Saturday, February 07, 2009

Japan as an example of Keynesian fiscal stimulus

From The New York Times:
Japan’s rural areas have been paved over and filled in with roads, dams and other big infrastructure projects, the legacy of trillions of dollars spent to lift the economy from a severe downturn caused by the bursting of a real estate bubble in the late 1980s. During those nearly two decades, Japan accumulated the largest public debt in the developed world — totaling 180 percent of its $5.5 trillion economy — while failing to generate a convincing recovery.

Now, as the Obama administration embarks on a similar path, proposing to spend more than $820 billion to stimulate the sagging American economy, many economists are taking a fresh look at Japan’s troubled experience. ...

It matters what gets built: Japan spent too much on increasingly wasteful roads and bridges, and not enough in areas like education and social services, which studies show deliver more bang for the buck than infrastructure spending.

“It is not enough just to hire workers to dig holes and then fill them in again,” said Toshihiro Ihori, an economics professor at the University of Tokyo. “One lesson from Japan is that public works get the best results when they create something useful for the future.” ...

In the end, say economists, it was not public works but an expensive cleanup of the debt-ridden banking system, combined with growing exports to China and the United States, that brought a close to Japan’s Lost Decade. This has led many to conclude that spending did little more than sink Japan deeply into debt, leaving an enormous tax burden for future generations.

In the United States, it has also led to calls in Congress, particularly by Republicans, not to repeat the errors of Japan’s failed economic stimulus. ...

Economists tend to divide into two camps on the question of Japan’s infrastructure spending: those, many of them Americans like Mr. Geithner, who think it did not go far enough; and those, many of them Japanese, who think it was a colossal waste. ...

Most Japanese economists have tended to take a bleaker view of their nation’s track record, saying that Japan spent more than enough money, but wasted too much of it on roads to nowhere and other unneeded projects.

48 comments:

  1. It is definitely worth keeping in mind. At this point we don't know what infrastructure projects are in the 1st stimulus bill...

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  2. Real estate took 14 years to hit bottom in Japan too.

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  3. Japan's population growth rate is .02% for a population of 127 million.

    US population growth rate is near 1% for a population in excess of 300 million.

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  4. "Japan's population growth rate is .02% for a population of 127 million.

    US population growth rate is near 1% for a population in excess of 300 million."

    Japan is smaller than a single state.

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  5. "Japan is smaller than a single state."

    Hundreds of years ago, Japan's rulers isolated that country; both culturally and economically. It remained that way until about 60 years ago. (When its government and its economy were reinvented by the United States.)

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  6. I was commenting on Japan population vs US population.

    Japan has half as many people but 1/50th the land mass. So you idiots cant claim "US population is growing so real estate will go up soon!!!!"

    Now as far as Japan being isolated back in the stone age, whats your point now?

    A fact is, that Japan the second largest economy, only behind the US, took 14 years for housing prices to bottom out. There is nothing you can spin to change that fact.

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  7. Anon, I think you missed the other Anon's point that Japan has virtually no population growth.

    In any case, it's not like it would have been hard to imagine Japan hitting the brick wall it did. It came out of the 50s with a reputation for producing cheap toys and gadgets. Because of central planning (the Japanese banks had a special relationship with Japanese industry), it was able to harness all its energy to produce good copies of items being made elsewhere ... e.g., cars ... and its copying of German products. It made good, high quality products ... no GREAT, high quality products ... but its whole production process was based on a highly centralized, almost indentured-servant like hold on its workers. Now this is something that might have worked in the days of the shoguns, but eventually the Japanese workers demanded a fair share of their work ... including some time to enjoy it ... And hence everything started to fall apart quickly. Yes, it's possible to achieve great things when you have a population tied to their work stations and afraid to not perform, but that isn't workable in a democracy. What we've accomplished here doesn't depend on the same indentured-servant-like ties. We'll recover. Easily. First off of course is to get the houses selling again. To conquer fear. Buying a house was far more expensive in the early 80s than it is now considering the difference in interest rates (and differences in pay), once the whiners stop whining, we'll be half way there toward a recovery.

