Latest economic data sparks recession fears

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  • 7

    BertieWooster

    Increasing public spending is all very well, but where does that money come from?

    Taxes, surely.

    As Churchill said, this is like standing in a bucket and trying to get off the ground by pulling the handle.

    Isn't it?

  • 1

    some14some

    latest? for all seasons i.e. past, present and future data indicating the same :(

  • 4

    Synbios

    "Do not worry my dear BertieWooster! For Mr. Abe has a solution to your problem!"

    "Forcing the Bank of Japan to buy national bonds "at infinitum" and let the cash flow as if it were booze in a high class party!"

    (Cute lady voice)"Say no to taxes and hello to the "Liberal Party of Japan national bond program"!"

    (The LDP logo is shown) "Vote for Liberal Party of Japan! Let's get Japan "back on track"!"

    I am sure that the LDP will show some commercial like this to convince the population that they have the panacea to heal Japan...

  • -1

    comarade_captain

    A painful diplomatic row with major trade partner China have dented Japan’s economy

    Thanks to the Ishihara clique, Toyota might file compensation law suit at him!

  • 0

    YuriOtani

    Synbios the foe is deflation and not inflation

  • 1

    marcelito

    Well Yuri, not for the legions of low income retirees and temporary and contract workers. They will be the loosers if and when inflation picks up. What Abe is doing will be most beneficial to big business not your average Taro.

  • 0

    kchoze

    Marcelito, inflation is strongly linked to wage growth. If inflation picks up, wages are likely to do so too, as inflation without wage growth is unsustainable (except if there's a big crisis in the real economy). So temp and contract workers would notbe hurt by inflation, retirees are another thing... but the biggest losers by far will be the capital holders as their capital's value will decline. Money isn't a limited resource, if the government desired, it could print unlimited amounts of it.

    BertieWooster, you have a false assumption: that there is a limited amount of money in the economy and that any fluctuation in the amount will automatically be countered by price changes. More currency in circulation does lead to higher inflation, but the relationship isn't one-one. As to where money comes in public spending, well it comes from investors who don't know where to put their money because there is no profitable investment opportunity around due to the crisis, or not enough of it. So they buy government bonds. Thus, the government is taking money that would otherwise be placed in "safes" (or commodities) and putting it back in the economy. Which is a good thing in a context of a demand-deprived economy.

    I think we can safely say that the main cause of the crisis is that money is not where it should be, the distribution of it is bad for the economy. People who would consume more products do not have enough of it, and people who want to invest it have too much, so there aren't enough investment opportunities around for them. The way to cure the crisis is to reestablish a proper balance, to get the money to go into the hands of those who would consume more, given a chance. Stimulus help do that by getting people working again, but it shifts consumer debt into public debt.

    In a crisis like this, what is needed is a debt jubilee, a way to forgive consumer debt and to rebalance wealth distribution. If you want to go full heterodox, you could do stuff like print a given amount of money (or just create bank credit ex nihilo) and give everyone a set amount, to pay down their debts and get rid of them. But that would give the markets a heart attack... the best way to do it subtly is by by increasing inflation, to inflate the monetary mass so money is easier to come by, which in effect forgives a part of everyone's debt.

  • 1

    marcelito

    Yes, you are of course correct about the inflation bringing about the wages increases in theory but I wonder whether the ever increasing percentage of temporary and contract J -employees would truly see any meaningful rises in their take home pay. My guess is the company profit, return to shareholders and possibly an increase for the regular employees would take precedence over any pay increase for the legions of temp workers who are scraping by as it is. Ditto the low income pensioners...

  • -1

    BertieWooster

    Synbios-san,

    After reading your post and thinking of the possibility of Abe becoming PM, I think now is the time to buy gold.

  • 1

    timtak

    I am buying land. I think that the Chinese are coming. And to the Chinese Japanese land is very cheap.

  • -1

    herefornow

    Technically, Japan is already in recession. As the article notes, they also revised downward the figures for the previous quarter (April-June) and that resulted in a negative growth of like .3%. So, with a decline of two straight quarters, the country meets the standard definition of recession. And, almost everyone predicts the last quarter (Oct. - Dec.) wil be negative as well. And this could be a prolonged one as exports will continue to be under pressure.

  • 1

    Herve Nmn L'Eisa

    BertieWooster, your Churchill analogy is spot on. It's as idiotic as the popular mindset of spending oneself into wealth, as most politicians propose.

    Gee, let's get rich by smashing windows, then hiring people via government sponsored programs to repair them. We can tax the wages and boost GDP, and employ the poor! Nevermind the broken glass, wasted resources, and increased debt.

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