John Cochrane is said to have been frequently asked the question “What about Japan” recently. It relates to US debt, financial expansion and planned infrastructure investments. The economist says, on the contrary, he is the one who will start questioning. Another economist, Michael Bettis, disagreed. So “What about Japan?”
1. Japan according to Cochrane: He is also an economist who is concerned about the growth of US debt and inflation. As an objection to his view, he often hears that Japan has the highest debt and that there is no inflation or crisis. Mr Cochrane responded by saying that not every country that borrows is as “happy” as Japan. It is also necessary to ask what this country actually got for its debts.
In other words, Mr Cochrane argues that although Japan’s government debt is stable, it does not apply anywhere else. In addition, the Japanese economy has only been growing for a long time, inflation has been low, rates at zero since the 1990s. So, we can ask what massive investment in the infrastructure of the United States will achieve, while their end is in Japan. Mr Cochrane says Japan’s slow growth is due to micro-economic factors such as taxes, regulation, productivity and population improvements.
2. Japan and the United States according to Cochrane. Japanese loans, unlike the United States, are mainly run by domestic companies and the central bank, and the economist compares Japan and the United States. U.S. debt is short-term and more prone to capital outflows overall. Japan also holds foreign assets by making trade surpluses (lending to buy its exports to other parts of the world and a country net lender). The United States is in the opposite position. But more aptly, according to economists, unlike the United States, Japan lacks health and social security funding. Overall, the argument is that the United States should not engage in “big stocks”:
3. According to Mr. Bettis of Japan: Michael Bettis took note of Mr Cochrane’s rationale and did not accept it. More specifically, he is more optimistic about the United States and points out other differences between Japan and that country in this regard. Unlike the above, it pays to invest in US infrastructure.
Mr Bettis said Japan was entering a period of increasing debt at a time when it was already “heavily invested”. Furthermore the fact that investments have increased the debt ratio is evidence that good investment opportunities are already exhausted and new investments are simply not being repaid. By the way, if this reminds the reader of my article since last Friday that “China is no longer Polaris”, it is not a coincidence. The logic is correct.
But is it not possible to invest more in the United States? Mr Bettis says many economists are not. Then investing in infrastructure will become different than in Japan. As a result, their productivity is likely to decline, but not increase.
In addition, Mr Bettis points out that consumption in Japan has a much lower share of product / gross domestic product than in the US, and that investment plays a much larger share here. According to economists, this will not lead to economic growth in Japan until there is a structural shift from investment (and exports) to demand for domestic consumption. This requires a structural change in revenue (not in distribution) Side Economics, as Mr. Cochrane argues). Again – if the reader finds this topic like China, it is not a coincidence.
4. How is it? If the reader wants to form an opinion about “who is here” I will not help him because I am not involved in such exercises anymore. Because truth is hard to “hold”. I feel here that Japan is often referred to as an example of many things (mostly in relation to Europe). As we can see, this forms the basis of very different ideas, even among people who understand their craft. Like so many “evidences” in place and time. The question is how relevant this “evidence” is.
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