21
Nov
2014
Tom Woods and I Talk Japan, Plus a Surprise Announcement
As I said on Facebook, it might be about the Flying Spaghetti Monster we captured. Or should I say, Spaghetti Monster.
As I said on Facebook, it might be about the Flying Spaghetti Monster we captured. Or should I say, Spaghetti Monster.
My karaoke request: http://www.youtube.com/watch?v=6XipRUgmQ40&t=51s
Thank you Beard Face.
I admit it, I took an interest in Austrian economics primarily because I instinctively know Krugman was full of it, and wanted to find something completely different to Krugman.
By the way, Zero Hedge is also piling onto Krugman over Japan: http://www.zerohedge.com/news/2014-11-21/and-person-responsible-japans-economic-endgame-paul-krugman
I’ve met people who feel sorry for Krugman and the mess he has got himself into. I’m not one of those people.
I found out about Austrian economics the exact opposite way. I found out about Krugman after he won the Nobel prize in 2008 and appeared on TV talking about his “The Return of Depression Economics” and how it was relevant to the financial crisis. I then started reading his blog, impressed by his mathematically sophisticated blog posts. Then on Steve Landsburg’s blog I learned about the Krugman Debate, and that led me find out about Bob’s blog, Austrian economics, and anarcho-capitalism.
I found out about Austrian Economics because Conservative Constitutionalists had a problem with this Ron Paul guy’s belief in a gold standard.
Had they read the Constitution?
Maybe Ron Paul wasn’t as kookie as they made him out to be.
What part of the Constitution are you referring to? Doesn’t the Constitution only prohibit the states from using anything but gold and silver coin as their currency?
True, but, as Tom Woods noted, If the states can’t make anything but gold and silver legal tender, then the states can’t make whatever other thing the general government wants to be legal tender:
Is Ron Paul Wrong on Money and the Constitution?
[www]http://www.youtube.com/watch?v=40MBdt1BQgE
“What is Constitutional Money?” with Edwin Vieira — Ron Paul Money Lecture Series, Pt 2/3
[www]http://www.youtube.com/watch?v=k6gMkKmQSW4
OK, but aren’t legal tender laws federal laws and not state laws?
My suggestion for the Karaoke bit. Quite obvious, but adequate – https://www.youtube.com/watch?v=pryJYyzoSpA
This podcast will rock.
Robert Murphy makes the incorrect claim that Japan has “never recovered” from the collapse of its 1980s/early 1990s bubble and has been “mired in this rut” – presumably meaning suffering recession or stagnation? – for over two decades. False. The lost decade ended 2003-2006. Keynesian stimulus was a vital part of the recovery. When in 1997 Prime Minister Ryutaro Hashimoto imposed sharp fiscal contraction, Japan fell into recession and recovery derailed.
Woods makes the even more bizarre implication that Japanese real GDP has been contracting or falling for 25 years.
Detailed refutation:
http://socialdemocracy21stcentury.blogspot.com/2014/11/robert-murphy-on-japan.html
Woods clearly said he was talking about the Nikkei 225, which hit a peak of over 20000, about 14 years ago, and has been unable to regain that.
http://www.tradingeconomics.com/charts/japan-gdp-per-capita-ppp.png?s=jpnnygdppcapppcd&d1=19900101&d2=20141231&URL2=/japan/government-budget
The graphs do not reflect your story about “sharp fiscal contraction” in 1997. Actually, the trend in government spending from the 1990’s right up to 2003 was fiscal expansion, and in 1997 we saw only a tiny ripple, and then another ripple in 2001. The per-capita-real-GDP stayed pretty much flat from 1997 to 2003 even while the government was busy building up more public debt.
To the extent that GDP does show growth in the economy (and it really is a very rough measure of anything, especially over time) the growth happened between 2003 and 2008 which was a time when the government was steadily contracting their fiscal position and shrinking the deficit.
After the 2008 crash, the Japanese government quickly went back to running big deficits again.
How do you explain that the Japanese government could undergo fiscal contraction during 2003 to 2008 that was five times larger than the minor fiscal contraction of 1997 and yet the 2003 to 2008 period showed major GDP growth? Apparently the rule only applies when convenient, and if in doubt redefine the meaning of “fiscal contraction”.
“Woods clearly said he was talking about the Nikkei 225,
False. Bob talks about the Nikkei.
Woods says:
“[sc Japan has been] … engaged in Keynesian policy for [sc. a] quarter century now, and, just recently, figures came out for, I guess, GDP growth there, and they were expecting, well, a couple of percentage points positive, and it turns out they keep sinking ever lower.”
