Yves Smith of Naked Capitalism passes on a report from Frank Veneroso decrying the massive collapse in Japanese manufacturing, which is the fastest on record for a major industrialized country. He complains that he's "crying from the rooftops" but it's "like a neutron bomb had gone off" because nobody cares. He blames the EEEVIL speculators, picking - of all agents to blame for a manufacturing depression - technical analysis traders. Blaming that fractious bunch earns him an "Oh Please" award.
Japan, a supercreditor nation, is now running a small trade deficit, which is what it should be doing, so the yen is about right. Of course they're getting a depression in switching from an insanely low manipulated exchange rate to a reasonable one, because they've had truly massive misallocation of resources over the past 30 years, due to the crazy low yen value. Basic economics, folks - bad prices cause bad decisions.
Venerosa is right that the rest of the world doesn't care - because we all know this is about where things should be. The depression which will result from this return to sanity isn't something we can do much about anyway. Normally there would be more sympathy but since Japan Inc. has been wrecking everybody else's manufacturing longer than most working people's memory nobody's going to feel too sorry for them now.
Maybe we can get a bunch of really, really small violins to play along with MITI's sob story about manufacturing disaster from unfair trade practices - their own. Heck, Japan's into miniaturization and classical music. Maybe they can provide the violins for us!
Showing posts with label Japan. Show all posts
Showing posts with label Japan. Show all posts
Monday, February 2, 2009
Friday, January 23, 2009
Thoughts of an unserious economist
William Pesek writes:
No serious economist thinks Japan is going to crash.
This charming little argument from intimidation reminds me of the endless parade of pundits proclaiming that all the "serious" people supported the War in Iraq. Or, for that matter, all the "serious" mockery of housing bubble predictions.
It seems most people fall into a fallacy encouraged by standard macroeconomic thinking that savings automatically produces something useful and that all "productive capacities" are equally good. All investments are particular - they are to make or do something. Market action equalizing marginal benefit *normally* produces a very good set of particular investments so it's an acceptable approximation to view any investment as equally good. But markets do fail, and they can also be distorted. If this happens the investment is wasted - perhaps partially; perhaps totally.
Japan has a huge productive capacity, but if that productive capacity is for export products that nobody will buy for years, then it's virtually worthless - regardless of how much people thought it was worth last year, or the effort put into creating it. Likewise Japan's vast savings, insofar as they own worthless productive capacity or assorted foreign bonds that can't be paid, are also worthless.
If Japan's exports continue down 35% they will crash. Hard. Are the "serious" economists going to be wrong again?
No serious economist thinks Japan is going to crash.
This charming little argument from intimidation reminds me of the endless parade of pundits proclaiming that all the "serious" people supported the War in Iraq. Or, for that matter, all the "serious" mockery of housing bubble predictions.
It seems most people fall into a fallacy encouraged by standard macroeconomic thinking that savings automatically produces something useful and that all "productive capacities" are equally good. All investments are particular - they are to make or do something. Market action equalizing marginal benefit *normally* produces a very good set of particular investments so it's an acceptable approximation to view any investment as equally good. But markets do fail, and they can also be distorted. If this happens the investment is wasted - perhaps partially; perhaps totally.
Japan has a huge productive capacity, but if that productive capacity is for export products that nobody will buy for years, then it's virtually worthless - regardless of how much people thought it was worth last year, or the effort put into creating it. Likewise Japan's vast savings, insofar as they own worthless productive capacity or assorted foreign bonds that can't be paid, are also worthless.
If Japan's exports continue down 35% they will crash. Hard. Are the "serious" economists going to be wrong again?
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