Posted by WARREN MOSLER on February 8th, 2013
> (email exchange)
> On Thu, Feb 7, 2013 at 1:06 PM, wrote:
> There was an almost sensible article by Samuelson in the WP today. What caught my eye
> was this comment that claims Japan failed at using Keynsian over the years. Can you
> clarify this:
> Here is the comment:
The problem is that economists have not recognized the failure of Keynsian economics. I think the uniform failure of deficit spending to promote growth has to be recognized.
They just didn’t run large enough deficits.
If the model worked, we would not be talking about Japan’s lost decade, or more accurately lost generation. Japan’s debt is now over 200 percent of GDP.
Their growth rate in response to an ocean of deficits is uniformly poor.
Because they aren’t large enough to cover their savings desires.
The story is similar in Europe, particularly Southern Europe. There is no way Uncle Sam can continue to borrow 40 cents of every dollar spent.
When governments get this far behind, they usually pay off the debt with hyper inflation.
This never ends well. The usual outcome is social disintegration followed by dictatorship. For example, the hyper inflation of Weimar Germany after WWI lead to Hitler.
That was due to deficits of 50% of GDP to sell marks for fx and gold to pay war reparations. Any other examples???
The Federal Reserve’s constant quantitative easing in search of economic growth is going to lead to increasing inflation and interest rates.
Japan’s been doing it for over 20 years and still has no inflation and a strong currency.
They are buying 70 percent of the debt the Federal Governments incurs this month. Once Once interest rates go up, the deficits will balloon, 160 billion dollars a year for each percentage point.
We have got to cut spending and stop the coming train wreck.
What train wreck? The train wreck is the current state of affairs from a deficit that’s too small.
Note that every move towards deficit reduction in Japan made things worse, and every supplementary budget made things better. they just haven’t ever done enough
> Its a typical RW comment, but what am I missing. How can you keep stating Japan did this
> wrong for the other reason?