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Japan is in a category of its own. They have a declining population which followed a massive asset bubble that popped 30 years ago. https://fred.stlouisfed.org

Japan is in a category of its own. They have a declining population which followed a massive asset bubble that popped 30 years ago. https://fred.stlouisfed.org/series/POPTOTJPA647NWDB https://fred.stlouisfed.org/series/POPTOTJPA647NWDB

throw0101a 6y ago
> Dean Baker goes after people who claim that Japan has suffered terribly from its debt burden, arguing that Japan has actually done pretty well. But he's wrong: Japan has done better than he says > Dean looks at GDP per capita. But Japan's aging population means that you really want to look at GDP per working-age adult. And by that measure Japan's growth has been essentially the same as America's […] > The truth is that these days Japan looks less like a cautionary tale than like a role model. Its performance only looks bad if you assume that the debt is a terrible problem, when all the evidence says that it isn't * https://twitter.com/paulkrugman/status/1215628645869420545 https://twitter.com/paulkrugman/status/1215628645869420545 25 years of <1% rates, huge 'money printing', and yet no inflation or currency debasement, and respectable per-worker GDP growth. Where's the problem?
- trident5000 6y ago
  I have to admit Japan is an interesting case and brings up good counter points. Really wages need to go up to spark inflation on the ground floor for common items.
  - throw0101a 6y ago
    Krugman has a 1998 paper on Japan that's probably still relevant today, especially since more places are hitting zero rates: * https://www.brookings.edu/bpea-articles/its-baaack-japans-slump-and-the-return-of-the-liquidity-trap/ https://www.brookings.edu/bpea-articles/its-baaack-japans-sl... * https://www.princeton.edu/~pkrugman/japans_trap.pdf https://www.princeton.edu/~pkrugman/japans_trap.pdf
    - trident5000 6y ago
      Giving these a read, thanks.
- Clewza313 6y ago
  You can't just ignore all the people who aren't working though? One of Japan's specific problems (which will also hit much of the West in a decade or two) is that society is aging fast and the ratio of retirees to working people is increasingly unsustainable.
  - spurgu 6y ago
    Exactly. Just reading those quotes (haven't read the linked article) leads me to think that you can't ignore the huge liabilities comprised of education, medical care and pensions.
  - throw0101a 6y ago
    > ratio of retirees to working people is increasingly unsustainable. I'd like to see the economic models that were used to calculate at what (estimated) point this becomes "unsustainable". Do you have a citation? What percentage of the population has to be "elderly" or taking their pension? What is the minimum percentage of the population that needs to be in 'working age' years before it becomes a problem? Unless there are models people are just throwing darts in making these statements. Show me that the math exists (even though I may not understand it as a layman). Pontificating is cheap. Krugman in 1998: > The purpose of this paper is to show that the liquidity trap is a real issue-that in a model that dots its microeconomic i's and crosses its intertemporal t's something that is very much like the Hicksian liquidity trap can indeed arise. Moreover, the conditions under which that trap emerges correspond, in at least a rough way, to some features of the real Japanese economy. To preview the conclusions briefly: in a country with poor long-run growth prospects—for example, because of unfavorable demographic trends […] > In the model of sections 1-3, a liquidity trap will arise only if future productive capacity is actually lower than current capacity. Before loosening that constraint, we can ask why one might expect Japan's future capacity to be relatively low compared with today's. And the obvious answer is demography: Japan's combination of declining birth rate and lack of immigration apparently means a shrinking rather than growing labor force over the next several decades. […] > Moving outside the formal model, the prospects for a liquidity trap also depend on investment demand. Here demography again comes into play: the prospective decline in the labor force reduces the expected return on investments. * https://www.princeton.edu/~pkrugman/japans_trap.pdf https://www.princeton.edu/~pkrugman/japans_trap.pdf

throw0101a 6y ago

> Dean Baker goes after people who claim that Japan has suffered terribly from its debt burden, arguing that Japan has actually done pretty well. But he's wrong: Japan has done better than he says > Dean looks at GDP per capita. But Japan's aging population means that you really want to look at GDP per working-age adult. And by that measure Japan's growth has been essentially the same as America's […] > The truth is that these days Japan looks less like a cautionary tale than like a role model. Its performance only looks bad if you assume that the debt is a terrible problem, when all the evidence says that it isn't * https://twitter.com/paulkrugman/status/1215628645869420545 https://twitter.com/paulkrugman/status/1215628645869420545 25 years of <1% rates, huge 'money printing', and yet no inflation or currency debasement, and respectable per-worker GDP growth. Where's the problem?

trident5000 6y ago
I have to admit Japan is an interesting case and brings up good counter points. Really wages need to go up to spark inflation on the ground floor for common items.
- throw0101a 6y ago
  Krugman has a 1998 paper on Japan that's probably still relevant today, especially since more places are hitting zero rates: * https://www.brookings.edu/bpea-articles/its-baaack-japans-slump-and-the-return-of-the-liquidity-trap/ https://www.brookings.edu/bpea-articles/its-baaack-japans-sl... * https://www.princeton.edu/~pkrugman/japans_trap.pdf https://www.princeton.edu/~pkrugman/japans_trap.pdf
  - trident5000 6y ago
    Giving these a read, thanks.
Clewza313 6y ago
You can't just ignore all the people who aren't working though? One of Japan's specific problems (which will also hit much of the West in a decade or two) is that society is aging fast and the ratio of retirees to working people is increasingly unsustainable.
- spurgu 6y ago
  Exactly. Just reading those quotes (haven't read the linked article) leads me to think that you can't ignore the huge liabilities comprised of education, medical care and pensions.
- throw0101a 6y ago
  > ratio of retirees to working people is increasingly unsustainable. I'd like to see the economic models that were used to calculate at what (estimated) point this becomes "unsustainable". Do you have a citation? What percentage of the population has to be "elderly" or taking their pension? What is the minimum percentage of the population that needs to be in 'working age' years before it becomes a problem? Unless there are models people are just throwing darts in making these statements. Show me that the math exists (even though I may not understand it as a layman). Pontificating is cheap. Krugman in 1998: > The purpose of this paper is to show that the liquidity trap is a real issue-that in a model that dots its microeconomic i's and crosses its intertemporal t's something that is very much like the Hicksian liquidity trap can indeed arise. Moreover, the conditions under which that trap emerges correspond, in at least a rough way, to some features of the real Japanese economy. To preview the conclusions briefly: in a country with poor long-run growth prospects—for example, because of unfavorable demographic trends […] > In the model of sections 1-3, a liquidity trap will arise only if future productive capacity is actually lower than current capacity. Before loosening that constraint, we can ask why one might expect Japan's future capacity to be relatively low compared with today's. And the obvious answer is demography: Japan's combination of declining birth rate and lack of immigration apparently means a shrinking rather than growing labor force over the next several decades. […] > Moving outside the formal model, the prospects for a liquidity trap also depend on investment demand. Here demography again comes into play: the prospective decline in the labor force reduces the expected return on investments. * https://www.princeton.edu/~pkrugman/japans_trap.pdf https://www.princeton.edu/~pkrugman/japans_trap.pdf