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> Japanese policy makers have long identified > deflation as enemy No. 1 for the economy. It is crazy when policy makers try to make prices increase, prices

• jpatokal 10y ago
  It's not much fun if you're in the same boat as the average Japanese salaryman, who is seeing prices increase while his meager pay packet stays unchanged.
  • hudibras 10y ago
    > who is seeing prices increase As the chart with the article notes, these price increases are now at -0.1% per year.
  • fiatjaf 10y ago
    Did I say it is fun? The average japanese is poor because the government policies are robbing him, not because of my comment.
• partiallypro 10y ago
  Prices increasing without increase in economic output though, stagflation becomes a danger. Deflation is very dangerous, stagflation is dangerous, runaway inflation is dangerous. Monetary policy isn't easy.
  • dredmorbius 10y ago
    Inflation, deflation, and stagflation are symptoms, not causes.
    • cjensen 10y ago
      Nope. Initially, deflation is a symptom as you suggest. The problem is that deflation is a stable state within the economic system. Once in deflation, people say "I could invest this $100, and in the long run I'll get back $98. Or I could stick it in a mattress and get back $100 in the long run." Investment ceases. If a manufacturing line needs to be refurbished, the owners will lay off workers and quit rather than pouring in money they will never get back. This is why the Fed in the US panicked so hard when during the last recession: we were approaching the stable state and they were willing to do anything to prevent that from happening.
      • mac01021 10y ago
        Why, just because deflation is happening, must shares of businesses depreciate? Is deflation incompatible with profits?
        • cjensen 10y ago
          Deflation means that rather than buy a car this year, maybe buy it next year when it's cheaper. It's a massive encouragement to buy nothing and save as much money as possible. Manufacturing capacity which was keeping up with demand suddenly has too much capacity. Factories shut down. People get laid off. New jobs aren't created. How do you make a profit in a world where people won't buy a new thing because they think it'll be cheaper in a few years? And you can't compete in the market for old things because there is already too much excess capacity. It's a giant snowball of bad for everyone involved: both business and for the everyday working guy.
          • dredmorbius 10y ago
            There's only so much purchasing as can be deferred. People as a whole need water, food, shelter, and clothing. Even under deferred purchase, other infrastructure eventually wears out and needs replacing. In this circumstance, particularly with lower levels of income falling below living wages, a simple transfer payment from rich to poor will increase trade markedly. If your real rate of return remains negative, that's another problem, but a somewhat tractable one at modest scales.
  • eru 10y ago
    Just set a level target (eg 5% increase in NGDP each year), and follow it. Very easy. If market forecasts are below target, do QE (= print money), if above, slow or stop the creation of extra money. (One can target the market forecast of ngpd in a years time or two, instead of current ngdp.)
    • fiatjaf 10y ago
      Japan is doing QEs since the 80's and now they achieved a 10 yen increase in the price of a candy with a strange name.
      • eru 10y ago
        They just didn't do enough, and didn't announce an NGDP level target. Announcing the target and that the central bank will do whatever it takes, makes the market help with achieving the target--because any difference between a target that will eventually achieved and current reality is an opportunity for arbitrage.
    • Gustomaximus 10y ago
      If only it was that easy. On the broadest strokes monetary policy effects tend to be delayed and do minor changes until you hit a tipping point then effects rocket on a direction. No-one really knows where the tipping points are as there a bunch of variables and unknowns in every scenario so you dont really know until you 'found it'. The old quote something like "economics is someone looking backwards telling us why stuff happened". Secondly, policy makers should manage monetary policy in conjugation with fiscal policy. But fiscal policy can a much harder political fight or have different groups/ideologies controlling it. So monetary policy often runs as a solus activity making its effectiveness limited.
      • eru 10y ago
        If long lags where a thing, wouldn't that lead to major arbitrage opportunities? See http://www.themoneyillusion.com/?p=6197 http://www.themoneyillusion.com/?p=6197 Monetary policy can always produce inflation, if the central banks wants it badly enough. You are right that better fiscal policy can be useful for the economy, too. (I'd like to see Georgism given an honest try again. Funny enough, that's a very orthodox economic suggestion. Just like free trade and free movement of labour.)