David_N
DP Veteran
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Wow, see?
Nonsense from a guy who thinks its Govt job to influence demand directly.
Weve tried unprecedented fiscal and monetary stimulus since 2008. We've added Trillions of dollars in new debt since 2008 and the economy is still on life support
Japan tried fiscal stimulus in the 90s and Abenomics, it didn't work. It doesn't work because it papers over the real issues that have led to stagnantion and eventually the money runs out.
What am I supposed to be seeing? That the economy has a lack of consumer spending?Wow, see?
The govt is an entity that can get us out of this depressed state, yes, I agree.Nonsense from a guy who thinks its Govt job to influence demand directly.
Unprecedented? I suppose, after all, this was the greatest recession since the great depression, where massive government spending got us out of it. You have to look at potential output and the gap that needs to be filled. The stimulus that was passed, which barely lasted and was sort of all over the place, with low spending in relation to the gap, did not work well. We needed at least another 1 trillion spent on getting people back to work, increasing benefits to the unemployed, etc..Weve tried unprecedented fiscal and monetary stimulus since 2008.
And?We've added Trillions of dollars in new debt
Due to a lack of spending, yes.the economy is still on life support
If you keep bringing up Japan without understanding Japan, that's fine.Japan tried fiscal stimulus in the 90s and Abenomics, it didn't work.
But let's look at Japan:
http://krugman.blogs.nytimes.com/2013/02/05/the-japan-story/
First, you should never make comments on Japanese growth or lack thereof without taking demography into account. Japan has low fertility and low immigration; this has translated into a dramatically aging population and a declining working-age population.
Surprisingly:
I’ve used a log scale, so you can view vertical distances as percentage changes. If we look at growth from the early 1990s to the business cycle peak in 2007, we have growth of about 1.2% per year. That’s actually not bad; you can argue that demographically adjusted, the whole tale of Japanese stagnation is a myth.
What is true is that there were two long periods of depressed output relative to trend, one in the mid-1990s and another, much worse, between 1997 and 2007. And one other thing: Japanese monetary policy was still up against the zero lower bound in 2007, leaving it no room to counter the Great Recession, and hence leaving Japan open to a deep slump when exports plunged.
So how do we think about this problem? Here’s my take. Japan has pretty much spent the past 20 years in a liquidity trap; as I’ve been explaining for years, one way to understand such traps is that they happen when, even at a zero real interest rate, the amount that people would want to save at full employment exceeds the amount they would be willing to invest, also at full employment
But Japanese policy has never sought to achieve this. Deficit spending has put part, but only part, of the excess desired private saving to work; this has mitigated the slump, but not produced a booming economy, except perhaps briefly circa 2007. And the Bank of Japan has always pulled back on monetary policy when the economy looks better, instead of doing what it should, which is to keep the pedal to the metal until the inflation rate is solidly into positive territory.
The point is that as an analytical matter, Japan’s experience is perfectly consistent with an IS-LM type story, with nothing in there to suggest that fiscal stimulus has somehow backfired; stimulus has done exactly what you’d expect given its limited size and the refusal to take the opportunity to break out of the liquidity trap.