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  8. "Anon, I think you missed the other Anon's point that Japan has virtually no population growth. "

    Nope, I didnt miss that at all.

    1) US population growth is a majority of nonskilled workers who cant afford current prices

    2) eventhough the US is at least 50 TIMES LARGER THAN JAPAN, the US has over a 1000 times more buildable real estate space.

    3) Japan built toys in the 50s, but in the 90s when their bubble bust, their economy was on par with the US.

    4) the US doesnt even make toys today. Nobody buys our crap. And thats TODAY not 1940.

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  9. Lance says BUY!

    News at 11

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  10. "the US has over a 1000 times more buildable real estate space."

    The house building industry is dead. Did you miss that memo?

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  11. "The house building industry is dead. Did you miss that memo?"

    yeah it was in Japan, for 14 years straight. As the US will probably follow. Did you miss this thread?

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  12. "4) the US doesnt even make toys today. Nobody buys our crap. And thats TODAY not 1940."

    Not true in the least. Where you have you been? We sell our services and expertise. Think for example, IT and pharmaceuticals. We own the most profitable sectors of the now global economy. If you think actually producing the goods is the way to go, ask yourself how it is that Europe still enjoys a standard of living exceeding ours some 60+ years after it stopped producing much of anything.

    Japan was a wannabe. The charade just finally fell apart on it. There can be no comparison between the US economy and Japan's.

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  13. It is funny watching lance try to talk about economics.

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  14. "Not true in the least. Where you have you been? We sell our services and expertise."

    You said it yourself right here:

    "...Japanese industry), it was able to harness all its energy to produce good copies of items being made elsewhere"

    We are the same. Japan sold its "services and expertise" as well....yet it took 14 years for real estate to hit bottom.

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  15. oh I just a quick search on pantents.....

    Top 15 International Patent Filings by Country (2005)

    1. United States (46,115 international patent filings)
    2. Japan (24,829)
    3. Germany (16,002)
    4. France (5,736)
    5. United Kingdom (5,103)
    6. South Korea (4,686)
    7. Netherlands (4,530)
    8. Switzerland (3,264)
    9. Sweden (2,858)
    10. China (2,501)
    11. Italy (2,351)
    12. Canada (2,322)
    13. Australia (1,999)
    14. Finland (1,890)
    15. Israel (1,456)

    Japan holds the most out of any country. (only behind the US) Wannabe that one Lance.

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  16. "yeah it was in Japan, for 14 years straight. As the US will probably follow. Did you miss this thread?"

    But when it comes roaring back in the US in 14 years, we'll just pave over cow pastures, forests, and deserts to build more housing! Never mind that goods, services, and employment centers will be nowhere nearby.... we'll build major roads linking all the disparate essentials together! Everyone will just DRIVE everywhere for everything in 14 years! We have about 600,000,000 personal vehicles in the US now! When the population grows to half a Billion in 14 years, we'll have 2 Billion personal vehicles and quintuple the number of roads! Yay for car-centricity!

    All that is in total contrast to Japan, which has a minuscule percentage of land mass when compared to the USA, so that right there obviates any argument that Japan and the USA are different.

    Funny (as in "Ha-Ha") how closed-minded BH's and HH's can be. Fools, there are more than two points of view to any issues.

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  17. "But when it comes roaring back in the US in 14 years, we'll just pave over cow pastures, forests, and deserts to build more housing!"

    yeah building more housing in the middle of nowhere is really going to drive up prices!!!!! You are a GENIUS!

    Japan has a word for "ghost neighborhood" cause they did the same thing.

    p.s. People drive cars in Japan too.....they have sprawl just like we do. Japan and downtown Tokyo are no synonymous, there are forrests and rice patty farms in the middle of nowhere that they tried to convert into towns....just like centerville and manassas.

    Its people who dont learn from mistakes that are the ones who repeat them. Dont matter if you are white, black or asian, if you point a gun at your head and pull a trigger, your splattered brains all look the same.

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  18. Anon,

    EU = 41,734 patents

    United States = 46,115

    + Canada, etc.


    Japan = 24,829

    Japan's a wannabe compared to the West ...

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  19. "yeah building more housing in the middle of nowhere is really going to drive up prices!!!!! You are a GENIUS!"

