[wat0n]

Just assertions. No details. No dates. Nothing.

I don't agree with any of that, except maybe the part about Russia.

I would say the US part is easy to tell by noting inflation and inflation expectations have been gradually coming down.

The rest is common knowledge at this point. The role of zombie banks, which are kept alive by the government, in Japan is pretty well documented.

https://www.chicagobooth.edu/review/zom ... ding-japan

[Steve_American]

I would say the US part is easy to tell by noting inflation and inflation expectations have been gradually coming down.

The rest is common knowledge at this point. The role of zombie banks, which are kept alive by the government, in Japan is pretty well documented.

https://www.chicagobooth.edu/review/zom ... ding-japan

OK, I looked at the linked article. It has very little about what the Japanese Gov. did. It was all about the zombie banks in Japan and how they lend to zombie corps, and how this was hurting the economy there. So, what Keynesian things did the Gov. do and how did that fail?

As for the US, I have asserted that inflation would come down as soon as the lockdowns and shipping problems had ended. Inflation has been coming down for a while now. So, my prediction was right.
The Def muddied the water about if that would have happened without the rate increases, so now we will never know. However, in Japan they didn't raise rates and its inflation is also coming down. Its infltion was never was high, though. So, it's as likely as not, that the rate increases did little or nothing to help. Some evidence of that is the fact that rate increases don't directly reduce prices, that is an indirect effect of increased unemployment and a decline in consumer spending as money is diverted from spending to paying more interest (to make banks richer). But, unemployment didn't increase much yet and consumer spending didn't decline much yet, either. So, how and why did, as you think, the rate increases directly redude inflation?

[wat0n]

OK, I looked at the linked article. It has very little about what the Japanese Gov. did. It was all about the zombie banks in Japan and how they lend to zombie corps, and how this was hurting the economy there. So, what Keynesian things did the Gov. do and how did that fail?

Did you read the part about subsidies?

As for the US, I have asserted that inflation would come down as soon as the lockdowns and shipping problems had ended. Inflation has been coming down for a while now. So, my prediction was right.
The Def muddied the water about if that would have happened without the rate increases, so now we will never know. However, in Japan they didn't raise rates and its inflation is also coming down. Its infltion was never was high, though. So, it's as likely as not, that the rate increases did little or nothing to help. Some evidence of that is the fact that rate increases don't directly reduce prices, that is an indirect effect of increased unemployment and a decline in consumer spending as money is diverted from spending to paying more interest (to make banks richer). But, unemployment didn't increase much yet and consumer spending didn't decline much yet, either. So, how and why did, as you think, the rate increases directly redude inflation?

That's not what happened. Inflation did not come down immediately after the logistics issues abated, as we saw on another thread there have been second round effects.

[Steve_American]

Did you read the part about subsidies?


That's not what happened. Inflation did not come down immediately after the logistics issues abated, as we saw on another thread there have been second round effects.

No, I didn't see that part. Can you point me to it?

I said that inflation is or has been coming down. It has.

It didn't come down as much or as fast as it could because corp's profits are up.
This is a sure indication that corps raised prices to make more profits, that is, more increase in prices than their costs increased. I.e., price gouging.
.

[wat0n]

No, I didn't see that part. Can you point me to it?

However, the political and regulatory response to the financial crisis was to deny the existence of the problems and delay serious economic reforms or restructuring of banks. Because banks had to comply with international standards governing their minimum level of capital, many banks continued to extend credit to insolvent borrowers, gambling that these firms would recover or that the government would bail them out. The Japanese government also encouraged banks to increase their lending to small- and medium-sized firms to ease the "credit crunch" after 1998.

The pattern of Japanese banks lending to insolvent borrowers, even when the prospects for being repaid were extremely doubtful, has been termed "ever-greening" in previous research. The practice of ever-greening became even more pervasive in the late 1990s and early 2000s.

...

Kashyap argues that regulators should have forced banks to recognize they were undercapitalized and needed to raise money, and face the consequences of poor performance. Instead, there was a serious discrepancy between regulators denying the severity of the banking crisis and the significant amounts of taxpayer money being spent to prop up the ailing banks.

"The government allowed even the worst banks to continue to attract financing and support their insolvent borrowers," says Kashyap. "By keeping these unprofitable borrowers alive, banks allowed the zombies to distort competition throughout the rest of the economy."

I said that inflation is or has been coming down. It has.

It didn't come down as much or as fast as it could because corp's profits are up.
This is a sure indication that corps raised prices to make more profits, that is, more increase in prices than their costs increased. I.e., price gouging.
.

