If you are actually bankrupt (having cash-flow or not - it doesn't matter) than you should be liquidated. If company stays "open" instead of going under than it is breaking the LAW and CEO should be punished by jail time.
But since countries break its own LAW and allow bankrupt companies to operate regardless of negative balance sheet than no wonder there is a depression without recovery.
Bankruptcy has to be swift and unconditional or else you get long-lasting Japanese style depression.
In the UK teachers are striking for a few percent what people have to wake upto is there is likely to be a 50% cut in pensions currently being provide and future pensions as well as a series of other austerity measures so this private sector stimulus can be achieved. Its going to be brutal, but perhaps the past few dacades were just too good ? The plus side is we come out stonger and more competitive, the down side, well thats social.
Fiscal stimulus however, doesn't mean not cutting pay and pensions of public sector works. Indeed quite the opposite. Fiscal stimulus needs to encourage the private sector to invest and spend by creating opportunities for a nation's companies. So we take money from social, health, welfare on one hand, wash it through a number of companies and then create a better economy serving the populations of those countries.
The description of a balance sheet recession is consistent with Austrian School economics analysis -- cheap money from the central bank creates a boom and mal investment. The recommendation is different though -- don't stimulate, just let the market adjust, letting firms who must go bankrupt.
@inquirer011 u r wrong. it's baby boomer demographics that created the boom. it's globalization and easy capital flow that created this boom. the problem is that most of the boom went into bubbles such as housing and bad derivatives. regardless, if it weren't for government Tarps and QEs, then we would be in a deflationary spiral and gold would be sitting at 500 bucks an ounce or even lower. The only way out of this is a massive debt default throughout the entire system.
Brilliant. Too bad he's wrong. The West is not in a balance sheet recession but in a full-blown currency crisis as evidenced by the inflation we are experiencing and what is coming down the pike. I like Koo and enjoyed his book. His errors were important in helping me see what is really happening in the US and EU - and it ain't what Japan went through. If only we were so lucky!
So what you are saying is you shouldn't have cut the stimulus as your people were paying off debt because they were at or near bankruptcy? So how long would it have taken you to reach sovereign bankruptcy? Ever think maybe the problem was the textbooks and schooling you and others received and who formulated that education? Students usually think what they have been taught to think and don't think out of the box. Could this have been planned? Did they teach the flaws of a fiat monetary system?
This guy is not a complete fool but still a fool! Spending money doesn't grow the economy. It's private sector saving and investing that grows the economy, dumbass! Pull your head out of the GDP equation sandbox!
@yjfoo23 Congratulations on not hearing what Mr Koo said. Did you hear what was happeningto private sector "saving and investing" - it turned into saving and not investing. Koo agrees with you 100% in the normal times, but sometimes it goes wrong. Keynes discussed it 70 years ago - maybe there is nothing to be done, but try to understand the problem first.
@yjfoo23 How exactly is Keynes wrong, or more relevant how is Koo wrong. How exactly do you know "spending momney doesn't grow the economy"? Or if you haven't got any argument, you can try some more abuse.
@yjfoo23 Spending to build or repair roads, for example, is investing in future wealth creation. The interstate freeway system was a massive wealth creator over the last 50 years, wouldn't you agree?
@macroman52 Road repair is not investment. It's like maintenance in order to keep the status quo. Let's say u got a new microwave which makes ur cooking more efficient, however it breaks down after 1yr usage. U spend $20 to fix it. In the end u're not better off than before because ur microwave still functions the same way, and u're $20 poorer, which u could've spent on something else like dinner at a steakhouse or new pair of jeans.
@macroman52 Building roads MIGHT increase productivity in the future in a developing country where no roads were there to begin with, but I'd argue it'd be much better done by private investors because govn't is almost always less efficient and more corrupt than private sector. Anyhow, in developed countries roads are already there. U can't just build a road to no where and generate no economic benefit like Japan did. Interstate freeway is less efficient than railway and cost tonnes of $.
@yjfoo23 Well-maintained roads help everybody thru lower travel costs. Perhaps private toll roads or railways are better. They would be financed by borrowed money. Koo claims the private sector is NOT borrowing/investing at the moment. So the actual road/railway built or maintained by government borrowing and private contractors are better than leaving workers and resources idle and having bad roads and no new railway. Idle workers are a cost too, now and in the future.
