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Tuesday, April 7, 2009

MISLEADING PARALLELS BETWEEN JAPAN'S FINANCIAL AND ECONOMIC CRISIS SINCE 1991, AND THE CURRENT US CRISIS

Today's First Buggy Topic

It was posted yesterday at Economist's View, the commendable economic web-site run by Professor Mark Thoma, a macroeconomist at the University of Oregon.  He started the thread with a link to a lengthy commentary by Ricardo Cabarello, a gifted economist at MIT who, among other things, has analyzed in depth --- at any rate, with the help of two other economists --- the banking problems that plagued Japan in the 1990s and way into this decade, resulting in a major financial crisis, deflationary price drops in the economy, and stagnant growth.  For that matter, though the Japanese economy started to grow steadily after 2004 until last spring (2008), the growth in real GDP was anemic and depended almost entirely on an export surge during the booming global economy that collapsed last year. 

In fact, prof bug --- who has read some of Cabellero's earlier work on Japan --- links in his initial post in the thread to an important article of Cabarello and two other US economists (one of Japanese origins) that appeared last year in the American Economic Review

Prof Bug's Rejoinder . . .

did not gladden many hearts among the dozens of posters in that thread . . . most of them not noticeably knowledgeable about economic theories, and leaning noticeably to the left-wing of the political spectrum: so much so that a fair number have already written off President Obama's financial rescue programs at captive of the financial oligarchy and his fiscal stimulus policy as markedly insufficient.  No matter.  Prof bug isn't posting there or elsewhere to win popularity contests; knows how to set out a coherent, closely argued analysis; knows too the need to back it up with good evidence; and is willing to acknowledge if others in that and other threads have show him to be wrong --- either about an important factual matter, or omitted important counter evidence, or made a theoretical or logical mistake. 

Click here for how prof bug seeks to show that parallels drawn between the current US financial and economic crisis and Japan's 18-year long crisis --- which is institutional and cultural, not just a matter of bad or tardy policymaking --- are simply wrong . . . however often those parallels appear all over the web and in print. 

A Reminder

To find prof bug's posts --- two of them in the Economist's View thread --- run a search for "the buggy professor" . . . and don't confuse other posters who sign on as gordon or mg.

Oh, one more point.  What really irked a few of the posters wasn't the initial buggy post yesterday --- rather, his second post that praised the Geither PIPP program --- Private and Public Partnership Investment Program, set out in March.  He does, however, think there is at least one alternative program sketched out by an investment manager and adjunct law professor at the University of Chicago, and cited that prof's work at length . . . the two Gordon-embraced policies calculated to evoke howls of denunciation from his fellow posters.