There is no discernible correlation between markups (difference between the price and marginal cost) and industry level inflation.

https://chrisconlon.github.io/site/markups_pnp.pdf

[Steve_American]

#1 However, the political and regulatory response to the financial crisis was to deny the existence of the problems and delay serious economic reforms or restructuring of banks. Because banks had to comply with international standards governing their minimum level of capital, many banks continued to extend credit to insolvent borrowers, gambling that these firms would recover or that the government would bail them out. The Japanese government also encouraged banks to increase their lending to small- and medium-sized firms to ease the "credit crunch" after 1998.

The pattern of Japanese banks lending to insolvent borrowers, even when the prospects for being repaid were extremely doubtful, has been termed "ever-greening" in previous research. The practice of ever-greening became even more pervasive in the late 1990s and early 2000s.

...

Kashyap argues that regulators should have forced banks to recognize they were undercapitalized and needed to raise money, and face the consequences of poor performance. Instead, there was a serious discrepancy between regulators denying the severity of the banking crisis and the significant amounts of taxpayer money being spent to prop up the ailing banks.

"The government allowed even the worst banks to continue to attract financing and support their insolvent borrowers," says Kashyap. "By keeping these unprofitable borrowers alive, banks allowed the zombies to distort competition throughout the rest of the economy."

#2There is no discernible correlation between markups (difference between the price and marginal cost) and industry level inflation.

https://chrisconlon.github.io/site/markups_pnp.pdf

#1] I think you are confused about the key element of Keynesianism. ARAIK, it is for gov. to spend more in recessions with deficits, and to spend less in booms with surpluses.

Where in that quote, that is your reply, does it talk about the Japanese Gov. spending more or spending less? ISTM, that the Gov. jawboned banks into lending more to poor credit risks. Where did Keynes ever say that is a good response, or a bad response for that matter?

#2 OK, how does that mean I'm wrong? It just can be said to say the excessive markups caused the prolonging of the inflation, and not the Gov. spending which had ended months before.
. . . Also, how do interest rate increases discourage excessive markups? That is, if excessive markups are the cause of the current inflation, how are interest rate increases going to reduce inflation?
.

[wat0n]

#1] I think you are confused about the key element of Keynesianism. ARAIK, it is for gov. to spend more in recessions with deficits, and to spend less in booms with surpluses.

Where in that quote, that is your reply, does it talk about the Japanese Gov. spending more or spending less? ISTM, that the Gov. jawboned banks into lending more to poor credit risks. Where did Keynes ever say that is a good response, or a bad response for that matter?

"...and the significant amounts of taxpayer money being spent to prop up the ailing banks."

#2 OK, how does that mean I'm wrong? It just can be said to say the excessive markups caused the prolonging of the inflation, and not the Gov. spending which had ended months before.
. . . Also, how do interest rate increases discourage excessive markups? That is, if excessive markups are the cause of the current inflation, how are interest rate increases going to reduce inflation?
.

If businesses are using monopoly power and that has increased inflation, why is it that having greater monopoly power doesn't correlate with inflation?

[Steve_American]

"...and the significant amounts of taxpayer money being spent to prop up the ailing banks."


If businesses are using monopoly power and that has increased inflation, why is it that having greater monopoly power doesn't correlate with inflation?

You still don't get it. No Gov. with its own fiat currency [after the end of the Gold Standard in 1971] spends taxpayer money. Taxpayer money is destroyed when it arrives in the Gov. account. In Colonial Virginia they really burned the cash when they received it. They could always print more and if they stored it, it would cost to guard it from thieves.
. . . Such Gov. spend all the money they spend into existence. It is all new money created out of thin air. Nowadays Gov. spend with checks, and the typewriter can type any number on the checks. The central bank always cashes the checks, no matter how much is in the Gov. account.

As for monopoly power, it must be complicated. What else can be the cause? Klein wrote a book that told corps to never let a crisis go to waste. Between crises it seems like corps are afraid of pissing the customers off. I don't really know. However, I learned decades ago about "concentrated" markets where 3 to 5 players controlled 80+% of the market, and this gave them pricing power, that is they cooperated somehow to fix the prices. The US currently has many such industries/markets.
.

[wat0n]

You still don't get it. No Gov. with its own fiat currency [after the end of the Gold Standard in 1971] spends taxpayer money. Taxpayer money is destroyed when it arrives in the Gov. account. In Colonial Virginia they really burned the cash when they received it. They could always print more and if they stored it, it would cost to guard it from thieves.
. . . Such Gov. spend all the money they spend into existence. It is all new money created out of thin air. Nowadays Gov. spend with checks, and the typewriter can type any number on the checks. The central bank always cashes the checks, no matter how much is in the Gov. account.

