Wednesday, May 20, 2009

The glories of Japanese Keynesianism

Japan's Economy Shrank 15.2% last quarter.

Therefore, the U.S. follows the plan precisely.


JG said...

I read the similar headline in WSJ this morning as well.

Mexico 21.5% GDP drop
Japan 15.2% GDP drop
Germany 14.4% GDP drop
U.S. 6.3% GDP drop

Question pops why is the U.S. contracting by only 6.3%, when others are so much higher? (Especially since the bubble was created here and burst here).

Mild case of cynicism takes over...
These other countries actually export what they produce, whereas U.S. has exported in return for these purchases, IOUs wholesale.

Not to worry... we are further bringing down the price of our produce by cranking up our factories (printing presses)even further....And haven't all the Kantian-Keynesians gone to great pains to explain to generations of men that it is spending power that is the problem, therefore extend credits in return for IOUs and ...viola prosperity will reign?!

Cynicism makes me sick in the stomach but serves me right for indulging in it!

Rajesh said...

I think the others are paying for the past follies. U.S. with Obama's help is going to surpass them very soon.
The oil and gold are already showing the ominous signs of the things to come.

JG said...

could you elaborate on "I think the others are paying for the past follies".
Of course all these other countries have been mixed economies as well, with central banks manipulating credit, money-supply and interest rates (and in many cases Forex as well) just as in the U.S. I am not sure, however, that if the debacle (that was meant to happen sooner or later) in the U.S. with frozen credit markets that came to a stndstill literally in September last year, and are now having a ripple effect the world over, would have happened in the absence of massive manipulations in credit markets with leverage ratios at many U.S. finance institutions in 1:40 -all under the auspices of the Fed -an institution created to control all credit in the U.S. and supposed to stop anything like that from happening (that is laughable, except for the fact that it is so grim and effects all our lives.) It is a different story that none of them at the Fed have any clue how capital markets work and so when they say they did not see this massive freeze in credit markets coming and the consequent recession and contraction -one can actually believe them!

Rajesh said...

Japan has been following Keyes's bitter dose constantly since last decade The economy has been stimulated to death. The governments urge to inflate along with their reluctance to let banks fail (which leads to wiping out of their checking deposits, hence deflation) which further accelerates the pace of inflation. The zero interest rates discourage savings and thus the capital goods production suffers.
This prolonged love-fest with Keynes is what I meant with past follies.