@macroman52 I don't remember exactly what he said but I believe he said something about how the govn't should spend money when consumers are not. That's just outright false. Govn't spending destroys capitals, especially in developed countries and more especially when govn't prints money to spend. You need to let bankrupt companies go bankrupt and let successful companies take and build on that stronger base. That's how capitalism works. What this fucker describes is socialism/fascism.
@yjfoo23 Koo said nothing about consumers not spending and nothing about printing money. He said private business was not borrowing and investing, because it was paying down debt. Savers have nothing to invest in, because business won't borrow. Governments can do the borrowing. Savers have somewhere to park their savings. The government contracts to build infrastructure, keeping the economy going until the private sector has paid off its debt and things are back to normal.
@macroman52 Remember one thing: the govn't doesn't produce, it spends whatever it takes/borrows from the private sector. When the private sector is saving it means it is building capitals for later investment because capital had been misalocated in the past and has gone to waste. In the mean time If the govn't just borrows to build infrastructure then that means capitals are further misalocated. For example, if u just got fired, would u contract to build a swimming pool to stimulate ur economy?
@yjfoo23 What about all the government money misallocated into the legal system, another way the government is a wealth producer. Establishing and enforcing the system of property rights is necessary for capitalism to work - more wealth is created with the legal system than in its absence. But this is just basics. Koo's point is different. Listen again, where he says "what happens if everybody saves at the same time", i.e. when everybody saves but no one borrows and invests what is saved.
@macroman52 Our legal system today is way overblown. It's inefficient and corrupt. Yes, even in the Western World! Govn't impose tonnes of regulations and useless rules so that business must hire an entire team of non-productive lawyers to protect themselves. It'd be much better off to shrink the entire legal system, abolish useless rules and let these excess of lawyers work in productive areas like factories, farms, medicine......anything that's tangible.
@yjfoo23 So no judges, DAs or prosecutors? Eliminate the inefficient government police as well. All that "miss-allocated capital" could be allocated to the private sector. I guess the Mafia might be interested in taking
@yjfoo23 "For example, if u just got fired, would u contract to build a swimming pool to stimulate ur economy?" No, I wouldn't do that. But if one of my children lost his job, and another child had a hoard of money, which he couldn't invest anywhere to earn more that 0.05% return, because business was not borrowing or investing, I would borrow that child's money (at say 0.055%) and employ the out-of-work child doing house/garden maintenance for me, until things got better.
@macroman52 Remember the money u use to help out ur jobless son is money u have to pay back someday with INTEREST. Also remember our interest rates are artificially suppressed by the govn't. If interest rates were really 0.05, then that means general prices are coming down @ 2%/yr. Then that means the real rate of interest u're paying is 2.05%. All in all, the gain of ur jobless son is a lose from u. It doesn't do the economy of ur family any good AS A WHOLE. Same for the country.
@macroman52 The money u pay ur son is money u could have spend on something that u cherrish more like a vacation on a cruise ship or whatever. All in all the economy of ur family doesn't improve. Whatever gain ur sons make is a loss u incur.
@yjfoo23 Actually, I cherish my son having some useful work to do, and an income, more than I cherish taking a vacation. And both my son and I gain - I get a better maintained hosue and garden (which might also be more valuable to me than a vacation).
@yjfoo23 A big gain for me is this: By keeping my son working (on borrowed money) he keeps his self-respect and working habits and is ready to get a better job when the economy recovers. If I ignore him, save myself some interest costs, take a vacation, he could sink into a state of permanent unemployablity. Then he is a burden on my "household society" for a long time, which would likely cost me more. We (he and I) will pay back the debt when the economy improves.
@macroman52 You could look at it like that. You could also look at it this way. The company he works for goes bankrupt, but to fill the hole - a successful company would hire him. And since it is successful to begin with he stands a better chance of having more security into the future. Unfortunately either of us can't prove our case, but one thing we can prove is that government bail-outs cause inflationary prices. Hurting everyone to keep these businesses afloat.
