from Ian Bremmer:
Why the U.S. is not—and never will be—Japan
By Ian Bremmer The opinions expressed are his own.
Though I’ve already written about the recent Munk debate in Toronto elsewhere, it’s worth taking some space to expand on my position, and why the U.S. truly is not going to experience a Japan-style lost decade of economic stagnation.
(The debate was on this resolution: Be it resolved North America faces a Japan-style era of economic stagnation. I joined Larry Summers in arguing the Con side against Paul Krugman and David Rosenberg.)
Let’s start with the political realities: Japan experienced 50 years of single-party rule. In the last 22 years, the country has had 17 prime ministers. Recently, the Democratic party there defeated the long-time incumbents, the Liberal Democrats, only to find that they had no idea how to govern the nation. They had no idea how the ministries worked, no relationships with industrialists or financial institutions, no grasp on the levers of power in society, and no strong policy apparatus. If the U.S.’s political situation looks bleak, consider that alternative.
In fact, the political situation in the U.S. may not be pretty or easy to watch, but it’s functioning. The President and Republicans continue to hammer out centrist deals on issues like tax hikes and the debt ceiling, albeit at the last possible minute after much gnashing of teeth. Ignore naysayers who say that budget supercommittee doom is coming; a deal will likely get done. And after the presidential election, things will get even better. That’s because Republicans are almost certain to retain the House and take the Senate. Whether Obama or the likely GOP candidate Romney wins the election, their dealings with a unified legislative branch will become far easier than the current divided government.
Our stable government is why foreign investors continue to flood into the dollar. Paul Krugman may have argued at the Munk debate that a strong dollar is what’s harming the U.S. economy, by making the country less internationally competitive, but I believe the confidence that foreign and sovereign investors continue to show in US debt outweighs that negative. Ask yourself what the better scenario is: a strong dollar that puts us at a slight relative disadvantage, or a pullout of investment dollars in the U.S. altogether? Investors continue to make bets in dollars, and that’s good for us. Yes, gold has risen dramatically in recent years, but "gold" is not a country. When investors need security and stability in currency, only the U.S. can still claim to provide it.
Krugman is also frustrated that the U.S. can’t move on a dime to enact policies needed to slam the country out of its current GDP growth lethargy. Looking around the world, there are only a couple countries of size that I can point to with that ability. One is Russia. Vladimir Putin has positively gutted that Moscow's fledgling institutions to let his will be done. Their growth rate has been phenomenal, but at what cost? No one can say what will happen to Russia when Putin exits the stage, and that’s not a situation the U.S. will ever be in. Our institutions endure.
Why donating to Japan can do good
By Larry Probus, the CFO of World Vision, U.S. The opinions expressed are his own.
Felix Salmon’s blog, “Don’t donate money to Japan,” appears to make a compelling argument for not donating to charities responding to the tragic earthquake and tsunami in Japan. Salmon says, “Earmarking funds is a really good way of hobbling relief organizations and ensuring that they have to leave large piles of money unspent in one place while facing urgent needs in other place.”
There is an element of truth to this argument, but as often is the case, simple answers to complex questions are usually wrong.
As the chief financial officer of the U.S. offices of World Vision, the international Christian humanitarian organization, I can appreciate Salmon’s complaints about earmarked donations enabling “a mess of uncoordinated NGOs parachuting in to emergency areas with lots of good intentions.” But rather than encouraging “business as usual” levels of giving, our response should be to ensure life-saving relief efforts are coordinated and effective.
NGOs need both designated and undesignated funds to be successful. Designated donations provide charities with discipline and discernment to perform the work they promise donors they will do – whether emergency relief operations or long-term community development. Moreover, donors can – and should – hold their charities of choice accountable and expect to be informed about how their designated contributions were used.
On the other hand, no charity could survive if all its donations were earmarked for specific programs. How could overhead be covered? I’ve yet to meet a donor whose passion is paying the office’s electric bills, let alone the costs of fundraising. My experience in both the corporate and non-profit sectors has enabled me to scrutinize expenditures for administrative functions, either for the benefit of stockholders, or targeting more money for programs serving the poor.
