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He does talk about Germany's 200 year manufacturing excellence. That doesn't explain why in 1992 Germany had a massive trade deficit and UK had an equally large

He does talk about Germany's 200 year manufacturing excellence. That doesn't explain why in 1992 Germany had a massive trade deficit and UK had an equally large trade surplus, or how they've been able to avoid the fate of Japan.

raxxorrax 7y ago
I think the current bleak estimates for Japan are quite exaggerated. Just recently economists proclaimed that their latest success must be a statistical fluke. Just look at the living conditions there... To be honest, I believe a lot of economists are a bit of the wrong side from time to time. Maybe analysts face a bleak economic future and got something mixed up?
vkou 7y ago
To be fair, this re-unification thing that was happening in 1992 was a bit of a drag on the German economy.
menotyou 7y ago
These were the years shortly after reunfication in 1990. The reunfication hit West-Germany during a econonmic boom, so the economy was already producing at capacity and the additional demand shock from East-Germany could not be covered by West-German production. As a result imports raised and exports products were diverted to East-Germany at the same time and for a short time the trade balance became negative and some of the trade balances of Germany's neighbours temporarily improved due to higher demand from East-Germany. BTW: It is a misconception that a trade deficit and a poor economy are related.
menotyou 7y ago
Japans economy was much more government managed than completely free at that time. Specifically the Japans Ministry of International Trade and Industry ("MITI") was steering the economy, mainly be using a control called "windows guidance". By given "window guidance" the commercial banks the Bank of Japan controlled which segment of economy was allowed to get what amount of credit. This turned out to be highly competitve compared to the western model of a completely free market economy. This system was later abandoned due to pressure of the US to make the banking system and the BoJ "independent". The result from this operation was that the commercial banks diverted more credit away from real investment to financial markets and assets investments, which in turn resulted in an unsustainable real estate boom in Japan. From of this real estate boom Japan never recovered when the bubble burst. BTW: The Bank of China uses nowadays window guidance as a system to steer the economy - and seems to be pretty successfull with it.

raxxorrax 7y ago

I think the current bleak estimates for Japan are quite exaggerated. Just recently economists proclaimed that their latest success must be a statistical fluke. Just look at the living conditions there... To be honest, I believe a lot of economists are a bit of the wrong side from time to time. Maybe analysts face a bleak economic future and got something mixed up?

vkou 7y ago

To be fair, this re-unification thing that was happening in 1992 was a bit of a drag on the German economy.

menotyou 7y ago

These were the years shortly after reunfication in 1990. The reunfication hit West-Germany during a econonmic boom, so the economy was already producing at capacity and the additional demand shock from East-Germany could not be covered by West-German production. As a result imports raised and exports products were diverted to East-Germany at the same time and for a short time the trade balance became negative and some of the trade balances of Germany's neighbours temporarily improved due to higher demand from East-Germany. BTW: It is a misconception that a trade deficit and a poor economy are related.

menotyou 7y ago

Japans economy was much more government managed than completely free at that time. Specifically the Japans Ministry of International Trade and Industry ("MITI") was steering the economy, mainly be using a control called "windows guidance". By given "window guidance" the commercial banks the Bank of Japan controlled which segment of economy was allowed to get what amount of credit. This turned out to be highly competitve compared to the western model of a completely free market economy. This system was later abandoned due to pressure of the US to make the banking system and the BoJ "independent". The result from this operation was that the commercial banks diverted more credit away from real investment to financial markets and assets investments, which in turn resulted in an unsustainable real estate boom in Japan. From of this real estate boom Japan never recovered when the bubble burst. BTW: The Bank of China uses nowadays window guidance as a system to steer the economy - and seems to be pretty successfull with it.