The Real Experiment That Is Being Carried Out In Japan

The future never resembles the past – as we well know. But, generally speaking, our imagination and our knowledge are too weak to tell us what particular changes to expect. We do not know what the future holds. Nevertheless, as living and moving beings, we are forced to act.John Maynard Keynes

Discussions of the population problem have always had the capacity to stir up public sentiment much more than most other problems.
- Gunnar Myrdal

Last Thursday the yen broke through the psychological threshold of 100 to the US dollar. On Friday the slide continued (see chart), even dropping very close to 102 to the USD at one point before strengthening slightly on the run in to the G7 finance ministers meeting. Continue reading

Does Portugal Have Its Own “Shortage Of Japanese” Problem?

In a number of posts recently I have highlighted the impact of declining workforces on economic growth (here, for example, or here, or here) and the way the policies persued to address the Euro debt crisis are having the impact of  accelerating the movement of young people away from the periphery and towards the core (here, or here) thus accelerating the decline in their working populations and exacerbating their growth problem. This issue has been already highlighted strongly in Japan’s ongoing crisis, and has to some extent come to be known as the “shortage of Japanese” problem following Paul Krugman’s memorable use of this expression to explain  why Japan’s economic performance seemed so poor to so many. Continue reading

The Suitcase Mood

Suitcase mood is a Russian website with travel and tourism content. The term is also a popular expression widely used within Russian culture to describe the state of mind which grips a voyager on the brink of a journey. The mood is often associated with a ritual which involves the departing person sitting, sometimes accompanied by family or friends, in the vicinity (when not actually on top of) the packed suitcase, ostensibly to try to remember if there is anything they have forgotten to take and bid loved ones farewell. Sometimes, however,  the phrase can take on a different, and rather darker, meaning. It can be used to describe someone who is fed up with the status quo, has become footloose and decided they simply want out. “This will never change,” might be the thought, “I’m leaving”. In my mind’s eye I even see the person having the thought seated on their suitcase adopting the posture of Rodin’s thinker, turning over and over again whether they are doing the right thing, even while those around them vent their sadness in a bath of tears and alcohol. Or maybe I have just been watching too many Russian movies. Continue reading

The A-b-e Of Economics

And the world said “Let Shinzo Abe be”, and all was light.

“The point is not that I have an uncanny ability to be right; it’s that the other guys have an intense desire to be wrong. And they’ve achieved their goal.” Paul Krugman

A new craze is sweeping the planet. The image I have in mind isn’t exactly that of the community of central bankers all dancing the Harlem Shake in unison, but for all the economic sense it has it might as well be. In fact the craze is called “Abenomics” and it is gathering adepts in financial markets across the globe. A precursor in Japanese history has already been found for the movement, Korekiyo Takahashi, who was the country’s finance minister during the key years of the 1930s depression. Even a book has been written to extol his virtues entitled “From Foot Soldier to FinanceMinister: Takahashi Korekiyo, Japan’s Keynes.” Unsurprisingly it was an immediate hit with Japanese academics when it came out in 2010.

While the creation of the Takahashi lineage may be important for home consumption in order to make the Japanese themselves more comfortable with the adoption of a set of radical and even unprecedented measures – Japan isn’t exactly the country you would expect to be in the vanguard of a major economic experiment with extensive global implications – the resonance of Abenomics outside the country among those with little knowledge of economics and even less of the specificities of the Japan problem is perhaps rather more surprising. Mariano Rajoy, for example, told journalists recently that the recent BoJ decision represented a “very important change in its monetary policies.” The Spanish PM argued in a clear reference to what is going on in Japan that Europe needed to decide which kind of powers its central bank should have, those it has now or “the ones other central banks across the globe have”. “We are in a decisive moment,” he said. Continue reading

Beyond Their Ken?

Spain’s economic problems now form part of such a complex web of cause and effect, action and reaction, that it is getting increasingly difficult for laymen, journalists and politicians alike to get to the core of what is actually happening.

To a herd of rams, the ram the herdsman drives each evening into a special enclosure to feed and that becomes twice as fat as the others must seem to be a genius. And it must appear an astonishing conjunction of genius with a whole series of extraordinary chances that this ram, who instead of getting into the general fold every evening goes into a special enclosure where there are oats- that this very ram, swelling with fat, is killed for meat”. – Tolstoy, ‘War and Peace’.