    Here, I'll spell it out for you:

    House-building as an industry is dead. Road-building as an industry is dead. (Google "state budget cuts") Hey, have you heard about the car industry lately? I'll let you look into that ond yourself.

    You're in violent agreement with me, but you're too dense to understand that I'm not making a pro-home value argument. All you understand is your "death to housing values" point of view, so when you see something outside that point of view, you conclude "must be pro-house!"

    God, you're an idiot. I'm guessing that you live like the typical suburban homeowner, but you rent your housing instead of 'owning' it. And you think that makes you special and different somehow. Yep; "funny Ha Ha".

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  20. ".just like centerville and manassas."

    Exactly. Dead. Doornail. Stick a fork in it. Renting in Herndon or Reston doesn't make you immune, either.

    Hard assets, useful skills and knowledge that are in demand, and source of income are what's important now.

    Being an angry renter that used to live in Japan doesn't make you different from Joe the Plumber. You ARE JtP.

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  21. Your strawman attack on me does nothing to prove your point.

    I dont rent in herndon or reston. I live in Bethesda. Im a web developer for a government contractor, which is high paying AND hiring right now in the DC area.

    I may be a renteer HERE, but I own a home in Japan. I just moved here last year. Which brings me to my last point....I rent it out and make positive cashflow. Something YOU CANT DO HERE WITH A HOME.

    No way Im going to buy during the inevitable price reduction that will continue here in montgomery county.

    Anyway, dont get angry at the messanger, Im just stating facts. No reason to build up a strawman Joe the Plumber attack.

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  22. Let me paraphrase your point of view.

    "The US is just like Japan and will suffer the same fate as Japan."

    and

    "The US is completely different from Japan and will suffer the same fate as Japan."

    I hope you have a stable government-related job close to your rental unit. You're going to need it. There are hundreds of thousands of people across the US who will gladly move to your apartment and take your job from you if they can.

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  23. "You're in violent agreement with me, but you're too dense to understand that I'm not making a pro-home value argument."

    Sorry then what IS your argument?

    So you agree the US is on the same path as Japan and home prices could potentially keep dropping for 14 years?

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  24. "Something YOU CANT DO HERE WITH A HOME."

    Says who? Close-in housing stock is anywhere from 60 to 120 years old. Much of it has been in the same family for generations.

    And you're making a blanket generalization that "homes can't be rented for profit in the DC area."

    Sounds pretty stupid to me.

    I guesstimate that more than 20 million 20-somethings in India have the same "web skills" that you do. Got a clearance?

    Bethesda. Nice. You must be rich, good looking, sophsticated, AND smart!

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  25. "'The US is just like Japan and will suffer the same fate as Japan.'

    and

    'The US is completely different from Japan and will suffer the same fate as Japan.'"

    No I think you are confusing my post with another anon users.

    My point of view is.....

    I lived in Japan, its not very different from the US AT ALL. They were the second largest economy, had a bubble, had a huge gov stimulus to encourage construction and STILL FLUNKED OUT. It took 14 years of price dropping before things finally corrected.

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  26. "Says who? Close-in housing stock is anywhere from 60 to 120 years old. Much of it has been in the same family for generations."

    Thats fine, Im not talking about 120 year old owners. Im talking about someone BUYING NOW at $400K for a house they could rent out at $1100 a month.

    "I guesstimate that more than 20 million 20-somethings in India have the same "web skills" that you do. Got a clearance? "

    Yes I do. Im not worried about my job. Even if I lost it, I would just move back to Japan into my home that I rent out. Keep the strawmen building.

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  27. "So you agree the US is on the same path as Japan and home prices could potentially keep dropping for 14 years?"

    I think home prices are the least of anyone's worries. Get a clearance or a medical degree, 'cause "web skills" can be outsourced.

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  28. "Im talking about someone BUYING NOW at $400K for a house they could rent out at $1100 a month."

    Ok. So why are you all hot and bothered? Not everyone is BUYING NOW or even thinking about it. Big deal.

    "Yes I do. Im not worried about my job. Even if I lost it, I would just move back to Japan into my home that I rent out. Keep the strawmen building."

