tag:blogger.com,1999:blog-17232051.post2849038834620983899..comments2024-03-18T22:32:52.802-04:00Comments on Noahpinion: Japanese promises (a reply to John Cochrane)Noah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger38125tag:blogger.com,1999:blog-17232051.post-14928292979269694982015-11-30T12:17:35.359-05:002015-11-30T12:17:35.359-05:00Inflation is too blunt an instrument which would a...Inflation is too blunt an instrument which would also penalise those who, concerned about government indebtedness, lent their money to, say corporates, instead, or stayed in cash.<br /><br />My suggestion would be a halfway house between you and Cochrane of levying a special withholdings tax on JGBs in lieu of default. In addition to putting up taxes - Japan's sales tax is low by at least European standards, and raising it progressively, say by 1% per year for a decade could generate the kind of "buy now" incentive that is supposed to be created by engineering inflation.RebelEconomisthttps://www.blogger.com/profile/13241098878248190971noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-56276493854898169612015-11-30T12:07:00.032-05:002015-11-30T12:07:00.032-05:00Noah, your remark on your Bloomberg article: "...Noah, your remark on your Bloomberg article: "In the long run, any deficit that stays higher than the rate of nominal GDP growth is unsustainable" is strictly incorrect. If for example, the fiscal deficit is 6% of GDP and GDP growth is 3% per year, the debt to GDP ratio will converge on 200% of GDP. Still not good though!Tim Youngnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-79475306318316491012015-11-30T11:59:28.543-05:002015-11-30T11:59:28.543-05:00Even with deflation, the real interest rate on Jap...Even with deflation, the real interest rate on Japan's government debt has been relatively low - less than nominal GDP growth, for example. The real reason for Japan's growing debt has been not deflation, but the fact that Japan's mostly LDP governments (Japan is almost a one-party state) have chose to blow the associated interest windfall pampering their traditional supporters in farming and construction instead of reducing fiscal deficits, cheerled by fools like Paul Krugman.Tim Youngnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-78639130203804062662015-11-29T04:24:58.952-05:002015-11-29T04:24:58.952-05:00It doesn't make you Stalin but it does make yo...It doesn't make you Stalin but it does make you undemocratic and illiberal. Advocating wealth transfer through monetary policy because it's politically easier being out of the public eye.<br /><br />I'm skeptical though that a surprise bout of inflation would be politically easy. To generate inflation some public body would need to spend in the real economy, a lot. The central bank isn't equipped. You need a democratic mandate to get it done like that or not.<br /><br />Another thing your economic analysis misses is the very large foreign assets especially corporate.<br /><br />Tom Warnerhttps://www.blogger.com/profile/11247836188106712069noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-91195756222817577172015-11-28T10:33:38.810-05:002015-11-28T10:33:38.810-05:00Cochrane is being inconsistent. If higher than ex...Cochrane is being inconsistent. If higher than expected inflation is “theft” from the old or bondholders, then Japan’s lower than target inflation and actual deflation have been a massive theft from the young and from future taxpayers and you now need higher inflation to redress that “theft.”<br />Dan12noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-52066597037035833542015-11-27T20:34:55.988-05:002015-11-27T20:34:55.988-05:00 It is nice to know that both Republicans and Demo... It is nice to know that both Republicans and Democrats want to push Grandma off the cliff.Walterhttps://www.blogger.com/profile/12703308672592587111noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-72530177097821166972015-11-27T10:16:28.984-05:002015-11-27T10:16:28.984-05:00All of the arguments on both sides seem to be in t...All of the arguments on both sides seem to be in the context of a stagnant economy. if the economy is growing at a reasonable rate, don't these problems just slowly evaporate? <br /><br />So all the bonds are owned by old people? Except for some decades-past-maturity Series E savings bonds, my mom sure didn't have any. Are all the mutual fund managers octogenarians?<br /><br />Does anyone seriously believe that governments actually pay off their debts, rather than issuing new bonds, etc, etc? <br /><br />I second what has been said in comments about hyperinflation.<br /><br />Noah - 1945-55 is a pretty bad example of sustained inflation. There were two recessions in that period, with almost 3% DEFLATION in 1949. After Feb. '52, except for a blip up to 3.2% that summer, inflation never reached 2.5% again until Dec. '56.<br /><br />https://research.stlouisfed.org/fred2/graph/?g=2HAT<br /><br />None of this takes into account wealth disparity. If I have a haircut choice between the Walton heirs and and an old couple living on SS, I will have no difficulty in making it.<br /><br />Maybe other old people are more savvy than i am, but I actually do pay taxes on my pension and social security. Now think about what most old people do with their money. They spend it. Sure most of that spending is wasted on health care [they're going to die anyway] but it ends up in the real economy diong something. <br /><br />I'm OK, but there re a lot of old folks in poverty who depend on SS to eke out an existence. {Pro tip - they don't own bonds!] I love the way the solution is always to target the pain on those who have the least.<br /><br />Wasn't there a time when Cochrane was a real economist?<br /><br />Cheers!<br />JzBJazzbumpahttps://www.blogger.com/profile/07337490817307473659noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-14382432066443099262015-11-26T11:54:34.025-05:002015-11-26T11:54:34.025-05:00Just a comment on "hyperinflation"...
