $10k by not buying a new car, you won't be able to persuade me to buy a motorcycle instead, as that buy would be delayable in the same way.

Re: Japan Falls into Recession

#155

Post by eli_gottlieb » Mon, Nov 17, 2014, 10:01 AM UTC

adventured wrote: post #132

ekianjo wrote: post #98

Earlier quoted context omitted.

Inflation/deflation indexes are massively skewed if you don't incorporate the right things into it. How sure are you that these indexes are factually correct?

Keynesian economists think that Japan's real estate implosion was deflation. Back in reality, Japan hasn't suffered any real deflation in 25 years. Which is why their prices are among the highest for pretty much everything. The deflation argument is a fraud cover for the failed Keynesian experiment. It's meant to give them the ability to endlessly print to debase the debt that the failed experiment took on. That's wh…

Biflation is a thing.

Re: Japan Falls into Recession

#156

Post by tomp » Mon, Nov 17, 2014, 10:01 AM UTC

adventured wrote: post #134

Thimothy wrote: post #125

Earlier quoted context omitted.

Becouse that is working quite nicely for Europe.

Show me the countries in Europe that have substantially reduced government spending over the last six years. In fact, spending as a % of GDP has increased. http://www.cato.org/blog/where-are-european-spending-cuts There has been almost zero spending reduction in Europe. They're calling a slow-down in spending expansion, austerity, when in fact there has been no austerity.

They're spending on different things, e.g. bailing out banks, which has the net effect of less spending for investments/services/wages.

Re: Japan Falls into Recession

#157

Post by paganel » Mon, Nov 17, 2014, 10:12 AM UTC

quanticle wrote: post #104

ekianjo wrote: post #94

Earlier quoted context omitted.

> It's literally impossible for Japan to default on their debts, which are almost completely in Japanese currency. Banks are not going to be super happy when the government tells them that their bonds are worth nothing through giga-inflationist measures. Or are they ? Default is better than nothing, at least you can pick up the pieces, while inflation is literally destroying your economy for any foreseeable future.

>inflation is literally destroying your economy for any foreseeable future. Is that actually true? Is inflation really worse than default? I mean, we don't have any samples from "advanced" economies, but from the what I've seen, high inflation, in the long run, doesn't seem to be that much worse for economic health than default. They're both very painful, but it's not clear to me that one is especially worse than the…

> Is that actually true? Is inflation really worse than default? I mean, we don't have any samples from "advanced" economies, but from the what I've seen, high inflation, in the long run, doesn't seem to be that much worse for economic health than default.

I grew up in an Eastern-European post-communist country which was very badly affected by inflation in the '90s (it ran in the high double-digits for almost all the decade, and in one year it actually surpassed 100%). Let me tell you that to see your life-savings absolutely annihilated in a matter of 2-3 years it's much, much, much worse than deflation. Japan got into the current mess after 20 years and it still manages to build Maglev trains and to be an economic power, but in a country affected by very high inflation all that goes out of the window (see the Soviet Union implosion).

And anecdotal recollection, I remember when my parents had asked me to be the one in charge of answering the family's phone (I was 14 or 15), and to tell whomever was calling that they were not home (they had borrowed money from lots of their friends to buy food and to pay for basic apartment maintenance and there is no-way to pay it back). One day a lady judge called, asking my parents to pay back the money they owned her because she did not have money to buy bread. Now, you can imagine that in a country where even judges cannot afford to buy bread for their family things are worse than worse.

Re: Japan Falls into Recession

#158

Post by tomp » Mon, Nov 17, 2014, 10:13 AM UTC

ekianjo wrote: post #100

mc32 wrote: post #4

Quantitative easing, Yen depreciation... What they need to do is figure out a way to grow the population locally or through large-scale immigration. I'm afraid this is the fate that awaits the developed world (or countries with low population growth). Japan is like a canary in the mine of post-industrialism. It'll be interesting to see what they figure out for their society and the lessons they might have for us.

> What they need to do is figure out a way to grow the population locally or through large-scale immigration Or drastically increase productivity, or have more people join the workforce. Women are massively under-used in Japan. There's no need for immigration as long as there is a large untapped segment of the population not actively employed.

> Women are massively under-used in Japan. There's no need for immigration as long as there is a large untapped segment of the population not actively employed.

How would that help? People who are not employed (not "unemployed", but they simply don't need to work) still spend money (that their working relatives make), so by having them enter the workforce, you would not increase consumption at all, while reducing the average wage (making it impossible for a single working spouse to sustain a family).

Re: Japan Falls into Recession

#159

Post by bildung » Mon, Nov 17, 2014, 10:15 AM UTC

adventured wrote: post #134

Thimothy wrote: post #125

Earlier quoted context omitted.

Becouse that is working quite nicely for Europe.

Show me the countries in Europe that have substantially reduced government spending over the last six years. In fact, spending as a % of GDP has increased. http://www.cato.org/blog/where-are-european-spending-cuts There has been almost zero spending reduction in Europe. They're calling a slow-down in spending expansion, austerity, when in fact there has been no austerity.

how me the countries in Europe that have substantially reduced government spending over the last six years. In fact, spending as a % of GDP has increased.> Show me the countries in Europe that have substantially reduced government spending over the last six years.

>In fact, spending as a % of GDP has increased.

Because e.g. in Greece, GDP shrank over 30% in the last 5 years. Have you ever looked at the things a country spends its taxes on? How should it out-save it shrinkage without destroying the very infrastructure it's economy needs to flourish?

> cato.org

Cato is good PR agency, but you should not take them seriously on anything economics-related. Just look who works there, I wasn't able to find a single phd in economics there, only public relations staff (people who studied politics, sociology etc, practically no one who actually did research in any field before working there).

Re: Japan Falls into Recession

#160

Post by honeybooboo123 » Mon, Nov 17, 2014, 10:17 AM UTC

cturner wrote: post #79

hindsightbias wrote: post #64

Earlier quoted context omitted.

> even thought (sic) some of them might agree that B were right If you have a citation for that, I'd love to read it. But I think cats and dogs will start raining from the sky first. You don't go anywhere if consumers expect prices to remain the same or deflate.

Why is this? Computers get rapidly cheaper for example.

It's not.

Price-inflation means our purchasing power decreases. We're all better off if we get moar stuff for our money instead of less, but governments would like us to believe the opposite.

We ordinary people clearly don't benefit from inflation, but who does? -Might it be the same people who are telling us inflation is good?