What a tragedy, now that Japan was getting out of the whole, the natural disaster happenned, pulling their ecomony back down. I wonder what is the "moraleja" of this? Do you see that happenning to the usa too?
That "money" never existed in the first place. Precisely because money rarely takes the form of cash, "money supply" is actually the sum of the promises that money will be there. The "money" is just a number in a computer. So firms start repaying debt en masse, the money supply decreases because all the loans that used to be assets for the banks melt away.
There is a simpler and more elegant explanation. As a disciplined, and hard working people, Japan's economy grew explosively and so did their monetary base, and the value of all assets till 1990. Not only was it unsustainable, a correction of of the same magnitude of the explosive growth was due. If nature has it's way, you let the death plunge happen, things are fine in two years. If you fight nature, keep rates at 0, repeatedly stimulate, you just end up creating 2 decades of long slow decay
@ahooahoo7777 This is what France decided in the 30s- they stuck to the gold standard and let failing companies failed. Things weren't fine in two years, rather, their growth stagnated and they were ultimately overpowered militarily.
@panopticonartist , I don't know what history books you read, but France had more casualties in WWI, on the allied side, except for Russia, and Russia had four times France's population. Also France's main economic counterpart Germany, was saddled with incredible war reparations, hindering Germany's ability to become productive again, which in turn hindered France's. Just 10 years after WWI, with the tremendous loss of men in their prime, you expect France to recover using the trick of Fiat?
Everyone should pick up a copy of his Holy Grail of Macroeconomics. It puts all the pieces together and may be the one book that has FINALLY solved the puzzle. If what he says is true about balance-sheet recessions, America is in for a LONG, tough journey. It's no wonder we've been in this recession for over 3 years now, and only recently is unemployment closer to 9% than 10%. If only more economists would actually LISTEN to what this man has to say instead of using models and assumptions.
This guy is coming at it from an EMPIRICAL perspective, and he deserves credit for putting forth a theory that actually makes sense and explains so much. I mean, why WOUDLN'T firms pay down debt in times of massive crisis?? Why would a firm just continue to borrow like there's no tomorrow when shit hits the fan? That's certainly not prudent household behavior, and a firm doing that would just be committing suicide.
One thing about his theory I still don't get though: If, as he says, the fact that firms and consumers were paying down debts meant that deposits and savings slimmed down, reducing the money multiplier for banks, did that money just disappear? I mean, every time you pay a bill or debt, doesn't SOME bank eventually get the money? Anyone who charges money, esp. as a business, has a bank account. Are there large businesses that bill you that only take cash in this day and age? O.o
this guy is really smart, Japan is going nowhere with their 0% interest rates. I buy construction equipment in Japan, I buy every year circa 500,000 USD worth of machines and pay them in 12 monthly installments of 41,600 USD. This is good for me, i don't need a huge cash flow, but their economy cannot move like this.
it's hard to make apples to apples comparison. He's probably right in that Americans are debt minimizing. However, everything else is different. Japan's hole was with their businesses. America, it's the consumer mortgage holders who are underwater.
The analysis is very piercing and most probably correct. The question is if fiscal stimulus (e.g. anaesthesia) is the answer or if pain and liquidation is better.
The truth is that there will be different sets of losers/winners either way.
Our situation is very similar to Japan's, with the exception that we've got more households and commercial real estate firms underwater. However, they had the advantage of cash flow from exports and they started with less government debt. Since our aggregate demand is going to remain depressed until enough people correct their balance sheets, we are going to find fiscal stimulus necessary to prevent decline into a more severe depression.
@Neophite101 Exactly, the economy will remain depressed until people correct their balance sheets... that is why we need a depression without fiscal stimulus. Allowing prices to fall and debt to be wiped out will correct that problem. The problem is the government bailouts, fiscal stimuli, and monetary stimuli have been preventing this from happening.
I don't believe that's possible. Government or private, the bills come due and someone pays or gets stiffed. Are you suggesting that the government should just spend like a drunken sailor and then eventually tell the lenders to take a hike? If this is what Japan has done all they have accomplished is to ward off the inevitable total collapse for a short time.
I think at this point everyone has figured out that Keynesian economics is doomed to failure.
