But crises will always happen and, even if there is a depressing periodicity to them, their timing, form and provenance will elude prognostication. Most crises, notably the big ones, creep up on us from unsuspected quarters. As Keynes wisely observed: "The inevitable never happens. It is the unexpected always." So, if the value of economics in preventing crises will always be limited (although hopefully not non-existent), perhaps a fairer and more realistic yardstick should be its value as a guide in responding to them. Here, one year on, we can say that economics stands vindicated. How so? Recall that the recession of the late 1920s in the US became the Great Depression, owing to a combination of three factors: overly tight monetary policy; overly cautious fiscal policy (especially under FDR in 1936, when tightening led to another sharp downturn in the US economy); and dramatic recourse to beggar-thy-neighbour policies, including competitive devaluations (as countries went off the gold standard in the 1930s) and increases in trade barriers. The impact of this global financial crisis has been significantly limited because on each of these scores, the policy mistakes of the past were strenuously and knowingly avoided.
How so? Recall that the recession of the late 1920s in the US became the Great Depression, owing to a combination of three factors: overly tight monetary policy; overly cautious fiscal policy (especially under FDR in 1936, when tightening led to another sharp downturn in the US economy); and dramatic recourse to beggar-thy-neighbour policies, including competitive devaluations (as countries went off the gold standard in the 1930s) and increases in trade barriers. The impact of this global financial crisis has been significantly limited because on each of these scores, the policy mistakes of the past were strenuously and knowingly avoided.
Phew In the long run, we're all dead. John Maynard Keynes
Strong economic data from Japan released on Monday helped ease fears that the country would suffer a double-dip recession and lifted the Tokyo stock market to a 14-month high.
then again:
But while Japanese exports have been growing, demand at home has been less rosy amid deflationary pressure. In November, total cash earnings among Japanese wage earners fell 2.8 per cent from a year earlier, according to the ministry of health, labour and welfare. The drop, which accelerated from a revised 1.9 per cent fall in October, is the 18th straight month of decline. Last month's unemployment rate rose to 5.2 per cent and consumer prices dropped for a ninth consecutive month.
But while Japanese exports have been growing, demand at home has been less rosy amid deflationary pressure.
In November, total cash earnings among Japanese wage earners fell 2.8 per cent from a year earlier, according to the ministry of health, labour and welfare. The drop, which accelerated from a revised 1.9 per cent fall in October, is the 18th straight month of decline.
Last month's unemployment rate rose to 5.2 per cent and consumer prices dropped for a ninth consecutive month.