...Just a comment on "hyperinflation"... <br /><br />Inflation, even bad inflation in the double digits, does not lead to hyperinflation. Hyperinflation is always caused by a massive reduction in the real productivity entering into the national monetized marketplace. The reduction is caused by a war, or other catastrophe, destroying the means of production - or a loss of confidence by producers who no longer accept money as a payment for their output.<br />Midmanhttps://www.blogger.com/profile/09141685096936921613noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-39949529232051630402015-11-26T06:15:40.469-05:002015-11-26T06:15:40.469-05:00This comment has been removed by the author.Cryptandrahttps://www.blogger.com/profile/02308633666277153594noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-66351734357502433812015-11-26T06:14:48.029-05:002015-11-26T06:14:48.029-05:00Not as offensive as your ignorance.Not as offensive as your ignorance.Cryptandrahttps://www.blogger.com/profile/02308633666277153594noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-21172740711410157692015-11-25T21:01:25.118-05:002015-11-25T21:01:25.118-05:00Cochran's comments are moral crap.
Older peop...Cochran's comments are moral crap.<br /><br />Older people made their investments in government bonds knowing that they were creating unasked for duty to repay with interest by the next generation. Is that any more moral than paying back at a lower rate? And as has been pointed out above, it is normal to expect inflation to take a cut of your investments.<br /><br />As for the idea of redistribution through inflation, that normally occurs in all investments. You also get redistribution in investments that fail for whatever reason. Generally, middle class investments involve substantial redistribution to Wall Street by a variety of means. We all should remember when our 401K's became 201K's for example. But you don't hear Cochrane bemoaning the redistribution due to the financial industry or the "creative destruction of the market that results in lots of people losing their shirts.Mike Hubenhttps://www.blogger.com/profile/01371469964446567690noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-38145287383887305172015-11-25T14:37:20.850-05:002015-11-25T14:37:20.850-05:00True. Any investment carries a risk. To conflate i...True. Any investment carries a risk. To conflate inflation risk and default risk just seems silly.Sarahhttps://www.blogger.com/profile/16366856391266597747noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-53417218512809912552015-11-25T02:29:17.685-05:002015-11-25T02:29:17.685-05:00I think you and Cochrane have left a few options o...I think you and Cochrane have left a few options off the table. Like helicopter drops. You both characterize the current public investments as bridges-to-nowhere. Then a better approach is to print money, give it to people, and let them signal via there spending where investments would be useful. This also increases demand and lets the old put their savings to productive use by creating investment opportunities. Additionally, this does not efficiently produce inflation (unless, of course, you are an Austrian and define inflation based on the amount of money as opposed to the level of prices). The labor force participation rate can rise in Japan. Until a bottleneck is reached, inflation won't occur. For awhile, the production of goods will increase within the bounds of existing production capacity. Capacity is thus used more efficiently, helping to keep inflation low.<br /><br />You can also look at encouraging business to pay higher wages. This also increases demand and allows excess savings to be productively invested. It also reduces the returns on investments to the old. Certainly Cochrane will claim that re-negotiating the balance of income that is paid to labor vs capital is Theft. But the rest of us will realize that the excessive payments to capital were also Theft.<br /><br />Cesiumhttps://www.blogger.com/profile/02025636403503365433noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-70879515814906831602015-11-24T23:42:28.585-05:002015-11-24T23:42:28.585-05:00By a real challenge I mean something some economis...By a real challenge I mean something some economist should be working on for real. Where is our modern Wassily Leontief with an input output model searching for eigenvectors in a stable or shrinking population economy? Leontief had to invert 100x100 matrices by hand, and he did, with help. Surely some promising graduate student can be interested in this.Kaleberghttps://www.blogger.com/profile/05283840743310507878noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-23894788606015703902015-11-24T23:39:14.293-05:002015-11-24T23:39:14.293-05:00A decreasing or stable population is a real challe...A decreasing or stable population is a real challenge, but the alternative is an increasing population which cannot be sustained indefinitely. Japan cannot support a population of twenty or fifty billion despite what the techno-futurists might say, at least not without some serious changes in societal structure.<br /><br />I think there are two real problems. <br /><br />One is that old people in Japan were expected to provide for their own futures rather than relying on social insurance which would let them pool risks. This means that there is a lot more money saved up than is actually needed to ensure every old person a satisfactory retirement. This is simple actuarial stuff. Having to save for a maximum possible life span rather than an average life span removes money from the working economy. It is available for investment, but that investment only happens when demand is growing. It's a Catch-22.<br /><br />The other is that Japan, like most countries, has a power curve wealth distribution even among old people. This means that only relatively few old people have assets well beyond actuarial necessity. Old people just aren't able to spend enough. If they were spending appropriately for their wealth levels, we'd see the rising demand for goods and services which would feed a dynamic economy with rising wages for young people who would be in scarce supply, i.e. inflation.