@UtwoBed - he answers that clearly, from about 8mins onwards. Governments need to open the purse strings and resist the tempatation to cut budget deficits (or maintain surpluses), to force the GDP back to regular levels, which in turn gives everyone a better sense of security in the health of the economy. As he says, government policy needs to do the OPPOSITE of the private sector (who are hamstrung paying down their balance sheet debts) and spend big.
If you are actually bankrupt (having cash-flow or not - it doesn't matter) than you should be liquidated. If company stays "open" instead of going under than it is breaking the LAW and CEO should be punished by jail time.
But since countries break its own LAW and allow bankrupt companies to operate regardless of negative balance sheet than no wonder there is a depression without recovery.
Bankruptcy has to be swift and unconditional or else you get long-lasting Japanese style depression.
infinummjb 1 month ago
In the UK teachers are striking for a few percent what people have to wake upto is there is likely to be a 50% cut in pensions currently being provide and future pensions as well as a series of other austerity measures so this private sector stimulus can be achieved. Its going to be brutal, but perhaps the past few dacades were just too good ? The plus side is we come out stonger and more competitive, the down side, well thats social.
crbower 2 months ago
Fiscal stimulus however, doesn't mean not cutting pay and pensions of public sector works. Indeed quite the opposite. Fiscal stimulus needs to encourage the private sector to invest and spend by creating opportunities for a nation's companies. So we take money from social, health, welfare on one hand, wash it through a number of companies and then create a better economy serving the populations of those countries.
crbower 2 months ago
All these comments show that economics is a pseudo science. You don't hear physicists having arguments like this.
whosforachat 2 months ago
The description of a balance sheet recession is consistent with Austrian School economics analysis -- cheap money from the central bank creates a boom and mal investment. The recommendation is different though -- don't stimulate, just let the market adjust, letting firms who must go bankrupt.
Look at the US 1921 depression short and quick.
inquirer011 3 months ago
@inquirer011 u r wrong. it's baby boomer demographics that created the boom. it's globalization and easy capital flow that created this boom. the problem is that most of the boom went into bubbles such as housing and bad derivatives. regardless, if it weren't for government Tarps and QEs, then we would be in a deflationary spiral and gold would be sitting at 500 bucks an ounce or even lower. The only way out of this is a massive debt default throughout the entire system.
mrzack888 3 months ago
Brilliant. Too bad he's wrong. The West is not in a balance sheet recession but in a full-blown currency crisis as evidenced by the inflation we are experiencing and what is coming down the pike. I like Koo and enjoyed his book. His errors were important in helping me see what is really happening in the US and EU - and it ain't what Japan went through. If only we were so lucky!
Natural deleveraging is not deflation.
MarcusCMarcellus 5 months ago
Just read up a little into iceland's addiction to inflation in the 1980's.
VanostranIV 5 months ago
Inflation can actually stimulate business, because business stands to lose if they don't act in the economy.
VanostranIV 5 months ago
Well I guess Japan is not just technologically more advanced it is financially ahead of us as well.
dinamo4889 5 months ago
I see you have changed the topic to bailouts cause inflation. Go ahead and prove it, making reference to the present inflation (or lack of).
macroman52 5 months ago
I could listen to him talk all day. Great explanation.
laxitout 5 months ago
So what you are saying is you shouldn't have cut the stimulus as your people were paying off debt because they were at or near bankruptcy? So how long would it have taken you to reach sovereign bankruptcy? Ever think maybe the problem was the textbooks and schooling you and others received and who formulated that education? Students usually think what they have been taught to think and don't think out of the box. Could this have been planned? Did they teach the flaws of a fiat monetary system?
