Re Paul Midford on Stiglitz comparisons

Do not directly compare unemployment rates!! The way in which they are compiled in the US and Japan differ; my last attempt to look through the details (drawing on a Monthly Labor Review [US Bureau of Labor Statistics]
2002 article by Yamagami Toshihiko) suggests you need to bump the Japanese data up by 1/3rd. The comparison is made more difficult by the vast expansion of "contingent" labor in Japan (vs a modest increase in the US).

In any case, that Japan under a per capita metric outgrew the US is a backhanded compliment: US growth is setting the bar very, very low.

Re Seprényi Gábor on Deflation

The Austrians don't define inflation/deflation in terms of money stock, they assume that one is equivalent to the other. For adherents of the One True Faith where the only thing that can be money is (gold) bullion, well, when the price of gold rose and fell sharply it implied that prices first plummeted (gold would buy more goods) and then skyrocketed (as the price recently dropped from $1900 to under $1400 per ounce). If that doesn't make sense ... well, it doesn't make sense.
Most self-proclaimed Austrians don't view economics as an empirically-oriented social science.

Zero interest rates are a sign of an economy performing below potential, in the US, in the EU and in Japan.
That also means monetary policy tends to be toothless, since real interest rates remain positive. Quantitative easing is a reflection of that: if lots of money (=zero short-term rates) doesn't work, just try harder. So far there have been portfolio reallocations -- buying foreign assets -- but I judge those to be reversible arbitrage, so every time Gov Kuroda hints an easing of the throttle, the yen will rise again. As to the domestic economy, if bank lending rates of 0.9% don't tempt firms to borrow (BOJ data on contracted lending rates, vs a prime rate of 1.5%), will ones of 0.8% be any different? – I think not!

That doesn't mean the economy won't grow / "recover"
but if so it will be for reasons other than monetary policy.

mike smitka

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Michael Smitka
Professor of Economics
Washington and Lee University

Home Page: http://smitka.academic.wlu.edu
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