As for your statements about Japan’s fiscal status, you have no idea what you are talking about. In 1997, the Japanese government raised both income taxes and the sales tax (as Abe did in 2013) when the economy was very weak and first caused consumption and then investment to slump.
Yeah, right it was Bob. So you knew that, you must have also known that Bob’s “never recovered” claim was directly related to the Nikkei. Why did you pretend otherwise?
Sorry but what part of that implies “Japanese real GDP has been contracting or falling for 25 years” ?
The graph is right there (I linked to it), unless you have come up with yet another new and unique retrospective definition of “austerity” the 1997 fiscal contraction was trivial, and part of a clear trend of fiscal expansion. Those deficits speak for themselves.
(1) “So you knew that, you must have also known that Bob’s “never recovered” claim was directly related to the Nikkei. “
He ALSO says that Japan never recovered from its lost decade. He is wrong.
(2) “Sorry but what part of that implies “Japanese real GDP has been contracting or falling for 25 years” ?”
To any reasonable person, that is exactly what it implies. Of course, you are not a reasonable person.
(3) I have always used the same definition of austerity: it means “fiscal contraction”
And the facts speak for themselves: in 1997, the Japanese government raised both income taxes and the sales tax when the economy was very weak and first caused consumption and then investment to slump.
The data set out clearly by Bill Mitchell:
http://bilbo.economicoutlook.net/blog/?p=20607
Your problem is: you can’t even properly interpret economic data.
LK:
So fiscal austerity is merely the direction of change in taxes, not the size of the deficit in relation to GDP?
That is a new definition of austerity.
“So fiscal austerity is merely the direction of change in taxes”…
False. I’ve never said that.
And the size of the deficit in relation to GDP is a function of BOTH the deficit AND GDP and is not necessarily a sign of austerity. I’ve always said this.
Bill’s graph shows the same data. You have a blue line and a red line with a very obvious trend showing those lines crossing then diverging (i.e. the government surplus collapses into a deficit and that deficit steadily gets bigger). “Fiscal stimulus” I think it’s called.
http://bilbo.economicoutlook.net/blog/wp-content/uploads/2012/08/Japan_Budget_Aggregates_Real_GDP_growth_1990_2000.jpg
You guys have zoomed in and found some tiny inflection on the blue line and made a big deal about it. Because that’s the only little part of the chart that supports your argument. Ignore the trend and find some tiny particle of noise to examine.
http://bilbo.economicoutlook.net/blog/wp-content/uploads/2012/08/Japan_Budget_Aggregates_Real_GDP_growth_1990_2000.jpg
lol… which shows falling government expenditure and rising revenues in 1997 — reflecting the fiscal contraction.
Once we add the multiplier effect in the private economy to this fiscal policy and the fact that economy was very weak, you just provided evidence proving my point.
Thanks for that.
That’s how Keynesian data analysis works: focus in on one irrelevant little plip while completely ignoring the obvious trend. Thus allowing any answer to be obtained from any data.
And that’s all you got, and you know it, and we know it.
LK:
“To any reasonable person, that is exactly what it implies. ”
No it doesn’t. It takes a very specific set of assumptions to make the argument “imply” that claim.
But reasonable people don’t start with a preconceived and desired conclusion, and only then select and argue and choose premises to get to that conclusion. Since that is what you do, you’re not a reasonable person. You’re a political strategist who wants to prolong government control.
Quick question, LK. Do you understand economic growth to be how much money the government takes in, such that if that number shrinks (all other things being equal) you consider that necessarily a recession?
I highly doubt Lord Keynes believes that. I’m not aware of anyone who does.
GDP is not a proper measure of economic health according to Austrian theory.
What you call “recovery” is just a reintroduction of historical trend of impoverishment at gunpoint.
1. I am ambivalent about the efficacy of trying to show that Keynesians are “inconsistent”. A fully consistent Keynesian is still completely wrong about how the world actually works. Demonstrating an alleged lack of inconsistency does not make the Keynesian right or the Austrian wrong.
2. LK’s Billyblog post by MMT Supremo Bill Mitchell demonstrates that Keynesians are socialists and believe in central planning (as I have maintained for decades):
WSJ: “In 2010, seniors were 23% of the population—while senior-related spending ate up 29.5% of the budget. Absent radical change in entitlement programs, Japan’s demography is on track to swamp its finances.”
Billyblog: Which means that the government will have to spend less on primary schools and pre-school facilities and more on personal care services for the aged.
THE ONLY ISSUE IS WHETHER THERE WILL BE SUFFICIENT REAL RESOURCES AVAILABLE FOR SALE TO FACILITATE THE LIVING STANDARD ASPIRATIONS OF THE AGEING COHORT. [emphasis added]
There is a chance that living standards will have to fall – but that will not be because the Japanese government will run out of the capacity to purchase any goods and services that are available for sale in the currency it issues.