ChulaKirby 7 months ago
This guy is not a complete fool but still a fool! Spending money doesn't grow the economy. It's private sector saving and investing that grows the economy, dumbass! Pull your head out of the GDP equation sandbox!
yjfoo23 9 months ago
@yjfoo23 Congratulations on not hearing what Mr Koo said. Did you hear what was happeningto private sector "saving and investing" - it turned into saving and not investing. Koo agrees with you 100% in the normal times, but sometimes it goes wrong. Keynes discussed it 70 years ago - maybe there is nothing to be done, but try to understand the problem first.
macroman52 8 months ago
@macroman52 It sucks to be you. Keynes is completely positively 100% wrong. You better change your major!
yjfoo23 8 months ago
@yjfoo23 How exactly is Keynes wrong, or more relevant how is Koo wrong. How exactly do you know "spending momney doesn't grow the economy"? Or if you haven't got any argument, you can try some more abuse.
macroman52 8 months ago
@macroman52 Do YOU(as a person) spend your way into prosperity? Lol! Use your brain! Spending ISN'T investing.
yjfoo23 8 months ago
@yjfoo23 Spending to build or repair roads, for example, is investing in future wealth creation. The interstate freeway system was a massive wealth creator over the last 50 years, wouldn't you agree?
macroman52 8 months ago
@macroman52 Road repair is not investment. It's like maintenance in order to keep the status quo. Let's say u got a new microwave which makes ur cooking more efficient, however it breaks down after 1yr usage. U spend $20 to fix it. In the end u're not better off than before because ur microwave still functions the same way, and u're $20 poorer, which u could've spent on something else like dinner at a steakhouse or new pair of jeans.
yjfoo23 8 months ago
@macroman52 Building roads MIGHT increase productivity in the future in a developing country where no roads were there to begin with, but I'd argue it'd be much better done by private investors because govn't is almost always less efficient and more corrupt than private sector. Anyhow, in developed countries roads are already there. U can't just build a road to no where and generate no economic benefit like Japan did. Interstate freeway is less efficient than railway and cost tonnes of $.
yjfoo23 8 months ago
@yjfoo23 Well-maintained roads help everybody thru lower travel costs. Perhaps private toll roads or railways are better. They would be financed by borrowed money. Koo claims the private sector is NOT borrowing/investing at the moment. So the actual road/railway built or maintained by government borrowing and private contractors are better than leaving workers and resources idle and having bad roads and no new railway. Idle workers are a cost too, now and in the future.
macroman52 8 months ago
@macroman52 I don't remember exactly what he said but I believe he said something about how the govn't should spend money when consumers are not. That's just outright false. Govn't spending destroys capitals, especially in developed countries and more especially when govn't prints money to spend. You need to let bankrupt companies go bankrupt and let successful companies take and build on that stronger base. That's how capitalism works. What this fucker describes is socialism/fascism.
yjfoo23 8 months ago
@yjfoo23 Koo said nothing about consumers not spending and nothing about printing money. He said private business was not borrowing and investing, because it was paying down debt. Savers have nothing to invest in, because business won't borrow. Governments can do the borrowing. Savers have somewhere to park their savings. The government contracts to build infrastructure, keeping the economy going until the private sector has paid off its debt and things are back to normal.
macroman52 8 months ago
@macroman52 Remember one thing: the govn't doesn't produce, it spends whatever it takes/borrows from the private sector. When the private sector is saving it means it is building capitals for later investment because capital had been misalocated in the past and has gone to waste. In the mean time If the govn't just borrows to build infrastructure then that means capitals are further misalocated. For example, if u just got fired, would u contract to build a swimming pool to stimulate ur economy?
yjfoo23 8 months ago
@yjfoo23 What about all the government money misallocated into the legal system, another way the government is a wealth producer. Establishing and enforcing the system of property rights is necessary for capitalism to work - more wealth is created with the legal system than in its absence. But this is just basics. Koo's point is different. Listen again, where he says "what happens if everybody saves at the same time", i.e. when everybody saves but no one borrows and invests what is saved.
macroman52 8 months ago
@macroman52 Our legal system today is way overblown. It's inefficient and corrupt. Yes, even in the Western World! Govn't impose tonnes of regulations and useless rules so that business must hire an entire team of non-productive lawyers to protect themselves. It'd be much better off to shrink the entire legal system, abolish useless rules and let these excess of lawyers work in productive areas like factories, farms, medicine......anything that's tangible.
yjfoo23 8 months ago
@yjfoo23 So no judges, DAs or prosecutors? Eliminate the inefficient government police as well. All that "miss-allocated capital" could be allocated to the private sector. I guess the Mafia might be interested in taking
over the rule-writing and enforcement roles.