    That proves it, you're better than everyone else. Congratulations! I hope your self-esteem gets a little bump from your commentary here! Good luck.

    (notice that you divulged personal details to a stranger in an argument via the internet. well-adjusted people don't have much incentive to do that. Yes, I'm saying that you aren't well-adjusted.)

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  29. home prices are the LEAST of anyones worries?

    You mean they are more worried that I have a medical degree and security clearance than being underwater on their mortage?? WOW! I do appreciate the concern, but dont worry about my place in the job market, Im fine!

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  30. "(notice that you divulged personal details to a stranger in an argument via the internet. well-adjusted people don't have much incentive to do that. Yes, I'm saying that you aren't well-adjusted.)"

    whatever guy. you win. I wait your reply.

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  31. Anonymous said...
    "2) eventhough the US is at least 50 TIMES LARGER THAN JAPAN, the US has over a 1000 times more buildable real estate space."

    For the record, I just looked up America's and Japan's land masses on the CIA World Factbook. The United States is 24 times the size of Japan. Our population is about 2.4 times the size of Japan's.

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  32. James, does that change the point I made any? Sorry if I missed any commas or periods in my posts too.

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  33. "Anon,
    EU = 41,734 patents"

    Lance,

    EU is a continent not a country. Germany, Sweden and France dont share patents or money with each other.

    try again.

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  34. "You mean they are more worried that I have a medical degree and security clearance than being underwater on their mortage?? "

    How big is your member? Got a picture of your woman? Or do you have several women? Got pictures of all of you together? Drive a Mercedes or BMW? Rolls? I'm thinking you're a BMW man...

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  35. "How big is your member? Got a picture of your woman? Or do you have several women? Got pictures of all of you together? Drive a Mercedes or BMW? Rolls? I'm thinking you're a BMW man..."

    Im gay and ride a bicycle. Still want to know about my member?

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  36. Japan is completely different!

    Japan is totally the same!

    I will retreat to Japan if things get truly unruly here!

    I have total stability here!

    But no, really, I will retreat to Japan if it gets crazy here, 'Cuz Japan is Totally Different/Completely the Same as here.

    I'm really Smart/Good Looking/Rich too!

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  37. "Im gay and ride a bicycle."

    Are you Top or Bottom?

    Steel, Carbon Fiber, Aluminium, or titanium bike? Hybrid, Mountain, Road, 'Cross, recumbent, or do your ride a tandem bike with your boyfriend(s)?

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  38. Your argument is weak, so all you do is strawmen.

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  39. "Are you Top or Bottom?"

    which do you prefer?

    "Steel, Carbon Fiber, Aluminium, or titanium bike? "

    its a bigwheel

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  40. Really, what is my position, exactly?

    (other than to enjoy getting you to huff and puff, of course)

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  41. Hey, Im just sitting here drinking a beer while my wife is out shopping.

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  42. I got mad Web Skillz, security clearances, a hot wife, a stable job, foreign real estate holdings, a totally kick-ass fallback position for when things go sour here in my Bethesda rental.

    AAANND... I'm old enough to drink beer!

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  43. You are infatuated with him! Get a room you two! Bunch of LOSERS!

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  44. "which is high paying AND hiring right now in the DC area."

    There are high paying jobs available now in the close-in DC area. Everyone knows this. Yet the information is being used here as an argument against economic stability in the DC area. Except for the original author of, course. I'm convinced.

    While he argues that major segments of the local economy suffer from instability, he points to stability in major segments of the local economy to bolster his argument that the close-in DC area is economically unstable. It it weren't for all the stability, it would be unstable.

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  45. Anonymous said...
    "James, does that change the point I made any?"

    Nope. Just correcting an error.

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  46. You are infatuated with him! Get a room you two! Bunch of LOSERS!

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  47. Your argument is weak, so all you do is strawmen.

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  48. "Im gay and ride a bicycle."

    Are you Top or Bottom?

    Steel, Carbon Fiber, Aluminium, or titanium bike? Hybrid, Mountain, Road, 'Cross, recumbent, or do your ride a tandem bike with your boyfriend(s)?

    ReplyDelete