What does any of this have to do with zombie banks?

As for monopoly power, it must be complicated. What else can be the cause? Klein wrote a book that told corps to never let a crisis go to waste. Between crises it seems like corps are afraid of pissing the customers off. I don't really know. However, I learned decades ago about "concentrated" markets where 3 to 5 players controlled 80+% of the market, and this gave them pricing power, that is they cooperated somehow to fix the prices. The US currently has many such industries/markets.
.

We're at least not seeing it in the inflation (Producer Price Index) data. There could be other effects of the well documented increase in monopoly power, but inflation isn't one of them.

[Steve_American]

1] What does any of this have to do with zombie banks?



2] We're at least not seeing it in the inflation (Producer Price Index) data. There could be other effects of the well documented increase in monopoly power, but inflation isn't one of them.

you said that Japan propped up the banks with taxpayer money. I'm responding to that error. Besides I didn't see in the part you posted where it said that the Gov. did prop them up.

2] Another assertion. I see data that for the last year or 2 corps have made higher profits by increasing prices. How can you claim the experts can't see what I see?

[wat0n]

you said that Japan propped up the banks with taxpayer money. I'm responding to that error. Besides I didn't see in the part you posted where it said that the Gov. did prop them up.

I already quoted it.

2] Another assertion. I see data that for the last year or 2 corps have made higher profits by increasing prices. How can you claim the experts can't see what I see?

And I don't see the correlation between markups and inflation. It's as simple as that.

[Steve_American]

1] I already quoted it.


2] And [highlight=yellow]I don't see the correlation between markups and inflation.[/highlight] It's as simple as that.

1] OK, I see it now. However, how is propping up banks Keynesian?

2] You defined markup in this sentence. "There is no discernible correlation between markups (difference between the price and marginal cost) and industry level inflation."
. . . I can see a clear correlation between generalized increased differences between prices and costs. That will show up in the economy as inflation. It is a direct result of the higher markups.

Lurkers, that says a lot. He can't see the relationship between markups and inflation.
.

[wat0n]

1] OK, I see it now. However, how is propping up banks Keynesian?

Counter-cyclical policy.

2] You defined markup in this sentence. "There is no discernible correlation between markups (difference between the price and marginal cost) and industry level inflation."
. . . I can see a clear correlation between generalized increased differences between prices and costs. That will show up in the economy as inflation. It is a direct result of the higher markups.

Lurkers, that says a lot. He can't see the relationship between markups and inflation.
.

Where can you see the correlation? Should I post plots from that draft?

[Steve_American]

1] Counter-cyclical policy.



2] Where can you see the correlation? Should I post plots from that draft?

1] But, where did Keynes ever say to spend to prop up zombie banks

2] I see it with logic and maybe in bookkeeping.
Logic tells me that inflation IS a general increase in prices.
Logic tells me that when the markup is increased as well as an increase to cover the increased costs, the corp will make more profit.
Bookkeeping tells me to look for an increase in profits, which I see, and not a little one. the profits increases are close to the rate of inflation.
So, I see increased markups, increased prices, and increased inflation. Each follows from the one before.

[wat0n]

1] But, where did Keynes ever say to spend to prop up zombie banks

I don't know if he ever said so explicitly, but he did say that the Depression was made much worse by the failure of banks. That meant in practice that they would need to get some support.

2] I see it with logic and maybe in bookkeeping.
Logic tells me that inflation IS a general increase in prices.
Logic tells me that when the markup is increased as well as an increase to cover the increased costs, the corp will make more profit.
Bookkeeping tells me to look for an increase in profits, which I see, and not a little one. the profits increases are close to the rate of inflation.
So, I see increased markups, increased prices, and increased inflation. Each follows from the one before.

Data > logic. You're actually sounding like the worst stereotypes of Austrian economists.

As far as logic goes, if all firms experienced a decrease in their marginal costs and didn't pass it on consumers by lowering prices, keeping everything else constant, markups would go up and inflation would be 0%. But that doesn't mean one should assume there will never be a correlation between both - their correlation depends on many more things. Hence why data is important here.

[Steve_American]

In the US? Absolutely.

The recent hike in rates has aided in abating inflationary expectations.

In Japan, they tried a Keynesian approach that failed.

In Russia, they didn't even follow the advice by economists to the letter to begin with. No one would advocate for privatizing monopolies without any regulation.

OK, I'm going back to page 1 to start us over, now that I understand what you meant here.

So, in Japan they had some problem with the economy and tried to deal with it by deficit spending to prop up the zombie banks, and this failed.

