{"id":20358,"date":"2016-05-02T05:22:40","date_gmt":"2016-05-02T10:22:40","guid":{"rendered":"http:\/\/olduvai.ca\/?p=20358"},"modified":"2016-05-02T05:23:03","modified_gmt":"2016-05-02T10:23:03","slug":"what-comes-next-krugmans-fiscal-equivalent-of-war","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=20358","title":{"rendered":"What Comes Next\u2014\u2014Krugman\u2019s Fiscal Equivalent Of War"},"content":{"rendered":"
\n

What Comes Next\u2014\u2014Krugman\u2019s Fiscal Equivalent Of War<\/a><\/h3>\n<\/header>\n
\n
\n

Somebody must have reinstated Paul Krugman\u2019s passport.\u00a0He was recently back in Japan to meet with the world\u2019s leading economy-wrecking triumvirate\u00a0\u2014-Prime Minister\u00a0Abe, BOJ Governor Kuroda and Finance Minister Taro Aso\u2014\u2013to dispense some desperately needed advice.<\/p>\n

Japan is on the verge of a second recession during Abe\u2019s tenure despite his\u00a0plunge into full frontal Keynesian stimulus.\u00a0 But since March 2013 when Kuroda cranked up the BOJ\u2019s printing press to white heat, two main things have happened. The BOJ\u2019s already bloated balance sheet\u00a0has exploded by\u00a02X\u00a0and the flat-lining Japanese economy has continued\u00a0undulating to nowhere.<\/p>\n

\"Japan<\/p>\n

\"Japan<\/p>\n

Professor Krugman was\u00a0naturally at the ready with a solution.\u00a0He recommended his hosts take a lesson from the\u00a0America\u2019s World War II playbook\u00a0and declare \u201cthe fiscal equivalent of war\u201d.<\/p>\n

Well, the US actually didn\u2019t\u00a0borrow<\/strong>\u00a0its way out of the Great Depression; it\u00a0saved<\/strong>\u00a0<\/em>its way out. As I documented in\u00a0The Great Deformation<\/strong><\/em>, total public and private debt at the end of 1938 amounted to\u00a0210%<\/strong>\u00a0<\/em>of GDP,\u00a0but by the end of 1945 it had dropped to\u00a0190%<\/strong><\/em>\u00a0of GDP.<\/p>\n

That\u2019s right. The hoary Keynesian mantra about the fiscal\u00a0stick save of WWII is a complete myth.<\/div>\n

What\u00a0happened\u00a0is that\u00a0the US economy was entirely regimented for war mobilization.There were few consumer goods on the shelves and business\u00a0had no need to borrow for working capital or equipment because\u00a0financing was supplied by Uncle Sam. So private sector savings soared to nearly 20% of GDP and combined household and business debt dropped from\u00a0150%<\/strong>\u00a0of GDP on the eve of war to\u00a060%<\/strong>\u00a0by the end.<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

What Comes Next\u2014\u2014Krugman\u2019s Fiscal Equivalent Of War Somebody must have reinstated Paul Krugman\u2019s passport.\u00a0He was recently back in Japan to meet with the world\u2019s leading economy-wrecking triumvirate\u00a0\u2014-Prime Minister\u00a0Abe, BOJ Governor Kuroda and Finance Minister Taro Aso\u2014\u2013to dispense some desperately needed advice. Japan is on the verge of a second recession during Abe\u2019s tenure despite his\u00a0plunge […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[57,5979,2120,195,353,452,467,1225,614],"class_list":["post-20358","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-of-japan","tag-contracorner","tag-david-stockman","tag-debt","tag-gdp","tag-japan","tag-keynesian-economics","tag-kuroda","tag-paul-krugman"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/20358","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=20358"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/20358\/revisions"}],"predecessor-version":[{"id":20360,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/20358\/revisions\/20360"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=20358"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=20358"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=20358"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}