Productivity growth clearly has to grow to maintain real standards of living when the dependency ratio is rising. That is the issue that Japan has to broker. Trying to broker it by plunging the economy back into recession or another extended period of low growth will undermine the capacity of that nation to generate productivity growth.*****
The WSJ say that the demands of the older Japanese:
“.. is creating irritation among many in their 20s and 30s who have had to make do with low-paying temporary jobs, as companies have responded to two decades of stagnation by reducing the number of young people they hire and cutting pay and benefits.”
Which gets to the nub of the ageing society argument in relation to fiscal policy. The younger Japanese might gain political sway as they get older and decide their parents do not deserve the standard of public goods that might be available.
The political process might force the government to cut the standard of living for the older population. But that won’t be a financial constraint binding – it will be the outcome of the political debate and lobbying by different demographic cohorts.
The WSJ article closes with this wonderful demonstration of ideology cum ignorance. They quote a 24-year-old as saying:
“There will be no money left in the pension system when our turn comes in 40 years … I am worried things are only going to get worse unless we do something.”
There will always be “enough money” available for government spending if the government chooses to make use of its currency-issuing capacity.
The problem is that if the government is pressured to “do something” by the neo-liberals then the 24-year-old will face a future of poor employment prospects and the rest of it.
Keynesianism destroys the ability of people to save for their old age and destroys the price system that might enable one to know if one has actually saved enough for retirements. Thus we see that Keynesians actually think of retirement assets as something that the government necessarily provides and, in a democracy, are provided purely by political whim which can be withdrawn at a moment’s notice by the 50% + 1 majority.
How moral and scientific of them.
(1) Bob Roddis:
“LK’s Billyblog post by MMT Supremo Bill Mitchell demonstrates that Keynesians are socialists and believe in central planning”
(2) Bob Murphy:
“[LK:] >Does it embarrass you that a man who abuses Keynesians and
>progressives almost on a daily basis here as “commies” can make a
>statement that ignorant and stupid?
[Bob Murphy]: I didn’t see Roddis calling you a “commie” until you just pointed it out.
So yes, Roddis, please don’t call LK and his peers “commies.”
———————————
So, Bob Murphy, Roddis is still at it, yet you banned Ken B and Philippe allegedly for slandering you.
Do you really think non-Austrians coming to your blog and seeing this abusive nonsense by Roddis does you and Austrian economics credit? Is this how you’re going win over opponents?
And note well, roddis, that calling Keynesians “communists”, “Marxists”, or “socialists .. [who] believe in central planning” is equivalent to calling them “commies”.
I believe it’s an issue of style. Krugman “Kontradiction” is fine. “Bass-Ackwards” Keynesians is not.
Keynesians “appear to be dishonest or confused” is fine. Keynesians are “lying “@$#$$## SOB’s” is not.
Also, “LOL” is not fine.
Not true LK.
Socialists who believe in central planning are not necessarily communists. They could be fascists as well.
You are more fascist than communist because you want socialism predominantly in the form of government control (i.e. “regulation”) but not outright ownership, of the means of production.
Murphy banned Ken B because he constantly trolled Murphy.
Are we still allowed to say, “Central Bank Strategic Plan” ?
That only sounds a little bit commie.
“… calling Keynesians “communists”, “Marxists”, or “socialists .. [who] believe in central planning” is equivalent to calling them “commies”.”
Thank you!
Just because some of us don’t know (and don’t care about) the nuanced differences between these groups doesn’t mean we aren’t correct in saying that they are essentially the same.
Consistency demands that Socialism leads to Communism.
Remember this?:
Learn to Speak Tea Bag
http://www.youtube.com/watch?v=QCqQRflUWd4
[Aside: It’s funny how everyone forgot about this video when the Dems started calling the Tea Party “Nazis!”.]
LK: On the merits, you’re mysteriously silent regarding my assertion that Bill Mitchell demonstrated Keynesianism to be socialist. Could it be because the criticisms in the comments section are right?
You demonstrated no such thing.
Billyblog’s little Japan charts show the blue line of revenue running below the red line of spending since around 1992. And (according to Billyblog) the old folks are in deep trouble unless the young folks decide to send them some transfers from the socialized stash. The socialized stash can only be grown by prodigious Keynesian spending and money dilution. The evidence shows that half-hearted prodigious spending and money dilution (aka “austerity”) do not achieve Nirvana. The Austrians and austerians have thus been vanquished.
What a wonderful system. What a wonderful argument. It looks like genuine austerity is on the horizon.