Time and time again I hear the mantra that low interest rates inevitably leads to high inflation - but how come Japan has managed to have a combination of near zero interest rates and near zero inflation for such a long time?...
What Went Wrong with Economics
The Japanese culture encourages vigorous savings, so the money as it is entering the market will leave at a rate approximately equal to its entrance.
"The power of liberty going forward is in decentralization. Not in leaders, but in decentralized activism. In a market process." -- liberty student
ladyattis:The Japanese culture encourages vigorous savings, so the money as it is entering the market will leave at a rate approximately equal to its entrance.
If the supply of money in Japan remained constant, then what would happen?
If I wrote it more than a few weeks ago, I probably hate it by now.
I. Ryan: ladyattis:The Japanese culture encourages vigorous savings, so the money as it is entering the market will leave at a rate approximately equal to its entrance. If the supply of money in Japan remained constant, then what would happen?
Pretty much nothing. Think of it as a fire cracker that has too little of the active ingredients to go boom: a dud. Also, there are other factors involved in the lost decade that lead to the further decline of Japan on the world scene. One of them was their over investment in real estate within their borders and on the east coast of the United States (oddly many of those holdings are now Dutch owned).
Ok... now I would guess that Americans have been so traumatised losing all that money on housing, and having their pension funds devastated, that they will now en masse be desperate to save. This means that perhaps there won't be hyperinflation in the US after all.
Original poster,
what's your definition of inflation? Monetary inflation or price inflation?
That is what has got caught in Krugman's craw. The boy thinks inflation is good without realizing that inflation does not lead to productivity. But don't bother telling him that, he's still stuck on stupid for Keynes.
either.
I presume that Japan has had low levels of both types of inflation for a long time (please correct me if I'm wrong).
The question is low interest rates for whom? If the banks are getting 0.1% short term loans from the central bank, but everyone else has to get a 5% long-term loan on his mortgage on a depreciating asset, that's not low interest rates.
The fallacies of intellectual communism, a compilation - On the nature of power
In Japan, loan companies like Takefuji routinely charge 20-30%.
Why anarchy fails
AJ: In Japan, loan companies like Takefuji routinely charge 20-30%.
Really??... presumably that's just for the most high risk customers. What if a long established business wants to borrow money to expand?
Dunno, but I think multi-year home loan rates are around 2-3%. Takefuji is basically for payday-style loans.
25% savings rate. 0% market rate of interest in Japan is not the same as a 0% market rate of interest in the U.S.
"If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion."
These answers are all rather brief - presumably someone somewhere has written about this in a little detail - can someone give me a good link?
mickanomics: AJ: In Japan, loan companies like Takefuji routinely charge 20-30%. Really??... presumably that's just for the most high risk customers. What if a long established business wants to borrow money to expand?
For a business to expand it must first identify a profitable investment opportunity. If the economy was not liquidated after a previous bust, then there will not be any such opportunities, and so there will not be business borrowing, and so there will not be fractional reserve inflation.