Tuesday, February 19, 2002
Everything's fine. Nothing to see. Move along.
The world—including even the previously sanguine Japanese—is now catching on to the fact that Japan's 12-year slump has deteriorated into a full-blown crisis, threatening a wild global ride. Falloffs in various indicators in the world's second-largest economy resemble the plunge of such countries as the U.S. into the Great Depression of the 1930s.
Via InstaPundit.Com, The Panic Spreads
If it's one thing that just plain defies common sense, it's economics. I consider inflation bad, as I can buy less stuff with my money. Yet economists like inflation. It's good for you, unless it's hyperinflation—then it's bad. But regular old inflation, that's good. I don't see the problem with deflation, as the money I have saved is now worth more, but to economists? Bad! Not good! Evil!
But I'm looking at it as a guy that doesn't buy stuff. Well, non-essential stuff anyway. The rich? They don't save money. Nope. They make money by making it move through the economy. They buy big stuff like real estate and then sell it back after inflation has driven up the price of stuff. When most of your liquid assets are not in a monetary liquid form then of course deflation is bad—your stuff is now worth less. And because the rich don't save money like we mere mortals do, deflation hits the rich rather harder than it does us. [actually, the super rich don't even buy stuff outright, they hand the money over to a foundation or trust they control (and take a nice write off on their personal taxes—heck, they may even make negative amounts of money that way and have the government owe them!) which then mortgages or leases the stuff the super rich desire, so the foundation or trust (which may or may not pay taxes—I'm not entirely sure of the law in this case) can then write it off as operating expenses. Any excess money is then invested and the rate of return on such actually covers the operating expenses generating a profit, which is usually handed back to the super rich as income (more operating expenses of course) or squirreled away in some offshore bank account hiding it from Uncle Sam. The money is always moving, never accumulating and most of it probably isn't in any monetary liquid form, which is why deflation is usually considered a Bad Thing.]
So now Japan is facing an economic crisis and economists here are all nervous because if Japan collapses economincally, it could affect us here. Economists are all worked up because Japan has a near zero interest rate and people over there are still saving! How dare them! They should be spending spending spending! Build up that debt! Grease those economic wheels!
Let's face it—no one really understands how the economy works anyway, and most of it appears to work off perception anyway so perhaps we should force all economists to say the economy is good no worry here and maybe once for a change get the rich folks to actually work for a living.
Just a thought.