11-21-2016, 07:36 PM
(11-21-2016, 03:39 PM)Galen Wrote:(11-21-2016, 07:36 AM)Warren Dew Wrote:(11-20-2016, 03:14 AM)Galen Wrote:(11-19-2016, 08:10 PM)Warren Dew Wrote:(11-19-2016, 03:23 AM)Galen Wrote: You have noted the negative effects of this policy on the young who also tend to be poorer and not hold equities. This has made wealth inequality greater than it otherwise would be just as it has in the US. I would also maintain that in addition to the taxes that fall more heavily on the poor, the decrease in purchasing power caused by inflation has fallen on the poor and the young. It seems likely that this is part of the reason why family formation and the lower birthrate has affected Japan more than it has in the US and Europe.
I really don't think you can say Japan continued with inflationary Keynesian policies after the crash. In the 1960s to 1980s, when they were trying to build exports to the U.S., yes, but since the beginning of the 1990s, inflation in Japan has been essentially zero, with the price index the same in 1992 as it is today:
http://www.tradingeconomics.com/japan/co...-index-cpi
(set the graph to "max" time period)
Fair enough but they have been trying to use Keynesian policies to create consumer price inflation which has not occurred. Inflation in the classical and Austrian sense is an increase in the money supply. They have been printing money and the government has been spending like a madman for nearly thirty years and it hasn't gotten them what they want. In this case nominal economic growth and price inflation which have yet to be seen.
The policies have been Keynesian with rather unexpected results.
Now, Japan did run large deficits during that period. However, one thing neokeynesians seem to have forgotten about Keynesian theory is that Keynesian stimulus requires both large deficits and also that those deficits be monetized by the central bank through increases in the money supply. Without that monetization, the deficits induced by extra spending are counteracted by high interest rates and their accompanying drag on the economy. And of course, compensating for spending with tax increases instead of deficits is even worse.
The indicated solution for the U.S. is a bit different since our retirees get inflation adjusted social security; inflation doesn't help us with our boomer retirements. What we need is massive tax cuts to motivate and reward work, but with less monetization and perhaps a partial removal of inflation adjustments for social security and welfare benefits.
You have to keep in mind that the US ran into some serious problems in the seventies by monetizing the debt. Consumer price inflation was approaching twenty percent by the end of the Carter years. One of the the surprising things about Reagan was that he permitted Volker to raise interest rates enough to kill inflation. The cost was a short and very severe recession early in his administration. Unfortunately, he did not do anything about the spending which is why we find ourselves staring trillion dollar deficits and twenty trillion in total debt. The Japanese are in an even worse position as a consequence of Abenomics.
I remember that extremely well. I graduated from college just as interest rates were peaking, and I knew from having read Friedman's column for many years that they would soon be coming down, and for the long term. I put $500 into a 5 or 10 year certificate of deposit yielding 15% - try getting that today - while cursing the fact that I didn't have more to invest. If I could have put $15k into stripped 30 year bonds, I'd be comfortably retired now.
The situation then is different from the situation now, though. Because of lower demographic and economic growth, the natural interest rate is lower. Thus, the federal government can support a proportionately larger debt burden with the same expenditure on interest payments.
Also, the 20 trillion in nominal debt is dwarfed by the unfunded liabilities of Social Security and other entitlement programs. It would be interesting to see a comparison of the nominal debt run up during the Reagan years with the savings in unfunded Social Security liabilities from the Social Security reform of 1983.
Quote:No doubt Eric the Obtuse is whining about how tax reductions don't reward work. There are plenty of cases where reducing taxes, government debt and government spending did improve economic growth. Eric the Obtuse also can't seem to figure out that with the Saudis and Chinese selling large amounts of their T-Bills means that the petrodollar is done and it is no longer possible to export inflation the way the US has been doing for the past fifty years. The government will have no choice but to get its spending under control and it will probably be a currency crisis that forces the issue.
Eric's position on taxes is ridiculous. Perhaps he believes that only billionaires pay taxes, which is close to the opposite of the truth.
The petrodollar could be restored and inflation exported again if we started living up to our obligations to protect commerce by sailing the Navy in harm's way rather than leaving it rusting in home port. I'm not sure if Trump has figured that out, though.