Very interesting paper comparing the similar experiences of Japan and Finland up until 1990, and their subsequent divergence, especially this: “In both countries monetary and fiscal policies, under a regime of currency regulation, were used to channel resources towards...
...industrialization. Capital flows were tightly-managed, and interest rates were set below market-clearing levels. This forced national savings toward investment and allowed for only essential consumption.”
The point is that Japan responded to the real estate boom, soaring...
The point is that Japan responded to the real estate boom, soaring...
...debt, and years of non-productive investment by circling the wagons and protecting the banks in ways that saw no “crisis” reduction of GDP, while Finland responded to the same problem by cleaning up insolvencies and forcing losses to be taken. Japan stagnated the next 2-3...
...decades whereas, according to the authors, Finland had a difficult 2 years after which it began to grow rapidly again.
I don’t know enough about the Finnish story to comment, but I will say that it seems to confirm a point I have made often about China. Many analysts say...
I don’t know enough about the Finnish story to comment, but I will say that it seems to confirm a point I have made often about China. Many analysts say...
...China does not have a debt problem because it is unlikely to have a debt crisis. I agree that China is unlikely to have a debt crisis, but that doesn’t mean it doesn’t have a debt problem. Crises are only one way historically of resolving excessive debt burdens – the other...
...way is in the form of “lost decades" of stagnation. The latter clearly is politically less damaging, but while it is socially and economically less damaging in the short term, it is almost certainly more so in the long term.
This doesn’t mean China’s only options are...
This doesn’t mean China’s only options are...
...“Japan” or “Finland”, but it does suggest that Beijing should understand exactly why rapid debt resolution and rebalancing of demand is necessary to regain growth, and figure out how to accomplish it without a crisis.