Before believing anything from World Vision, search for the transcript from a radio story broadcast by PRI’s THE WORLD, a co-production of the BBC World Service, PRI and WGBH in Boston.
The cantankerous effects from Japan’s radiation
Devra Davis, PhD, MPH, president of Environmental Health Trust, is an award-winning scientist and writer on environmental health issues, author of “The Secret History of the War on Cancer,” and “Disconnect” who served as the founding director of the Board on Environmental Studies and Toxicology at the U.S. National Academy of Sciences, 1983-93. The opinions expressed are her own.
The discovery of ionizing radiation at the turn of the nineteenth century revolutionized science and society. Within two weeks of their being created at the end of 1895, the stunning x-ray images of his wife’s bejeweled hand that physics professor Wilhelm Conrad Röntgen had taken appeared in major newspapers around the world. From Paris, to London and Tokyo, scientists and celebrities engaged in a world-wide medical vogue with fashionable x-ray parties featuring popular demonstrations of moving skeletons.
This extraordinary discovery in fact came with extraordinary risks. The same technology that could light up lurking solid tumors of the lung and stomach and save lives on the battle field also damaged the ability of bone to make healthy red blood cells and induced an array of crippling deformities. Girls who worked hand-painting clock dials with luminescent radioactive paint and wet their brushes with their tongues to craft fine lines lost their jawbones years later. Men who chipped uranium out of the earth eventually grew pale as their blood became swamped with white blood cells and bereft of iron by aplastic anemia and leukemia.
These deadly problems were believed to arise only decades after high doses of radiation exposure had taken place. At the time that Enrico Fermi and Leo Szilard split the atom in 1934 to produce nuclear energy, many hoped that the dangers of radiation resided solely with massive releases that added up over the long term–the sort that sickened Nobel Laureate Marie Curie and made her notebooks too hot to handle. Donald Hornig, the man who literally sat upon the atom bomb as he developed the wiring for the trigger, once told me that “We all figured we were young, healthy and smart. So long as we didn’t do anything stupid to set things off, we would be fine.”
One of the first irrefutable signs that general population exposures to lower levels of ionizing radiation were not fine occurred two decades after the bombs that ended World War Two, when increased rates of cancers were found in Japanese survivors. Others reported that women exposed to unfocused radiation from fluoroscopic x-ray exams carried out for tuberculosis screening after the war ended had increased risks of breast cancer three decades later and that children treated for ringworm with radiation to their heads had increased brain tumors.
Nuclear power plants have been touted as safe, because their releases of radiation are believed to be so slight. We have also assumed that their spent fuel remains spent, out of sight and out of harm’s way. The Chernobyl nuclear plant containment meltdown in 1986 released radiation comparable to several hundred Hiroshima bombs into the environment and marked the beginning of the end of the secret Soviet system. This tragic natural experiment made several important additions to the literature. Less than a decade after the meltdown of this uncontained Soviet reactor, children, who normally do not develop thyroid cancer at all, had unusual patterns of the disease.
We need to be prepared for anything including nuclear radiation, plutonium and other poisons entering our environment wherever we are. Radiation effects include cancer, genetic and DNA damage, reproductive damage, hormonal damage, and thyroid damage (that’s why they want you to take potassium iodine, another dangerous toxin) but I wouldn’t. There is a much safer substance (nascent iodine).
There are some natural substances strong enough to protect against radiation. A good article on what you can do is here:
http://thehealingfrequency.com/japan-rea ctor-fukushima-nuclear-radiation-protect ion/
And to make sure the water you drink is safe, look at the following article:
Japan shows another side of the press
By Anya Schiffrin The opinions expressed are her own.
