Japan Needs a Massive Stimulus...

Article;

Bank of Japan Pledges Unlimited Easing Commits to Price Goal


Comment;

 Wages in Japan is 739 yen too high than 7.24 dollar in the US in absolute terms with out dollar and yen. Both country are at the same stage of development and even the poverty figures with the US at 16% and Japan at 14% tells that the same number of people in theses economies are above and below the poverty line. Then why we see the differential we see in their wages rate. It is because of our currency system, other things being constant. Have people accepted high voulmes of money as normal in Japan? Or deflation is due to a very high base period? Japanese per capita income has increased relative to other countries in OECD  with a higher rate. When Chinese per capita increases 3, 000 to 5, 000 US $ the Japanese percapita income rose from 37, 000 to 45, 000 US $. And, per capita income in the US expanded from $ 46, 000 to $ 48, 000 in the same period. I just want to say that Japan needs a so massive stimulus that is hard to expect. The13 trillion yen in stimulus will not match the quality of recovery we want. If the US spends 1 trillion on recovery Japan will need 100 trillions. At least the absolute wage differential but same stage of development tells us so … IS THIS IS WHAT OUR CURRENCY SYSTEM OFFERS ?

Inequality is holding back US recovery (BY) Joseph E. Stiglitz

"Inequality is holding back US recovery"



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Our Mistakes...

Article;

Price-rise Weakness in Government Record Concrete Steps will be taken in Next Financial Year


Comment;

You know Mr. Prime Minister your government has pushed growth so hard that unemployment rate fell below its natural rate after which inflation started ticking up and is almost persistent. And the many rounds of price hike of petroleum products has worsen the inflation scenario. We as a economist should not entertain policies that push unemployment rate below its natural rate (5%, frictional unemployment)...

Article;

RBI Governor Subbarao may not Oblige with a Rate Cut of 50 Basis Points- Economists

Comment;

RBI is doing what needs to be done but the government with an economist as head does not know about the limits of growth. Growth can not be pushed above a certain rate if unemployment rate falls below its natural rate at 5%. Also called the NAIRU i.e., non accelerating inflation rate of unemployment. above which inflation is nearly dead and below which inflation starts rising. Its time for the government to increase income-tax to control aggregate demand. But i think the government will try to present a populist budget because elections are next year...

Reserves...

Article;
Can Europes Markets Climb through the slump



Comment;
Europe is fixed in a problem of too much of the government debt and deleveraging of it. That is too much of government debt as high as 200% of GDP. The deleveraging process necessitates tightening of the fiscal belt which is counter productive during recession. We simply call it austerity. Higher taxes and spending cuts. When government spends money it creates employment actually a multiple of it through multiplier. European countries are mostly welfare states and they spend a lot on welfare. And, when the government spending is stopped that multiplier stops working. They have spent so high that the sum can not be derived from taxes without curbing demand. This, in a recession can not be done. The countries had a relief if either they had a reserve or the privilege to monetize their debt. Economies are stuck without money, they can not devalue. No real monetary track of economy. A single centarl bank regulates the market  and of course it does not offer different interest rates to economies in different part of the cycle. Some are better than others, they need different interest rates. The ability to monetize your debt or a default, may be half, will be the only ways to go around if we need the governments to spend more and create more employment…

Japan's Poor...

Article;

Weak Economy Large Budget Deficits will Force Japan to Default on Domestic Debt

 Comment;   Relative poverty in Japan is only next to the US among OECD countries and I think the government needs to address this issue. Inequality in Japan has increased in recent years due to slow economic growth the need is to reduce inequality in its economy. Japan is facing the same situation (not all) the United States is facing, depressed demand. The economy is in a deflating mode and to reflate it we need to infuse demand in the economy. But where is the demand? We all know that the demand constitutes the purchasing power in the hands of a buyer and not just the desire to buy a product. To buy a product we need to have money. And who does not have money but the desire to buy a product? The poor... We need to support the poor to reduce inequality in the economy and this will kick start the economy. We know about multipliers – any spending creates a multiple of that spending in the final. And the multiplier is highest when we put money in a poor man’s pocket because he almost spends all of it. Therefore, to sum up, Japan to reflate its economy should spend more on poor people and build demand right from the bottom…

Stimulus or Stymied?: The Macroeconomics of Recessions by Brad DeLong

Very Nice... Stimulus or Stymied the Macroeconomics of recessions

The Poorest...

 Article;
Rage against the coin



Comment;
If we use this money to avert depression and use fiscal policy in liquidity trap, then we surely need to worry about inflation down the line. The question is “Whether this money will be accepted by common people and in times of high inflation (whether) it can be used to suck liquidity from the market like done under Open-Market-Operations (OMO)? If it is so it will be good but the only difference differences will be that there will be no debt on the either side. But only wealthy people can do so, not the common man. The arrangement should be such that in times of crises people or every house-hold can buy or exchange that coin and be able to hedge themselves against unemployment and inflation as does the government. Or, people will see it as an antique and investment in antique. But the ailment of the economy is depressed demand and the money’s best use will be to infuse demand in the economy through fiscal policy. If government needs to infuse demand very soon it can support the poorest households for another year or two but good thing would be to also make arrangements for jobs. Otherwise we would be in a long debate like this one (the coin)….