macroman52 8 months ago
@yjfoo23 "For example, if u just got fired, would u contract to build a swimming pool to stimulate ur economy?" No, I wouldn't do that. But if one of my children lost his job, and another child had a hoard of money, which he couldn't invest anywhere to earn more that 0.05% return, because business was not borrowing or investing, I would borrow that child's money (at say 0.055%) and employ the out-of-work child doing house/garden maintenance for me, until things got better.
macroman52 8 months ago
@macroman52 Remember the money u use to help out ur jobless son is money u have to pay back someday with INTEREST. Also remember our interest rates are artificially suppressed by the govn't. If interest rates were really 0.05, then that means general prices are coming down @ 2%/yr. Then that means the real rate of interest u're paying is 2.05%. All in all, the gain of ur jobless son is a lose from u. It doesn't do the economy of ur family any good AS A WHOLE. Same for the country.
yjfoo23 8 months ago
@macroman52 The money u pay ur son is money u could have spend on something that u cherrish more like a vacation on a cruise ship or whatever. All in all the economy of ur family doesn't improve. Whatever gain ur sons make is a loss u incur.
yjfoo23 8 months ago
@yjfoo23 Actually, I cherish my son having some useful work to do, and an income, more than I cherish taking a vacation. And both my son and I gain - I get a better maintained hosue and garden (which might also be more valuable to me than a vacation).
macroman52 8 months ago
@yjfoo23 A big gain for me is this: By keeping my son working (on borrowed money) he keeps his self-respect and working habits and is ready to get a better job when the economy recovers. If I ignore him, save myself some interest costs, take a vacation, he could sink into a state of permanent unemployablity. Then he is a burden on my "household society" for a long time, which would likely cost me more. We (he and I) will pay back the debt when the economy improves.
macroman52 8 months ago
@macroman52 You could look at it like that. You could also look at it this way. The company he works for goes bankrupt, but to fill the hole - a successful company would hire him. And since it is successful to begin with he stands a better chance of having more security into the future. Unfortunately either of us can't prove our case, but one thing we can prove is that government bail-outs cause inflationary prices. Hurting everyone to keep these businesses afloat.
animateclay 5 months ago
What a tragedy, now that Japan was getting out of the whole, the natural disaster happenned, pulling their ecomony back down. I wonder what is the "moraleja" of this? Do you see that happenning to the usa too?
SilverRose09 11 months ago
@whoo689
That "money" never existed in the first place. Precisely because money rarely takes the form of cash, "money supply" is actually the sum of the promises that money will be there. The "money" is just a number in a computer. So firms start repaying debt en masse, the money supply decreases because all the loans that used to be assets for the banks melt away.
AsianCynicist 11 months ago
There is a simpler and more elegant explanation. As a disciplined, and hard working people, Japan's economy grew explosively and so did their monetary base, and the value of all assets till 1990. Not only was it unsustainable, a correction of of the same magnitude of the explosive growth was due. If nature has it's way, you let the death plunge happen, things are fine in two years. If you fight nature, keep rates at 0, repeatedly stimulate, you just end up creating 2 decades of long slow decay
ahooahoo7777 11 months ago 2
@ahooahoo7777 This is what France decided in the 30s- they stuck to the gold standard and let failing companies failed. Things weren't fine in two years, rather, their growth stagnated and they were ultimately overpowered militarily.
panopticonartist 8 months ago
@panopticonartist , I don't know what history books you read, but France had more casualties in WWI, on the allied side, except for Russia, and Russia had four times France's population. Also France's main economic counterpart Germany, was saddled with incredible war reparations, hindering Germany's ability to become productive again, which in turn hindered France's. Just 10 years after WWI, with the tremendous loss of men in their prime, you expect France to recover using the trick of Fiat?
ahooahoo7777 3 months ago
Everyone should pick up a copy of his Holy Grail of Macroeconomics. It puts all the pieces together and may be the one book that has FINALLY solved the puzzle. If what he says is true about balance-sheet recessions, America is in for a LONG, tough journey. It's no wonder we've been in this recession for over 3 years now, and only recently is unemployment closer to 9% than 10%. If only more economists would actually LISTEN to what this man has to say instead of using models and assumptions.