From this you deduce what?
You seem to think it proves that the expected results of an increased money supply are inflation. I get this from this that you wrote on page 1, "I mean the effects of money supply on economic activity in the short run, at least. "

So, how does Japan failing to solve its economic problems by bailing out some banks provide any evidence that increasing the money supply will always cause high inflation? Remember, Japan has never had high inflation since 1993.

What was the problem that Japan had with its economy? I'm guessing it was related to the real estate bubble bursting in 1992, or so.

Also, MMTers are asserting that in a properly functioning economy, more deficit spending will only cause inflation if there are no excess labor or additional real resources to use as a result of the actions the new spending are intended to cause. It is real labor or resources being available to use that limits what the Gov. can do. Nations (with their own money, no foreign debts, and don't peg the money to anything) can always spend more money and will never go bankrupt.

Antway, how did Japan fail?

[wat0n]

OK, I'm going back to page 1 to start us over, now that I understand what you meant here.

So, in Japan they had some problem with the economy and tried to deal with it by deficit spending to prop up the zombie banks, and this failed.

From this you deduce what?
You seem to think it proves that the expected results of an increased money supply are inflation. I get this from this that you wrote on page 1, "I mean the effects of money supply on economic activity in the short run, at least. "

So, how does Japan failing to solve its economic problems by bailing out some banks provide any evidence that increasing the money supply will always cause high inflation? Remember, Japan has never had high inflation since 1993.

What was the problem that Japan had with its economy? I'm guessing it was related to the real estate bubble bursting in 1992, or so.

Also, MMTers are asserting that in a properly functioning economy, more deficit spending will only cause inflation if there are no excess labor or additional real resources to use as a result of the actions the new spending are intended to cause. It is real labor or resources being available to use that limits what the Gov. can do. Nations (with their own money, no foreign debts, and don't peg the money to anything) can always spend more money and will never go bankrupt.

Antway, how did Japan fail?

That's actually an interesting question. It seems the Japanese central bank hit the zero bound - it got to a point where even a 0% rate was disinflationary.

From the point of view of fiscal policy, the Japanese government not only decided to prop zombie banks up, but it also invested on white elephants - i.e. projects that didn't really make much sense, just for the sake of keeping employment afloat - and it worked, actually, as unemployment eventually decreased even if the economy was stagnant otherwise.

And there's an issue that may not be economic but has major economic implications: The aging of its population that is currently leading to decreases of Japan's population is also a major issue. That definitely depresses growth (although this is arguably justified since less people should mean less economic activity anyway).

[Steve_American]

That's actually an interesting question. It seems the Japanese central bank hit the zero bound - it got to a point where even a 0% rate was disinflationary.

From the point of view of fiscal policy, the Japanese government not only decided to prop zombie banks up, but it also invested on white elephants - i.e. projects that didn't really make much sense, just for the sake of keeping employment afloat -and it worked, actually, as unemployment eventually decreased even if the economy was stagnant otherwise.

And there's an issue that may not be economic but has major economic implications: The aging of its population that is currently leading to decreases of Japan's population is also a major issue. That definitely depresses growth (although this is arguably justified since less people should mean less economic activity anyway).

There you say that the Japanese policies "worked" to some extent. Then go on to point out that the economy didn't grow much. But, then you provide a partial reason for that, that the population is aging and maybe shrinking.

Somewhere in this thread of another here I argued that the reason it took WWII to end the Great Depression was that FDR didn't deficit spend enough. Maybe because those in Congress would not let him spend more. Very like southerners in Congress would not let him desegrate Gov. programs like the WPA and CCC, etc.

I propose that in Japan it was much the same problem. Elements in the Parliament would not let it deficit spend more. Prof. Mitchell knows a lot about Japanese economics, and he says that Japan raised the sales tax to reduce the deficit (twice IIRC), and both times it reduced GDP growth. Faint hearts can screw up a good plan or program.
.

[wat0n]

@Steve_American indeed, there are multiple reasons for the Japanese stagnation. But, you can't say it's not too surprising that building large international airports in localities with like 20,000 inhabitants didn't generate too much long term economic growth even though it did generate quite a bit of short term employment.

[Steve_American]

@Steve_American indeed, there are multiple reasons for the Japanese stagnation. But, you can't say it's not too surprising that building large international airports in localities with like 20,000 inhabitants didn't generate too much long term economic growth even though it did generate quite a bit of short term employment.

I said that the problem for Japan is that it didn't deficit spend enough, and you didn't address that claim. Please do that now.

Those runways may be useful in a war with China involving Tiawan, US, Japan and others.