Re: RE: Re: Re: Re: Yen still overvalued

[Peter Dorman <dormanp@xxxxxxxxxxxxx>]

We shouldn't underestimate the problem of shifting the structure of production.
This was the same problem (only on an even larger scale) faced by the east
Europeans, and it was accomplished through massive downsizing.  But there are
two points to bear in mind:

1. The equity writeoffs accrued to compliant state owners, not capitalists with
the means and will to resist, and

2. Except for Slovenia (where there was arguably not too much restructuring to
perform), it hasn't been completed yet.

(None of the above should be construed as an endorsement of the particularly
restructuring going on in the CEE countries.  I offer it simply by way of
example and to suggest why Keynesian methods alone are not sufficient.)

Peter

"Devine, James" wrote:

> Gil writes:>The interesting question, in light of Peter's assessment, is why
> the Japanese
> government can't use traditional Keynesian fiscal tools to pull itself out
> of
> the recession.<
>
> 1) the IMF and the assembled economic pooh-bahs argue against it.
> 2) they've already done it a lot, building a lot of infrastructure, much of
> it useless, but never enough to get the Japanese economy moving again.
> 3) they don't want to get into raising government consumption (building
> pyramids, as Keynes suggested) and they're still restricted from doing
> Military Keynesianism.
>
> But that doesn't mean that fiscal policy couldn't be used. My idea is that
> they should stimulate the Japanese economy by giving foreign aid to poor
> areas (such as East St. Louis, IL) that's "tied," i.e., can only be spent on
> Japanese goods. This is what the U.S. did for many years.
>
> Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine
>
>