Sitting in Japan in the days after the Friday earthquake and watching the official broadcaster NHK cover the disaster has been an unusual experience. There has been the typical blanket television coverage of this tragedy but the flavor of the reporting is different than it would be in the U.S. “Restrained” is how one friend described it. Over and over we’ve seen the same awful footage of the enormous dirty wave sweeping up cars and houses as it inches slowly along the land.
There are the inevitable interviews with displaced people and experts in their offices. But there are very few graphics or charts, no catchy logos and certainly no dead or injured on the screen. Just as U.S. presidents take off their ties when they visit the troops, Japanese officials appearing on television wear the blue uniforms of someone doing physical labor but with their logo of their ministry or office sewn on their pocket. “It’s theatre” a Japanese friend said dismissively as we watched television last night. But the purposefulness and determination of the government officials were evident — and even my skeptical friend agreed that this commitment would be well-received by the electorate.
At Columbia University we recently began a study with Professor Jairo Lugo in the UK comparing the New York Times and UK Guardian’s coverage of natural disasters. One thing that was immediately clear is how quickly newspaper coverage of natural disasters becomes coverage of the state. This is so even in the US where there is long standing skepticism about the state, and — these days — a widespread view that the government should play a limited role.
But things change when it comes to natural disasters. In Pakistan when religious groups stepped in to provide emergency care it was taken as a sign of how bad things have gotten there. When China’s premier Wen Jiabao immediately turned up in Sichuan after the earthquake there, he was thought of favorably. These responses inevitably are compared to the failure of the U.S. government after Hurricane Katrina.
A paper written by my students Alexandra Crabtree, Faith Kim and Lina Salazar noted that the New York Times reporting on Hurricane Katrina, the Haitian earthquake and floods in Pakistan critiqued the failures of government to administer aid and guarantee security and praised the role of non- governmental organizations. NGOs know that the media can help their cause and so work closely with reporters to highlight the work they do.
Euro zone faces QE2 pain test
QE2 — a second round of quantitative easing — means that soon the U.S., Japan and Britain will all be busily exporting their deflation, raising the question: Just how much pain can the euro zone take?
If by November we have three of the largest economies printing money and buying up their own debt, the outcome — in fact the intention — will be to drive their currencies lower against their trading partners, opening new international markets for their goods and, by raising the price of imported goods, fighting deflation before its debilitating psychology can take hold.
That is the plan, at any rate, and, unless something else happens, it will force the euro up against all major currencies, including, as it is tied to the dollar, the Chinese yuan. The euro has risen about 9.5 percent against the dollar in the past month, a trend that ultimately will murder European exporters and its stock market.
For reasons of history, society and sheer cussedness, the European Central Bank does not seem inclined to join in, though as usual there is dissension.
Speaking in New York on Tuesday ECB President Jean-Claude Trichet said that the ECB’s own version of QE, buying bonds of euro zone weak links and other liquidity support, will continue as planned at least until the end of the year, at which point, “We will see.” In contrast governing council member Axel Weber, speaking in the same city on the same day, pointedly called for an end to special measures immediately, saying the risks do not justify the benefits.
Forcing Europe to absorb more of the global deflation is really nothing more than a “back at ya” by the U.S. and others. Europe, in deciding to cling to its currency union and impose austerity on its weaker members, was doing exactly the same thing; exporting deflation, both in terms of a weaker euro and through the desperate actions of Greek and Irish residents who will consume less and must export more.
So, why won’t Europe simply power up its own printing presses and join the currency debasing party? In part it is a matter of history; the old Bundesbank horror, bred in the bone, of the inflation that devastated Weimar Germany.
Euro zone faces QE2 pain test ?
actually this title is “Reverse engineering”
of the U.S., Japan and Britain deflation
problem
The Speculation group against the Euro on hold,
R&D investments made in a strong Euro currency will
return investments. Who invests in Innovation in a
low Dollar Zone without the Sub-prime Scams returning
Investments….Good bye old economy view.
