Re: Gen. Theo. Sem. response to Basil Moore

["J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>]

Basil,
      I have not seen recent data, but your observation is
essentially correct, although there was some decline
of land prices between 89-91.  OTOH, they did not run
up as quickly as did stock prices just before 1989.
      One source is "Explaining Asset Bubbles in Japan,"
by Takatoshi Ito and Tokuo Iwaisako, NBER Working Paper
5358, Nov.1995.
Barkley Rosser
-----Original Message-----
From: Warren Mosler <mosler@xxxxxxxx>
To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
Date: Thursday, February 24, 2000 1:12 PM
Subject: Re: Gen. Theo. Sem. response to Basil Moore


>
>
>Basil Moore wrote:
>
>> Warren
>>
>> I agree wholeheartedly that we must find an explanation for Japan. Why is
>> it that low rates there have not induced the private sector to deficit
>> spend, so that the government must do it?
>
>It could be a lot of things, including the tax structure and other
institutional
>structure.  Not to mention cultural biases.
>
>So why not let the public sector use that which the private sector won't,
>at least until the private sector 'kicks in?'
>
>>
>>
>> I have a student working on this, and think one reason may be asset
deflation:
>>
>> Stock prices fell sharply from 89 to 91, but land prices did not. (My
>> student is trying to find a series for Japanese land prices. Have you
seen
>> one?)
>
>A couple of years ago.  I think it was from one of the dealers, maybe
Nomura.
>
>>
>>
>> I have heard that land prices are still falling, but relatively slowly,
say
>> 10-20 % per year. Given the high price of land, (1 Million US$ a lot),
and
>> the expectation that land prices will be lower next year, these
>> expectations serve to deter spending. Asset deflation may be viewed as is
>> deflation generally, as raising the real rate of interest on loans. This
>> was the case in the late 30's in the US, when expectations of further
falls
>> in the goods and asset price levels were prevalent?
>>
>
>Probably true.  Sounds like prices are still 'too high' and the adjustment
has
>further to go?
>Income is still too low relative to prices for private sector expansion?
>
>>
>> Comments?
>
>ELR would work wonders in Japan.  Make ELR employment respectable with
>decent pay and public purpose, so that corporations
>would feel good about laying people off and restructuring themselves.
>This would then allow the adjustment on the corporate side and the deficit
>would float to levels where desired net nominal savings equal actual net
nominal
>savings
>in the private sector, stabilizing prices and creating profitable
opportunities in
>the private sector?  And, as the economy recovered, the private sector
could
>begin to hire the elr workers away from the govt, automatically cutting
fiscal
>expenditures countercyclically?  And don't forget to leave overnight rates
>at 0 bid forever!
>
>Best,
>
>Warren
>
>> Basil
>>
>> Another reason may be that people do not trust that the banks will remain
>> solvent, since they suspect that they would have negative net worth, if
>> assets were valued at market. As a result they just save, as a precaution
>> against future losses on deposits.
>>
>> At 11:44 PM 12/18/99 -0500, you wrote:
>
>