November 15, 2010

THEIR BUBBLE WAS AN EFFECT, NOT A CAUSE...:

How to avoid Japan's economic mistakes (Robert J. Samuelson, November 15, 2010, Washington Post)

It's hard to remember now that in the 1980s Japan had the world's most-admired economy. It would, people widely believed, achieve the highest living standards and pioneer the niftiest technologies. Nowadays, all we hear are warnings not to repeat Japan's mistakes that resulted in a "lost decade" of economic growth. Japan's cardinal sins, we're told, were skimping on economic "stimulus" and permitting paralyzing "deflation" (falling prices). People postponed buying because they expected prices to go lower. That's the conventional wisdom - and it's wrong.

Just the opposite is true: Japan's economic eclipse shows the limited power of economic stimulus and the exaggerated threat of modest deflation. There is no substitute for vigorous private-sector job creation and investment, and that's been missing in Japan. This is a lesson we should heed.

Japan's economic problems, like ours, originated in huge asset "bubbles."


...which is why they haven't been able to fix it. A nation with a declining population has to have a burst property bubble.

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Posted by Orrin Judd at November 15, 2010 6:33 AM
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