Is deflation a menace?
Not if we take it from Japan's recent economic performance.
This from Japan Times, (bold highlights mine)
"The economy grew at its fastest pace in three quarters as an export surge prompted companies to increase capital spending even as the nation endures persistent deflation at home.
"Gross domestic product rose 4.9 percent pace in the first three months of 2010 at an annual rate, less than forecast, a Cabinet Office report showed Thursday. So-called nominal GDP, which is unadjusted for price changes, increased 1.2 percent on a quarterly basis, the most in a decade.
"The Cabinet report shows that more than half of growth came from trade, with consumer spending contributing less than one-fifth to the expansion. Finance Minister Naoto Kan warned within minutes of the release that the economy continues to be in a deflationary state and kept up his pressure on the Bank of Japan to sustain its efforts to halt the slide in consumer prices."
Falling consumer prices means MORE purchasing power. Stated differently, if you can buy more goods with the same amount of money how can deflation be bad?
Proof?
Again from the same report,
"The export-fueled rebound also started feeding into wages and the labor market. Earnings rose for the first time in 22 months in March and the ratio of job openings to applicants advanced for a third month."
So rising earnings, wages and more employment seem to be manifesting a productivity driven deflation dynamics or people are producing more than money is being printed by the authorities.
Yet mainstream experts and the media seem to be seeing it differently,
"The reliance on overseas demand may also be a vulnerability as Europe's debt crisis sparks concern about the durability of the global economic recovery.
"The best thing Japan can do is to bring inflation back to their economy," said Huw McKay, a senior international economist at Westpac Banking Corp. in Sydney.
As shown above, media through quoted mainstream analysts prescribe that the Japanese should earn less, pay for higher prices for consumer goods and services, go for debt driven expansion, see a boom-bust cycle and become less productive, which all translates to less prosperity.
As Ludwig von Mises rightly argued,
``Deflationary policy is costly for the treasury and unpopular with the masses. But inflationary policy is a boon for the treasury and very popular with the ignorant. Practically, the danger of deflation is but slight and the danger of inflation tremendous."
Not if we take it from Japan's recent economic performance.
This from Japan Times, (bold highlights mine)
"The economy grew at its fastest pace in three quarters as an export surge prompted companies to increase capital spending even as the nation endures persistent deflation at home.
"Gross domestic product rose 4.9 percent pace in the first three months of 2010 at an annual rate, less than forecast, a Cabinet Office report showed Thursday. So-called nominal GDP, which is unadjusted for price changes, increased 1.2 percent on a quarterly basis, the most in a decade.
"The Cabinet report shows that more than half of growth came from trade, with consumer spending contributing less than one-fifth to the expansion. Finance Minister Naoto Kan warned within minutes of the release that the economy continues to be in a deflationary state and kept up his pressure on the Bank of Japan to sustain its efforts to halt the slide in consumer prices."
Falling consumer prices means MORE purchasing power. Stated differently, if you can buy more goods with the same amount of money how can deflation be bad?
Proof?
Again from the same report,
"The export-fueled rebound also started feeding into wages and the labor market. Earnings rose for the first time in 22 months in March and the ratio of job openings to applicants advanced for a third month."
So rising earnings, wages and more employment seem to be manifesting a productivity driven deflation dynamics or people are producing more than money is being printed by the authorities.
Yet mainstream experts and the media seem to be seeing it differently,
"The reliance on overseas demand may also be a vulnerability as Europe's debt crisis sparks concern about the durability of the global economic recovery.
"The best thing Japan can do is to bring inflation back to their economy," said Huw McKay, a senior international economist at Westpac Banking Corp. in Sydney.
As shown above, media through quoted mainstream analysts prescribe that the Japanese should earn less, pay for higher prices for consumer goods and services, go for debt driven expansion, see a boom-bust cycle and become less productive, which all translates to less prosperity.
As Ludwig von Mises rightly argued,
``Deflationary policy is costly for the treasury and unpopular with the masses. But inflationary policy is a boon for the treasury and very popular with the ignorant. Practically, the danger of deflation is but slight and the danger of inflation tremendous."
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