Goodbye America, Hello China? Think again
For the growing number of Americans who see China heading for inevitable global dominance, nudging aside the United States, a brief walk down memory lane helps put long-term predictions into perspective.
Not so long ago, Japan was seen as the next (economic) number 1. American executives studied the 14 management principles of The Toyota Way, developed by the automobile manufacturer that grew into the world’s biggest car maker and is now recalling millions of defective vehicles.
Between the mid-1980s and early 1990s, books with titles such as Trading Places – How We Are Giving Our Future to Japan and How to Reclaim It (by Clyde Prestowitz) were required reading in Washington. Learned panelists expounded on the wondrous efficiency of “Japan Inc.”
A glut of “Amazing Japan” books, Chicago Tribune writer Ronald Yates noted in 1987, hammered home the same theme: Japanese technology is superior, Japanese management is better, Japanese products are unrivaled, Japanese people work harder, Japanese are smarter, Japan is No. 1.
Skip over the two decades of economic stagnation of Japan Inc. that soon followed the hype and fast forward to the present. The book which best reflects today’s American worries is entitled When China Rules the World: the End of the Western World and the Birth of the New Global Order, by British author Martin Jacques. His forecast is part of a growing library of essays, analyses and books on the 21st century belonging to China.
If history is any guide, there’s a better than even chance that the “goodbye America, hello China” school of thought will prove as embarrassingly wrong as the 1980s assessment of the relative strengths of Japan and the United States.
Long-term predictions tend to be more often wrong than right and the decline of the U.S. is a topic of seasonal regularity.
The comparison with Japan is a tired old chestnut. Japan has less than half the population of the U.S. while China has more than four times the population of the U.S. China has serious problems, but so has America. America can remain the leading nation, but only by working hard and smart, so your advice to “relax” is absurd. Anyway, my money is on India to be the leading nation in a hundred years time.
At least U.S. has Japan to fall back on
(James Saft is a Reuters columnist. The opinions expressed are his own)
The bad news for holders of U.S. debt, in case you missed it, is that China has sold so many Treasuries that it is no longer America’s leading lender.
The worse news is that there is a new creditor-in-chief, and it is Japan, an aging country with its own government debt bubble to contend with.
China sold about $34 billion of Treasuries in December, taking its holdings to $755 billion, while Japan increased its purchases and now is in the top spot of the Treasury Department’s scroll of merit, with $768 billion. China’s holdings peaked in April, since when the trend has been gently downward.
From a demographic point of view, though, the United States making a long term borrowing plan based on access to Japanese funding is a bit like my daughter making a retirement plan that has me continuing to work when she stops at its centre.
Japan is a wonderful country with many strengths, but one salient feature of Japan is that it is aging, or should that be aging, deeply in debt and dependent upon very low rates to continue to make those debts manageable.
Japan’s government debt to GDP ratio is 190 percent, as against 84 percent for the U.S. That huge debt, which has nearly quadrupled in the past 15 years, is made tenable because the Japanese are great savers and own the vast majority of their government’s stock of debts, unlike Americans, who own instead the vast majority of stuffed animals made in China. Japanese debt is also manageable because market interest rates are so low — just a 1.32 percent yield on 10-year government bonds.
This is really big. Perhaps 2010 will be the year when we will see the fall of modern Spain empire. To understand this you have to look to 16-17 century Spain and its overseas silver production. It may seem that the things are different now but in its essence the story is the same.
However in these times you need to prepare yourself mentally. You need to start growing peace in yourself in order to take advantage of these times we are living in.
My blog tells about it (see my webpage if interested in).
from The Great Debate UK:
Development of the risk trade
- Jane Foley is research director at Forex.com. The opinions expressed are her own.-
A willingness to differentiate between risk on a country or at a regional level is an important part of the repair process in financial markets.
Credit worthiness is at the core of any assessment of risk and naturally credit worthiness can sort "risk" into a hierarchy which should be instrumental to the pricing of assets and currencies.
