How is this similar/different from the situation in Japan in the 1990s where (if I am not mistaken) the credit also wasn't being rolled over, but it was because people there were so many savings that nobody needed to borrow? A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
In Japan in the 1980's, corporate investment in domestic productive capacity was strong, until there was a decision to shift the imported value added in Japanese production and corporate investment in domestic productive capacity substantially dried up.
I don't understand the Japanese political economy well enough to know who exactly reached that decision and how, but the transition was very dramatic, from roughly 90% domestic value added to roughly 60%.
"Magic force field of savings" people would ascribe all sorts of causal effect to Japanese saving rates, but with strong exports, weak imports because of the sluggish GDP growth, and massive government deficits to keep the economy ticking over in the face of the corporate investment drought ...
(I-S)+(EXP-IMP)+(G-T) so
S = I + (EXP-IMP)+(G-T)
... even with I in the doldrums, with a trade surplus and a massive government deficit, there has to be substantial savings. The only question is who ends up holding it. Given the system of big corporate networks having their own pet banks and high downpayments required for consumer purchases, it seems unsurprising for the saving to be acquired by households rather than as retained earnings. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
The big increase in outsourcing of various stages of production by Japanese firms in the late 1980's and 1990's led to a corresponding reduction in the share of the value of Japanese production that originated within Japan. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
And these bizniz pundits who recommend outsourcing are being taken seriously because?
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
How deliberate that timing was, or whether it just took the Japanese that long to decide upon such a dramatic monetary policy ... like I said, I don't understand Japanese political economy to really have any idea.
A little while after the outsourcing wave was over, the Japanese economy showed a return of stronger economic growth ... it was the shift from one level to another level so dramatically that led to the domestic investment drought in Japan ... at least, compared to prior levels of investment. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
