tag:blogger.com,1999:blog-17232051.post9181298659234177411..comments2024-03-28T03:16:14.104-04:00Comments on Noahpinion: Abe surprised me!Noah Smithhttp://www.blogger.com/profile/09093917601641588575noreply@blogger.comBlogger69125tag:blogger.com,1999:blog-17232051.post-31402833176978318812013-04-12T19:35:28.637-04:002013-04-12T19:35:28.637-04:00Yes, Mr. Abe. Excellent job! You have demonstrat...Yes, Mr. Abe. Excellent job! You have demonstrated your utter cluelessness with respect to macroeconomic fundamentals and will now go down in history as the man who drove the Japanese economy off a cliff and destroyed the yen along with your yes-man Kuroda.<br /><br />Listen to hedge fund manager Kyle Bass, who accurately shorted subprimes to the tune of a half bil, shock the Keynesian establishment by calling the JPY short as his next big bet.<br /><br />http://www.bloomberg.com/news/2013-04-09/bass-says-japan-bondholders-reaction-to-stimulus-telling.htmlAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-36716911249747151482013-04-11T10:44:17.657-04:002013-04-11T10:44:17.657-04:00Troy,
I like your comments.
I can see how the fe...Troy,<br /><br />I like your comments.<br /><br />I can see how the fear of inflation is overblown.<br />First it seems to me the BOJ is mainly increasing the monetary base.This does not mean that velocity will spike up.<br />Just look at what happened in the US where velocity has been plunging non-stop for the last 7 years (with or without QE). <br />Then under-employment is now structural in Japan and with capacity utilization being so low, it looks like there is a huge margin before anything wild happens.<br /><br />So yes the key is probably the currency "war" Japan is finally starting. With only 17% of its economy now geared towards exports as the country has learned how to adapt to decades of deflation, there is so much room to grow here.<br />Japan might finally regain lost market shares to often inferior products from China...and of course Korea, which Galaxy phone might have never existed had the won not depreciated so much vs the Yen in the last 10 years !<br /><br />With a weaker Yen, the fundamentals of the growth model so many countries have enjoyed since the mid-90's would start being threatened here...no wonder China started "voicing its concerns" about Japan's new policy.<br /><br />I'd love to hear Noah's feedback here...if I might ask.<br /><br />Cheers.<br />Sakekuseknoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-17234574048221527462013-04-08T04:09:33.060-04:002013-04-08T04:09:33.060-04:00Hey there!
My interpretation of macro factors is ...Hey there!<br /><br />My interpretation of macro factors is a bit different. I do not believe this QE will have more than marginal effects on the exchange rate. I also don't believe the exchange rate is all that central, even if it's part of the solution.<br /><br />The demand for labour is related to aggregate demand, not only external demand, so it can be arranged in other ways too.<br /><br />Being a scandinavian myself, i know about our currencies, and i can tell you they're not weak per se. They all float, except in Finland (Euro). The Swedish Krona is strong at the moment. Wages in Denmark are as high as ever (~18USD/hour market minimum wage). Norway is the richest of our countries with incredibly cheap imports. These are not currency regimes intended to be weak, but rather market-oriented and floating.<br /><br />The only advantage Scandinavia has is the policy-mixes, except for Norway. Norway has oil. The other Scandinavian coutries have competent labour and high productivity, low corruption etc. Also - While Scandinavia isn't a weak exporter, it is primarily a region of strong policies for mass-consumption, which helps drive domestic demand.OWHnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-86113091242451855252013-04-07T22:19:57.981-04:002013-04-07T22:19:57.981-04:00I think that you have confused creating money with...I think that you have confused creating money with borrowing it (issuing bonds). The BoJ, like the Fed, will be buying bonds and earning interest. Unwinding QE would consist of selling the bonds back into the market and collecting the money, thus shrinking the monetary base. There is nothing here that could result in the central bank becoming insolvent.<br />If interest rates spike, debt payments would put pressure on government budgets, not the central banks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-33119944502831124402013-04-07T18:05:12.538-04:002013-04-07T18:05:12.538-04:00You need to first think about what exchange rate J...You need to first think about what exchange rate Japan wants, and work back from there to figure out what policy it needs to get there.