At the start of this year, fear and uncertainly herded investors in and out of "risky" investments fairly indiscriminately. Even though the overall rally in risk since the spring suggests that broad based fear has been dispersing, strong correlations between some of these "risky" assets persist.
Forecasts of slow levels of growth for most of the G10 in 2010 suggests that there are still a few more negative shocks in store for the markets in the coming months.
That said, reduced levels of fear should allow fundamentals including assessments of credit worthiness to play a greater part in asset allocations.
China must avoid a Japanese-style bubble
– Wei Gu is a Reuters columnist. The opinions expressed are her own –
Everyone agrees that China’s economy must be rebalanced, but few have bothered to delve into the costs. Japan’s experience has shown that even well-meant changes could sow the seeds for a bubble.
China cannot stay with its current economic model forever. But as the economy has become extremely unbalanced, to some extent even more so than Japan’s in the 1980s, rocking the boat too much risks tipping it over. Instead of rushing into changes, it would be better to make reforms gradually.
Most observers believe an extremely loose monetary policy was the root cause of Japan’s bubble. But Tomo Kinoshita, an economist at Nomura, reckons that efforts to liberalise the economy, such as sharply revaluing the yen, developing a deeper bond market and deregulating interest rates were among the fundamental reasons behind the bubble.
The challenges facing China’s economy are similar to those seen in Japan in the 1980s. Foreigners are calling for a currency revaluation because the undervalued yuan gives China’s exports an extra boost. Capital markets need to play a bigger role because investment has been directed mostly by state-owned banks.
True, property price increases appear to be milder than in the Japan of the 1980s. Household loans only account for 30 percent of disposable incomes in China, versus about 90 percent in Japan in 1989, according to Nomura. But there are warning signs. New mortgages recently hit a record. And ratings agency Fitch has cited China’s property market as a cause for concern.
The Chinese stock market also looks less overvalued than Japan’s did. The ratio of Chinese stock prices to earnings is only a third of the peak levels reached in Japan. Stock market capitalization as a percentage of GDP is 62 percent, much lower than Japan’s 150 percent at end of 1989. But China is catching up fast, and the ChiNext market, China’s long-awaited Nasdaq-style market, debuted last week with a speculative surge.
It’s true in a sense, but I doubt it’s appropriate to compare China with Japan.
The world cannot exist without China-made products at the moment. Many companies invest too much in China for it to fail. Many countries have overhauled the economic model, since China becomes the manufacturing plants of the world.
If the economy of China collapses like what Japan did, then the world suffers a depression!
It’s better for China to make many small and cautious steps forward, then one big economic reform.
Japan, nominally lost, not really so
Al Breach was Russia economist with UBS and Goldman Sachs and is currently managing partner of TheBrowser.com. The views expressed are his own.
HOSTENTAL, Switzerland – How bad was Japan’s “lost decade”? As we look east for clues as to the possible fate of western economies, it is worth dwelling on what actually happened, and not just how it was reported.
Japan’s stock market bubble burst at the end of 1989, and house prices started to fall about a year later. Asset prices at the peak were wildly inflated. Stock prices were trading at ratios of well above 50 times boom-time earnings, while the total value of housing represented around 300 percent of GDP.
These bubbles had formed after decades of rapid growth and, critically, even more rapid credit expansion. Total bank credit to the private sector had risen to 200 percent of GDP, doubling over 20 years.
Despite grammatical errors, aplenty, the body of your work is largely accurate. However, it would be reckless to assume the consequence as reached in your conclusion.
The myriad forces working to create our future, today, defy the most rigorous of models employed to determine it.
If you expect to be surprised, profoundly, by the future, then you shall never succeed to be.
LOL this guy writes a paper like he just discovered something the whole world never knew already. Congratulations guy for showing us the OBVIOUS. Good grief your paper reads like a crappy graduate thesis proposal. Reuters you really hit the bottom of the barrel on this one… You want to know whats wrong with the world guy? We keep wasting our money on columns and jobs like this that add nothing to the productivity of this world.