[Previous] [Main Index] [Next]

Saturday, May 22, 2010

MISLEADING COMPARISONS BETWEEN THE JAPANESE AND AMERICAN ECONOMIES, NOW OR WITH JAPAN'S STAGNANT GROWTH FOR THE LAST TWO DECADES. Or why is Paul Krugman a Cassandra doomster?

Today's Buggy Topic

As usual, it's found in a thread at Economist's View that started with an op-ed by Paul Krugman.  In it, he argued unless the Obama administration introduces another large fiscal stimulus package --- while simultaneously the Federal Reserve would show no worries about future inflation and keep interest rates near zero to accommodate the fiscal expansion --- the USA would be in danger of emulating Japan's growth-stagnation and concurrent deflation that has marked that economy for two decades now.

Is That Comparison Sound?

Just the opposite.  It ignores numerous institutional, policy, and cultural differences between Japan's state-guided economy and the far more vigorous, innovative, and flexible market-oriented economy of the USA.  Small wonder that since the recession ended officially here and in Europe last summer (2009), the USA has registered the strongest growth in GDP . . . with Canada not too far behind.  The EU countries have hardly grown at all, whether you look at the EU-27 countries or the EU-15 West European ones or the eurozone-16 members.  Japan has experienced negative growth. 

In a word or two, the Krugman doom-doom stuff --- which he has repeatedly drummed on for the last two years or so --- seems extravagantly misconceived.  Click here for the buggy take.  Remember to scroll down to the end of the first page of comments and click on the "Show More Comments" bar to find the bug-stuff.