<br /><br />the ¥80 regime was killing Japan -- Japan's hourly wage was Shenzhen's daily wage.<br /><br />People say Japan needs to open up their service sector to foreign 'efficiency'.<br /><br />Foo on that. Efficiency is just a way to pull wealth out of the Japanese economy.<br /><br />When I arrived in Japan in 1992 the yen was at 125, a 50% strengthening from the pre-Plaza days.<br /><br />Prices, though, were still largely unmodified from the previous regime, so everything looked expensive in dollar terms.<br /><br />>i believe it will not coax the private sector into actually consuming<br /><br />Prices WILL go up as the yen goes down. The government can soften the shock by lowering the gas tax etc, but that is not in the plans AFAIK.<br /><br />The question is what's going to happen to wages. Just making the cost of living go up isn't going to help anyone, sigh.<br /><br />For wages to go up, industry is going to need to demand more domestic labor. For that to happen, they need a more favorable yen regime vis-a-vis China.<br /><br />I am guardedly optimistic about the Abe plan, for these currency reasons. The scandinavian export economies also run weak currencies to give them an advantage.Troynoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-88003715677206655802013-04-07T17:06:43.652-04:002013-04-07T17:06:43.652-04:00Why would Japan be "out of the picture?"...Why would Japan be "out of the picture?" Is it going to sink into the ocean?<br /><br />A cheaper Yen means more Japanese exports, which means Japan likely holds a current account surplus vs. the United States...which must lead to them buying our bonds.<br /><br />I don't understand how people insinuate whole countries will blow up and disappear because of economic difficulties or a recession.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-33944318345985295092013-04-07T15:17:06.446-04:002013-04-07T15:17:06.446-04:00I believe this type of policy will not work. Centr...I believe this type of policy will not work. Central banks cannot directly control demand and interest rate changes are blunt-force tools at best. While a policy like this could inflate asset prices alot in a boom, i believe it will not coax the private sector into actually consuming. No consumption means no reason to invest in additional capacity, which means no additional demand is created.<br /><br />Now i am not sure about how this will affect the prices of financial products, but i believe that whatever happens in that sector, it will not alter the direction of other sectors.<br /><br />Let's see what happens. Best case, we have a solution that fits both sides politically. Worst case, we don't have a solution at all, but rather an unnecessary market disturbance.<br /><br />//OWHOWHnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-3469569126881249632013-04-07T06:40:50.662-04:002013-04-07T06:40:50.662-04:00I wonder if the BCE could do the same and what cou...I wonder if the BCE could do the same and what could happen if all major economies enter competitive quantitative easing.<br /><br />before doing it the BCE should have the Eurobonds at its disposal...<br />http://mgiannini.blogspot.be/2013/04/launch-euro-bonds-and-then-go-bit-japan.htmlM.G. https://www.blogger.com/profile/14140876295753661499noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-25078764858960538792013-04-07T03:11:48.730-04:002013-04-07T03:11:48.730-04:00CB buying bonds is just swapping one government ba...CB buying bonds is just swapping one government backed/issued financial asset for another and as Mosler points out is deflationary as it removes government paid interest income from the economy.<br /><br />CB buying real estate and stocks could be wildly inflationary.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-27281982064053996892013-04-07T01:40:33.998-04:002013-04-07T01:40:33.998-04:00>"What you seem to be saying is that QE wo...>"What you seem to be saying is that QE won't generate growth." <br /><br />It's very much still an open question whether or not it will generate growth- a lot of people doubt it will even generate substantial inflation.<br /><br />That remains to be seen, but even if it's relatively successful, then it becomes a matter of whether or not the growth can compensate for a very dramatic demographic shift. Japan's increases in productivity have already been quite good the past 20 years, but the population is shrinking at such a rate that GDP hasn't increased so much. <br /><br />Those demographic trends are accelerating. Abenomics will have to generate a hell of a lot of growth just to compensate for them, let alone grow the economy at a respectable rate. In 25 years, Japan's population will be 16% down from what it is now, and 30% of the population will be over 65 and leaving the workforce.