After so many false dawns, the recent announcement by Spain’s Prime Minister Mariano Rajoy that the government was revising down its 2013 economic forecast hardly caused a blink among a citizenry that is now completely inured to deception and ready to believe the worst about the intentions of any politician willing to come forward with either good or bad news. The long announced recovery has once more been delayed, and will now be noted not in the last three months of this year, but during the first six of 2014. Naturally, a public which is now totally accustomed to such postponements will not be surprised if this one is far from being the last. Continue reading

Does Emigration Put Spain’s Health and Pensions System At Risk?

According to the Economist’s Buttonwood, “desperate times require desperate measures”. I am sure this is right, times in Spain are certainly getting desperate and many of the measures being implemented in Brussels, far from representing radical and innovative solutions look much more like continually closing the barn door after the horse has bolted.

The issue Buttonwood draws our attention to in the blog post which accompanies this statement is that of migration trends within the Euro Area and the impact these have on trend GDP growth and structural budget deficits in the various member countries. This is an important issue indeed, since such movements seem to be an unforeseen and largely unmeasured by-product of the current monetary and fiscal policy mix being pursued by the EU and the ECB, yet the consequences they have shape the long term future of the whole Eurozone, and with it the sustainability or otherwise of the component states. Continue reading

The Great Portuguese Hollowing Out

With every passing day Portugal has less and less economy left, while fewer and fewer people remain to try to pay down the debt.

As Portuguese President Aníbal Cavaco Silva once put it, “A country without children is a nation without a future.” He was, of course, referring to his country’s ultra-low birth rate, which is just over 1.3 (Tfr) and has been below replacement level (2.1Tfr) since the early 1980s. In 2012 only just over 90,000 children were born in the country, the lowest number in more than a century – you need to go back to the nineteenth century to find numbers like the ones we have been seeing since the crisis really took hold. Continue reading

The Shortgage of Bulgarians Inside Bulgaria

Oh, there’s a hole in my bucket, dear Liza, a hole……

Wenn der Beltz em Loch hat -
stop es zu meine liebe Liese
Womit soll ich es zustopfen -
mit Stroh, meine liebe Liese

According to Angela Merkel, speaking in the German city of Mainz in mid February,  European countries struggling with the fallout of the euro-area debt crisis have much to learn from East Germany’s experience with economic overhaul following the fall of the Berlin Wall. In the main she was speaking about the need for reform, something on which we can all agree. “At the beginning of the 21st century”, she said, “Germany was the sick man of Europe and that we are where we are today also has to do with reforms we carried out in the past. That’s why we can say in Europe that change can lead to good.”

But there was one tiny little detail she forgot to mention. During the post unification period East Germany’s population went into melt-down mode. Continue reading

Has Spain’s Economic Contraction Now Become Self Perpetuating?

Spain’s political leaders are in cheerful, almost jubilant, mood at the moment. Economy minister Luis de Guindos, speaking in Davos, declared the tide had turned, and forecast that the Spanish economy would return to growth in the second half of 2013.

“The perception of the Spanish economy has improved and will continue to do so over the coming weeks and months,” he told his audience at the World Economic Forum. In similar vein, he told Spanish journalists in Moscow last weekend that Spain’s economy no longer being a key theme at G20 meetings was another welcoming sign of the times.

As ever, Spain’s economy sage is hedging his bets – earth shattering the growth will not be, but grow the economy will, this is his mantra. Put another way, the bottom in Spain’s economic collapse has now been passed. From here on in the road may be winding, but it will be up. Perhaps, he suggested, the economy will be stationary in the third quarter, and then we will see growth, albeit ever so slight, in the fourth one. And quite possibly he is right. The core of the issue is not whether the country could see one, or even two, quarters of positive performance, but whether any faltering recovery will be sustained out into the future, through 2014 and beyond. It is here that all the old doubts really emerge. Continue reading

Hungary’s Matolcsy Joins Japan’s Abe In Practicing The Ancient Art Of Verbal Intervention

It’s amazing what you can achieve these days just by promising to do something. It’s also fascinating to watch just what a storm you can stir up.

Last July Mario Draghi surprised markets when he  vowed to do anything – whatever it would take – to save the Euro. He didn’t go into details, he didn’t really need to. He simply informed his audience that whatever he did it would be enough. What I suppose no one – not even Mr Draghi himself -  imagined at the time was that doing precisely nothing would turn out to be sufficient. Yet since that time that is just what has happened, he has done nothing, nothing whatsoever – no bonds have been purchased and no country has even asked for aid. So to date this verbal style intervention has been exactly what he said it would be, enough. Continue reading