{"id":14133,"date":"2011-04-12T18:35:07","date_gmt":"2011-04-12T07:35:07","guid":{"rendered":"https:\/\/billmitchell.org\/blog\/?p=14133"},"modified":"2011-04-12T18:35:07","modified_gmt":"2011-04-12T07:35:07","slug":"are-they-all-lining-up-to-be-japan","status":"publish","type":"post","link":"https:\/\/billmitchell.org\/blog\/?p=14133","title":{"rendered":"Are they all lining up to be Japan?"},"content":{"rendered":"

\t\t\t\tEveryone is lining up to be the next Japan – the lost decade or two version that is. It has been taken for granted that Japan collapsed in the early 1990s after a spectacular property boom burst and has not really recovered since. The conservatives also claim that Japan shows that fiscal policy is ineffective because given its on-going budget deficits and record public debt to GDP ratios the place is still in shambles. I take a different view of things as you might expect and while Japan has problems it demonstrates that a fiat monetary system is stable and we should be careful comparing Ireland, the US or the UK to the experiences that unfolded in Japan in the 1990s and beyond.
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\nAn article in the UK Guardian yesterday (April 11, 2011) – Is Ireland heading for a Japanese lost decade?<\/a> – by Irish academic economist Stephen Kinsella claims that the when making a comparison between Ireland and Japan:<\/p>\n

\nThere are more similarities than differences in this story.\n<\/p><\/blockquote>\n

Kinsella says he is a “student of economic history” and has been reviewing “Japan’s lost decade” which led him to that conclusion. He acknowledges without explanation that “Of course the economies are different. Of course Japan had its own currency. Of course Ireland’s fiscal and political problems would be there regardless of Ireland’s banking disaster”.<\/p>\n

I thought that was an interesting juxtaposition. Japan’s monopoly over its own currency issuance is a defining difference rather than one difference that can be easily compared to the similarities.<\/p>\n

Further, Ireland would not have any fiscal problems if it had its own currency. It might has some real economic problems, as has Japan but they would be of an entirely different scale to those faced today by Ireland. Further, one might speculate that its political problems should be less acute had it stayed out of the Eurozone (that is, kept its own currency).<\/p>\n

Japan’s lost decade has been vilified by the mainstream for years. The New York Times ran a special series last year – The Great Deflation<\/a> – which purported to examine “the effects on Japanese society of two decades of economic stagnation and declining prices”. It was an interesting series but missed several key points.<\/p>\n

Consider this Huffpost article (November 19, 2010) – Reconsidering Japan<\/a> – from political analyst Steven Hill which addressed some of the “myths” about Japan that motivate economic policy debate in the advanced nations (such as the US).<\/p>\n

In relation to the NYT series, Hill says:<\/p>\n

\nReading the series is about as cheery a task as rubbernecking at a car wreck on I-95. But unfortunately the Times series simply repeats the “conventional wisdom” about Japan put out by the same economic experts who missed an $8 trillion housing bubble in the United States, and in fact have been wrong on most of the big economic issues over the past two decades.<\/p>\n

Look at it this way: In the midst of the Great Recession, the United States is suffering through nearly 10% unemployment and 50 million people without health insurance. A new report has found over 14% of Americans living below the poverty line, including 20% of children and 23% of seniors, the highest since President Lyndon Johnson’s War on Poverty. That’s in addition to declining prospects for the middle class, and a general increase in economic insecurity.<\/p>\n

How, then, should we regard a country that has 5% unemployment, healthcare for all its people, the lowest income inequality and is one of the world’s leading exporters? This country also scores high on life expectancy, low on infant mortality, is at the top in literacy, and is low on crime, incarceration, homicides, mental illness and drug abuse. It also has a low rate of carbon emissions, doing its part to reduce global warming. In all these categories, this particular country beats both the U.S. and China by a country mile.<\/p>\n

Doesn’t that sound like a country from which Americans might learn a thing or two about how to get out of the mud hole in which we are stuck?\n<\/p><\/blockquote>\n

The article is insightful and documents why the “you don’t want to end up like Japan” syndrome is appealing to conservatives but missed the point entirely.<\/p>\n

According to Hill, during the lost decade, Japan maintained:<\/p>\n