<br /><br />>"That is contradicted by your assertion that the retired are turning from saving to spending."<br /><br />The reason the elderly are turning from saving to spending is because they're retired now, and are no longer generating any income themselves. There's no growth to stimulate with the emerging largest demographic because they're leaving the workforce.<br /><br />They're living off the saving they've accumulated, and heightening their burden to the state by way social security and health care. Which is to say they're simultaneously depleting their savings *and* spending less. jjrsnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-42258463803658532472013-04-07T00:45:11.362-04:002013-04-07T00:45:11.362-04:00Japanese government paying money to the rich, whil...Japanese government paying money to the rich, whilst taking it from the poor through increased consumption tax.<br /><br />I think it is pretty clear who will benefit from these policies.(Hint, not the ordinary workers still facing pay cuts.)<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-80384718938793888522013-04-07T00:13:57.420-04:002013-04-07T00:13:57.420-04:00I would agree if you mean it would benefit those w...I would agree if you mean it would benefit those with variable as opposed to fixed incomes, as I'm sure is your point, but don't you think that real yields would tend to increase if the CBJ is able to deliver on its promise?Anonymoushttps://www.blogger.com/profile/14235846531323511190noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-61831168425191413752013-04-07T00:09:16.237-04:002013-04-07T00:09:16.237-04:00>will get hyperinflation first
LOL
"No w...>will get hyperinflation first<br /><br />LOL<br /><br />"No wage inflation, no inflation"<br /><br />Japan is running its macro economy roughly in balance -- they've seen a trade deficit appear, but that's why they want to push the yen down from 80 to 120 or whatever.<br /><br />Where the yen ends up after all of this is the critical question, not interest rates, not "inflation".<br /><br />Japan can feed and manufacture what it needs, so it doesn't need to fear inflation per se.<br /><br />And it needs the soft-protectionism of a cheaper currency to bring more jobs back from E Asia.<br /><br />Its baby boom is tiny compared to ours (~10M vs our 80M) and they're already aged 63-65 now and heading off to a well-deserved retirement.<br /><br />Pensions are paltry and Japan's medical system is pretty well-regulated on the profit control side so inflation isn't going to hurt seniors.<br /><br />It's either inflation or massive tax rises on everyone this decade and next.<br /><br />I think Japan's problems are a lot more solvable with the yen out of the 80 area and up around 120-130. Heck, back to 220 would be a paradise for them again.<br /><br />Gasoline taxes are $3/gallon so they could cut that back to soften the energy shock.<br /><br />Plus I suspect they're wanting to get those nukes restarted before next year's summer demand season . . .Troyhttp://example.com/blahnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-61039188329515414892013-04-06T23:18:38.300-04:002013-04-06T23:18:38.300-04:00The theory is that the growth which will accompany...The theory is that the growth which will accompany the inflation will generate more than sufficient revenues to pay the higher yields while shrinking the size of debt relative to GDP. <br /><br />What you seem to be saying is that QE won't generate growth. That is contradicted by your assertion that the retired are turning from saving to spending. The young may earn less, spend less and save more, but ostensibly more of them will be earning. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-13735461384969110972013-04-06T21:00:15.092-04:002013-04-06T21:00:15.092-04:00Does it make any difference that the deflationary ...<i>Does it make any difference that the deflationary wind that blew in with the emergence of China as the world's factory seems now to be fading? I wonder if this is the right policy, but too late.</i><br /><br />I think this might matter a lot! But if so, it matters in a good way, since it'll help Japan break out of its deflationary trap.<br /><br /><i>Besides exporters, who wins and who loses in Japan from this policy?</i><br /><br />If they can cause moderate inflation, young people win at the expense of old people (another reason I like the policy; maybe even the main one!)...Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-35580224441386183492013-04-06T20:27:13.055-04:002013-04-06T20:27:13.055-04:00Looks like Japan will get hyperinflation first. I...Looks like Japan will get hyperinflation first. In any case, I am sure it is worth spending some time to understand hyperinflation. <br /><br />I have a Hyperinflation FAQ:<br />http://howfiatdies.blogspot.com/2012/10/faq-for-hyperinflation-skeptics.html<br /><br />Also, a model and simulation of hyperinflation:<br />http://howfiatdies.blogspot.com/2013/03/simulating-hyperinflation.htmlVincent Catehttps://www.blogger.com/profile/06502618776820144289noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-2342830646477069152013-04-06T20:07:00.301-04:002013-04-06T20:07:00.301-04:00Noah,
