Posted by: The moderator | January 30, 2012

They grow up so fast

After 31 years of building an advanced economy by exporting high-tech gadgets to the world, Japan has joined the United States in the pantheon of rich countries that don’t bother making stuff anymore. Japan is now experiencing a trade deficit resulting from an aging workforce, unfair competition from cheap Chinese labor, and natural disasters disrupting domestic production. At least we won’t be alone in our decade of decline.

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Responses

  1. It’s also worth noting that we’re hand-in-hand with our Japanese compatriots in the longest time spent at a 0% Federal Funds Rate, essentially meaning companies and banks can borrow from the federal government with no nominal interest. It was intended to spur the economy, but after four or five years of what’s essentially a negative rate of interest (accounting for inflation), it may be spurring an overall deflationary bubble.

    But trade deficits have never made terribly much sense to me. Under the math of a trade deficit, if I am a paper company that buys $1 million worth of paper from a Japanese supplier and turns it into $10 million in magazine sales domestically, I still have a $1 million foreign trade deficit regardless of a $9 million profit on my finished product. The problem being trade deficits don’t seem to care much about domestic consumption or the value-added to resources. A trade deficit only really comments on the vigor of cross-border trade, not the multiplier effect WITHIN an economy from cross-border trade.

    You’re a hero Matt. Keep on keeping on.

  2. I don’t mean to be mean. Also, Nothing personal. But, to see the history, Japan has done so many evil things in Asia. so… many people in Asian countries believe it is their karma, and I am one of the believer. “You’d better be nice to people when you are going up, because you need their hands when you have to step down.” 😉

  3. I’m not sure this is new, though. Japan has been in a 10-year long recession. It has one of the highest levels of personal debt in the entire world. It’s quite simply an inflationary mess – where a bowl of beef broth out just keeps getting more and more expensive. The steps that Japan has taken to try to even out its economy are important for us to watch from and learn – it acted very hesitantly, and didn’t pump enough money into the economy, and as a result, it did create new waves of consumer spending and keep inflation low. And its totally interesting system of corporate ownership is getting increasingly strange in the post-2000 era.


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