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Balanced Fare: We Report, You Deride

Friday, August 16, 2002




Turning Japanese, He Thinks We're Turning Japanese

He sort of thinks so. Paul Krugman's latest. Oh, that is not right, here we go.

An interesting column, but again, no links. Krugman refers to a recent Fed paper: Brad DeLong covered it, and presents follow up comment.

My summary of Robert Feldman's response to the Fed paper: Japan used macroeconomic tools - fiscal and monetary stimulus - to address what was fundamentally a bundle of microeconomic problems - "less flexible labor markets, more intrusive regulation, less strict corporate governance, an inadequate judicial system, and many other structural problems.... ".

And, with respect to Japan's financial system:

"Because of the reluctance of the financial regulatory authorities to impose and implement strict standards on loan classification or capital adequacy for financial institutions, both the institutions and the inefficient borrowers have remained in business."

Both quotes are from DeLong's site, but are excerpts from Robert Feldman of Morgan Stanley, for those of you scoring at home.

Krugman admits he is not sure how worried about the "turning Japanese" scenario we ought to be, but seems to prefer an interest rate cut ASAP. Complete agreement here.

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