Does it make any difference that the defla...Noah, <br /><br />Does it make any difference that the deflationary wind that blew in with the emergence of China as the world's factory seems now to be fading? I wonder if this is the right policy, but too late. <br /><br />Besides exporters, who wins and who loses in Japan from this policy? Obviously Japan has energy cost issues and a huge number of pensioners, and there isn't a huge unemployment problem, so why is this policy the right one now?Daniel Kwiathttps://www.blogger.com/profile/18087836942435435388noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-20504018277967040682013-04-06T17:34:32.097-04:002013-04-06T17:34:32.097-04:00"It's not only a huge win for Japan - whi..."It's not only a huge win for Japan - which needs moderate inflation to erode its mountainous debt, and could probably use an employment boost too - but also for New Keynesian and monetarist type macroeconomics, which generally holds that a central bank has the tools to control the rate of inflation (or to beat any depression). A failure would mean either an uncontrolled "inflation snap-up", or a failure to budge Japanese expectations and prices. A majority or plurality of top macroeconomists probably believes in some sort of monetarism, so hopes are high. I'm a little bit more agnostic, and I'm excited to see what happens."<br /><br />So... we should have vote for Romney? for his new keynesian advisor fan of Friedman Greg Mankiw?<br /><br />blah........Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-8021993435310055322013-04-06T15:25:42.145-04:002013-04-06T15:25:42.145-04:00"It will not work" ?? Looking forward to..."It will not work" ?? Looking forward to seeing you eat your words, mate.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-90532240046876520102013-04-06T13:55:47.943-04:002013-04-06T13:55:47.943-04:00Yes, this is exciting. If for no other reason than...Yes, this is exciting. If for no other reason than to close (one way or the other) an escape hatch: <br /><br />Keynesians -- We didn't spend enough (US).<br />Austerians -- We didn't cut enough (Eurozone).<br />Monetarists -- We didn't QE enough (Japan). Trixiehttps://www.blogger.com/profile/17763994914034770622noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-50063213036998506292013-04-06T13:17:46.937-04:002013-04-06T13:17:46.937-04:00Agree on all but 6. Obviously, competitive devalua...Agree on all but 6. Obviously, competitive devaluation gets everyone back to where they started, but with higher inflation if the devaluation is attempted by increasing monetary base. This is a win for everyone in a deflation! It's possible to have both more jobs in Japan and more jobs here as Japan helps us reflate.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-47594325976974345972013-04-06T13:01:43.722-04:002013-04-06T13:01:43.722-04:00QE for the individual is the correct strategy. The...QE for the individual is the correct strategy. The only reason it is not considered so is that it will REDUCE borrowing and the CONTROL of the Financial "industry."Anonymoushttps://www.blogger.com/profile/10115431758912669755noreply@blogger.comtag:blogger.com,1999:blog-17232051.post-31085753345951076122013-04-06T12:34:21.792-04:002013-04-06T12:34:21.792-04:00"... What if the BoJ on the verge of becoming..."... What if the BoJ on the verge of becoming insolvent prints a trillion to increase its capital? ..."<br /><br />"Printing" is a liability, NOT equity capital, for the central bankAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-85119056626145588962013-04-06T12:19:11.027-04:002013-04-06T12:19:11.027-04:00The central bank can sell of the ETF's and bon...The central bank can sell of the ETF's and bonds it has bought. It can increase the interest rates as well when the inflation is to high. This will decrease the monetary base and inflation will be lowered again.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17232051.post-84246280570571024162013-04-06T11:37:26.367-04:002013-04-06T11:37:26.367-04:00What is TPP?What is TPP?Anonymousnoreply@blogger.com