<br /><br />Raising inflation and improving social insurance would provide old people with more goods and services. It would also provide young people with more goods and services. Inflation, like high taxation, is just a way to force people to spend. Given that spending is the lifeblood of every modern economy it is sad the Cochrane finds spending repugnant while he considers general deprivation laudable.Kaleberghttps://www.blogger.com/profile/05283840743310507878noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-16283749744343007842015-11-24T14:11:14.461-05:002015-11-24T14:11:14.461-05:00Looks to me like Cochrane is engaging in doubletal...Looks to me like Cochrane is engaging in doubletalk for the benefit of his blog readership's prejudices at the expense of Noah's credibility for them.<br /><br />He's not accidentally misunderstanding a persistent negative real rate of 2-5% for a decade as a call for hyperinflation or total debt default, he's deliberately pretending that there is no difference, or that the one must always lead to the other, to discredit "financial repression" in the eyes of his (inflation paranoiac) followers.JJFhttps://www.blogger.com/profile/11948014831964413383noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-70446393974574286042015-11-24T13:25:25.234-05:002015-11-24T13:25:25.234-05:00I simply do not understand Cochrane's apparent...I simply do not understand Cochrane's apparent belief that there are simply no numbers between "approximately but in no case to exceed 2% per year" (the current typical inflation target) and "more than 50% per month" (one of the few attempts at a numeric definition of "hyperinflation" I could find). As our host points out, isn't "3% per year" between those two numbers? Maybe even 10% per year? Hauling out the term "hyperinflation" as the apparently definition of any inflation target above the one currently in use seems thoroughly disingenuous. Granted, Noah didn't set a bound on the inflation target he thought might be beneficial, but I think "less than Weimar" was pretty well understood.Anonymoushttps://www.blogger.com/profile/04238192025210567854noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-15799014337049453732015-11-24T12:46:40.931-05:002015-11-24T12:46:40.931-05:00Want to make Medicare affordable? It can be done b...Want to make Medicare affordable? It can be done by paying (developed) world prices for medical care instead of rent-inflated American prices. But that would come at the expense of the wealthy and politically powerful...<br /><br />IIRC France after WWI benefited substantially from inflation that reduced the real burden of Government debt.<br /><br />Insert snide remark about Cochran here. inquirerhttps://www.blogger.com/profile/17712708265810814971noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-90754860294918696002015-11-24T11:22:34.677-05:002015-11-24T11:22:34.677-05:00Agreed. Buying nominal bonds is an investment like...Agreed. Buying nominal bonds is an investment like any otherchristyhttps://www.blogger.com/profile/08500353320254109698noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-69234508423801590472015-11-24T11:04:37.999-05:002015-11-24T11:04:37.999-05:00These guys like Cochrane who redefine "redist...These guys like Cochrane who redefine "redistribute" as "thieve" (and "healthcare policy" as "death panels", and etc.) just don't understand the modern civilized world at a basic level. Truly the beginning of another "dark ages" if their type of characterization of everything carries the day.Jeff Younghttps://www.blogger.com/profile/12680729526940989989noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-34445565794776126372015-11-24T10:03:18.130-05:002015-11-24T10:03:18.130-05:00I find it odd that Prof. Cochrane asks for a "...I find it odd that Prof. Cochrane asks for a "single happy historical antecedent" where attempted inflation has produced desirable outcomes AND in the same paragraph says that inflation is NOT the optimism-boosting actions of FDR. FDR attempted deliberate inflation through abrogation of the gold standard and a ban on gold hoarding. This "wiped out middle-class savings and government debt". It was analogous to a 40% haircut and the economy rebounded at about 10%/year from 1933-37. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-67913491384933375222015-11-24T09:59:40.097-05:002015-11-24T09:59:40.097-05:00This is amazingly restrained, given the patronizin...This is amazingly restrained, given the patronizing and OTT tone of Cocoran's comments. Well done, Noah.Griff Wodtkenoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-63205363365012935142015-11-24T09:18:16.926-05:002015-11-24T09:18:16.926-05:00Japanese debt is sustainable so long as the real i...Japanese debt is sustainable so long as the real interest rate on their debt is less than real growth. Has little to do with past sacrifices, only future ability to produce or import the needed goods/resources/labor. mmcoskerhttps://www.blogger.com/profile/09340832287496890370noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-59069219052256116502015-11-24T07:56:04.217-05:002015-11-24T07:56:04.217-05:00.
And The Stalin picture is offensive.
..<br /> And The Stalin picture is offensive.<br />.Anonymoushttps://www.blogger.com/profile/01098498673510354088noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-36147346324425249012015-11-24T07:52:43.405-05:002015-11-24T07:52:43.405-05:00.
Additionally, this gets you an allocation of....<br /> Additionally, this gets you an allocation of resources to a valuable part of the economy, demand improvements and possibly, although not necessarily, inflation - which under the above regime may no longer be desirable.<br />.Anonymoushttps://www.blogger.com/profile/01098498673510354088noreply@blogger.com