Paul Krugman on Japan

[Peter K.]

It was an interesting, well-done mainstream overview of current conditions
(no mention of class struggle or class war except  obliquely: "You should
probably think of Japan's labor market as being comparable to what ours
looks like at the bottom of a deep recession, with unemployment approaching
10 percent.
[snip]
... So perhaps it isn't too surprising that the grimmest indicator of
Japan's
troubles is a sharp rise in suicides, especially among those who have lost
their jobs or their businesses."

However "Over the past decade Japan has used enormous public works projects
as a way to create jobs and pump money into the economy. The statistics are
awersome. In 1996 Japan's public works spending, as a share of G.D.P., was
more than four times that of the United States."

Krugman says that both of the convential means of fighting a recession have
failed in
Japan, short term rates are at zero and deficit spending was holding the
line
until recently, but they have other options. The U.S. still has 3 points
left
on interest rates and we haven't really engaged in deficit spending
yet, plus their are the other options, like creating mild inflation. But,
there's the
question of whether there will be the political  willingness to pursue
unconventional
options should things get awful.


>I was away for a few days, sorry if this was already discussed. Did any of
you catch Paul Krugman's piece in the
>Sunday Magazine of the NYTs? He suggests ways America might be in similar
straits to Japan 10 years ago, and then
>he suggests ways in which we might be different. I thought the tone of the
piece a little more alarmist than
>needed, but then, his point was to attack the complacency that might allow
a worse case scenario to become reality.
>