whoo689 1 year ago
This guy is coming at it from an EMPIRICAL perspective, and he deserves credit for putting forth a theory that actually makes sense and explains so much. I mean, why WOUDLN'T firms pay down debt in times of massive crisis?? Why would a firm just continue to borrow like there's no tomorrow when shit hits the fan? That's certainly not prudent household behavior, and a firm doing that would just be committing suicide.
whoo689 1 year ago
One thing about his theory I still don't get though: If, as he says, the fact that firms and consumers were paying down debts meant that deposits and savings slimmed down, reducing the money multiplier for banks, did that money just disappear? I mean, every time you pay a bill or debt, doesn't SOME bank eventually get the money? Anyone who charges money, esp. as a business, has a bank account. Are there large businesses that bill you that only take cash in this day and age? O.o
whoo689 1 year ago
Are corporate deposits and bank accounts exempt from the multiplier because of Fed and central bank rules or something?? O.o
whoo689 1 year ago
this guy is really smart, Japan is going nowhere with their 0% interest rates. I buy construction equipment in Japan, I buy every year circa 500,000 USD worth of machines and pay them in 12 monthly installments of 41,600 USD. This is good for me, i don't need a huge cash flow, but their economy cannot move like this.
49fiori 1 year ago 2
it's hard to make apples to apples comparison. He's probably right in that Americans are debt minimizing. However, everything else is different. Japan's hole was with their businesses. America, it's the consumer mortgage holders who are underwater.
sugarkang 1 year ago
@sugarkang same thing bro. same concept
afiqnordin 11 months ago
Koo is claiming that Japan has already "climbed out" in 2005, but does this really seem to be the case?
It doesn't seem to be so... prices in Japan have not yet cleared.
jbperez808 1 year ago
Pain, liquidation and *price clearing* - the latter which many analysts feel is essential.
jbperez808 1 year ago
The analysis is very piercing and most probably correct. The question is if fiscal stimulus (e.g. anaesthesia) is the answer or if pain and liquidation is better.
The truth is that there will be different sets of losers/winners either way.
jbperez808 1 year ago
Our situation is very similar to Japan's, with the exception that we've got more households and commercial real estate firms underwater. However, they had the advantage of cash flow from exports and they started with less government debt. Since our aggregate demand is going to remain depressed until enough people correct their balance sheets, we are going to find fiscal stimulus necessary to prevent decline into a more severe depression.
Neophite101 1 year ago 9
@Neophite101 Less government debt? You mean more than 200% of GDP? You don't know a shit about it.
EnLugal 5 months ago
@Neophite101 Exactly, the economy will remain depressed until people correct their balance sheets... that is why we need a depression without fiscal stimulus. Allowing prices to fall and debt to be wiped out will correct that problem. The problem is the government bailouts, fiscal stimuli, and monetary stimuli have been preventing this from happening.
objectivistathlete 1 month ago 3
I don't believe that's possible. Government or private, the bills come due and someone pays or gets stiffed. Are you suggesting that the government should just spend like a drunken sailor and then eventually tell the lenders to take a hike? If this is what Japan has done all they have accomplished is to ward off the inevitable total collapse for a short time.
I think at this point everyone has figured out that Keynesian economics is doomed to failure.
UtwoBed 1 year ago
Cash is King. Inflation is nowhere to be found. We are entering a strong Deflation cycle.
drkevincampbell 1 year ago
this is what's happening to the USA
zeusvalentine 1 year ago
We are following the same path as Japan. Deflation here we come!
drkevincampbell 1 year ago 11
@ UtwoBed
The point seemed to suggest Americans need to start thinking for themselves, instead of mindlessly waiting for someone to hand them an answer.
CSRealist 1 year ago
OK Great, they figured it out. Now how about sharing with the rest of the world what the hell you did to fix it?????
UtwoBed 1 year ago
@UtwoBed - he answers that clearly, from about 8mins onwards. Governments need to open the purse strings and resist the tempatation to cut budget deficits (or maintain surpluses), to force the GDP back to regular levels, which in turn gives everyone a better sense of security in the health of the economy. As he says, government policy needs to do the OPPOSITE of the private sector (who are hamstrung paying down their balance sheet debts) and spend big.
candyflip69 1 year ago