Selected Central Government Debt Ratios: An image begs a thousand questions

When discussing with my undergrad students why I thought Japan Inc. was bust I trotted out the graph below.  However, this morning while looking at the graph several questions came to mind.

1) From 1998 – 2008 what was average real interest rate in Japan and how does that compare to the ten years previous to 1998?

2) What has been the average level of inflation in Japan since 1998?  Again how does that compare to the 10 years previous to 1998?

I already know the answer to those questions but I would have not arrived there by any HAT (highly accepted theory).

3) Why are we even talking about programs cuts in Canada before it is clear that the world economy and the US economy has started a robust recovery? And why especially when Canada is way below the advanced capitalist curve (in terms of debt to GDP)?

Click for larger image

Delong is Wrong Again

What is up with Brad Delong?  It is like he is itching for a job in the Obama administration.  By his own admission he is no macro-economist but surely he knows the difference between effective demand at the level of the grass roots and supply push.  Then again maybe he is a macro-economists…of the fresh water variety.  Just read the following:

Even after central banks have pushed government bond prices as high as they can go, they should keep buying government bonds for cash, in the hope that people whose pockets are full of cash will spend more of it, and that this will directly pull people out of joblessness and into employment.

Here is a rather old fashioned idea: temporarily beef-up both the number of those covered by UI and the level of the replacement wage so that unemployed workers will have cash to spend on things like mortgages, rents, food and transportation.  Surely this seems better than hoping those who already have pockets full of cash will spend more of it and pull people out of employment.  And while unemployed workers are spending their UI, the Obama administration can find a little bit of breathing room to come up with a coherent plan to the financial mess instead of playing hanky panky ad hocery with the Fed, the Treasury and Wall street.

Dude trickle down is so like…the eighties.

Krugman is getting closer

In his latest Op-ed Krugman seems to be getting closer to the nub of it.  Just a little further Paul you are almost home.

Much discussion of the toxic-asset plan has focused on the details and the arithmetic, and rightly so. Beyond that, however, what’s striking is the vision expressed both in the content of the financial plan and in statements by administration officials. In essence, the administration seems to believe that once investors calm down, securitization — and the business of finance — can resume where it left off a year or two ago.

To be fair, officials are calling for more regulation. Indeed, on Thursday Tim Geithner, the Treasury secretary, laid out plans for enhanced regulation that would have been considered radical not long ago.

But the underlying vision remains that of a financial system more or less the same as it was two years ago, albeit somewhat tamed by new rules.

As you can guess, I don’t share that vision. I don’t think this is just a financial panic; I believe that it represents the failure of a whole model of banking, of an overgrown financial sector that did more harm than good. I don’t think the Obama administration can bring securitization back to life, and I don’t believe it should try.

Once krugman integrates some notion of stagnant wages and the privatization of debt via the massive extension of consumer credit he will arrive at an indictment of a growth model that goes well beyond a bloated financial sector.  He will, in short, end up indicting the very neoliberal growth model he once so proudly shilled for.

Crisis? Which Crisis?

A monetary crisis rapped inside a liquidity crisis; all rapped inside a quality crisis;

All rapped inside a fiscal crisis rapped inside a financial crisis;

All rapped inside a confidence crisis rapped inside a crisis in the dominant growth paradigm;

All rapped inside a contradiction rapped inside an enigma.