To whom,
When I note that:
Japan pays the "Japan
> > Premium" when they borrow. There is, so far as I know, no "America
> > Premium."
C. Redmond responds:
> Yes there is. It's called long-term interest rates, and they're much,
much
> higher in the US than Japan.
-and apparently misses the meaning of the word "premium", that being an increase in interest rate over and above what the apparent exchange and interest rates would predict. Japan pays a premium when borrowing and it is in part because of the poor quality of Japanese loan portfolios. U.S. Treasuries are the standard by which all other credit is judged.
When I ask:
> > How is it that nearly zero interest rates are not producing an economic
> > boom in Japan?
C. Redmond responds:
> Because effective demand is still being strangled by insufficient
> fiscal stimulus. You need low rates *and* the willingness to run
deficits.
> Japan in 1998 is very much like the US in 1933; low rates aren't enough.
Sure, why should we even wake the Japanese bankers up in the morning? Let them stay snug in their futons while the government finds things to invest in. Why should they have to go through all the trouble of finding investments that will cover those astoundingly high interest rates. After all, with overnight BOJ money at all of, what is it? fifty basis points above *zero*, (it's such a dwindlingly small figure, one has trouble believing it really makes a difference) how do you expect a banker to make a profit? Maybe the BOJ should actually pay bankers to borrow money from them.
That's an easier question to answer than to ponder how, with rates that low, a capitalist *can't* make a profit. What investment *can't* cover a loan with a one or two percent interest rate? How ungodly awful does your economic situation have to be that capitalists can't think how to extract a little value using money borrowed at those rates? What kind of crushing debt loads and slack internal demand must pervade if a capitalist cannot convince himself or his banker that *now* might be a good time to finance a little expansion?
The Japanese are discovering that sitting on a mountain of saved cash without being able to invest it is economic suicide. There isn't enough money in the world for an industrial economy to start living on principal. That money has to be borrowed by somebody, producer or consumer, and somebody has to *do* something with it or it just sits there losing value.
The industrially unsound U.S. economy continues to steam along because it puts more money out on the street than any other.
peace