Paul Krugman on Japan

Peter K. peterk at enteract.com
Sun Sep 30 13:26:54 PDT 2001


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.
>



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