Good news on the proposed ‘stimulus’ even in the face of 200% type debt to GDP ratios.

Someone over there must get it?

They obviously don’t like the way the yen is going, which calls for deficit spending to reverse it.

(Budget deficits are like bumper crops, which put downward pressure on the price of the crop. Budget surpluses are like crop failures which do the reverse)

The off balance sheet way to deficit spend to weaken the yen is to buy fx, as they used to do, and, from the charts on their US Tsy holdings, they may currently be quietly doing just that.

The other way is to cut taxes to spur private sector demand, or increase govt spending to provide more public goods.

The exporters like the latter even though it does add to private sector demand some.

Japan Headlines,

Govt To Mull Extra Stimulus: Arai

Kan Says Govt Considering Additional Economic Stimulus

Inventory, Capital Spending Fall Short Of Economist Estimates

Forex: Dollar Remains in Lower Y85 Range in Tokyo on Weak US Data

Stocks: Nikkei Hits New 2010 Closing Low;Firmer Yen Trips Tech Shares

Bonds: JGB Yields At Multi-Year Lows On Views BOJ May Ease Policy

Govt To Mull Extra Stimulus: Arai

TOKYO (NQN)–Minister of Economy and Fiscal Policy Satoshi Arai said Tuesday the government will start discussing extra stimulus measures later this week.

“From around Friday, we’ll begin discussions on whether to implement (an additional pump-priming package),” Arai said in a speech at a Tokyo hotel that afternoon.

As for the need to compile a supplementary fiscal 2010 budget to finance the extra measures, “Prime Minister Naoto Kan will start hearing from ministries and agencies involved from Friday,” the minister said.

Kan Says Govt Considering Additional Economic Stimulus

TOKYO (Nikkei)–Prime Minister Naoto Kan said Monday that the government may offer another round of stimulus measures in a bid to underpin the economy.

On Monday, Kan instructed Minister of Economy and Fiscal Policy Satoshi Arai, Minister of Finance Yoshihiko Noda and Minister of Economy, Trade and Industry Masayuki Naoshima to examine the current economic conditions and report back with specific proposals.

Japan’s preliminary real gross domestic product showed a tepid 0.4% growth for the April-June quarter, while a strong yen and weak stocks threaten to derail the economic turnaround. “We need to closely monitor developments, along with currency conditions,” Kan told reporters at his official residence.

The stimulus steps could include extending such consumer spending incentives as the eco-point program for energy-saving electronics, which is set to expire at the end of December. Programs to support job-hunting graduates and measures to aid small and midsize businesses beleaguered by a strong yen are also believed to be in the works.

The government is expected to have around 900 billion yen in leftover funds in the fiscal 2010 budget originally earmarked for the economic crisis and regional revitalization. And an additional 800 billion yen of surplus money from the fiscal 2009 budget gives it a combined 1.7 trillion yen to fund additional stimulus.

But government officials are reluctant to increase bond issuances, citing concerns about the nation’s deteriorating finances.

(The Nikkei Aug. 17 morning edition)

23 Responses

  1. Warren it’s time to send in the MMT stormtroopers again so they can win some MMT hearts from you – Mish makes fun that all 19 economists missed! MMT’ers go get him!

    The expansion was less than the estimates of all 19 economists surveyed and pushed the economy into third place behind the U.S. and China.


    Every country wants a cheap currency relative to the others to help fuel exports. Mathematically that is impossible, and the global imbalances keep piling up as a result.

  2. If Gov. should borrow and spend its way out of this slump, are there any investments that can be made today that we have any evidence will reduce future health care spending?

    1. Is there evidence that the cost increases in health care are the result of under-investment, or are other factors at work?

      1. Investing in death panels will help a lot with costs. :^)

        And of course the legal framework now exists. The government now has control over the minimum benefits a health insurance plan must offer, as well as how much the cost of that plan can vary between different risk groups. This logically gives the government power to dictate whether certain treatments are covered under insurance at all. And of course the government’s power over Medicare is plenary, and it will now be delegated to unelected, unknown bureaucrats — one of whom, Donald Berwick (a great admirer of the British NHS) was recess appointed to be chief administrator of Medicare without so much as a single Senate committee hearing.

      2. ESM, would you rather have your fate in the hands of unelected bureaucrats or an insurance adjusters whose job it is to save the company money by whatever means they can? Damned if you do and damned if you don’t.

        As long was we focus chiefly on funding, when that this not really the bottom line anyway, availability of real resources is, this dilemma will be the outcome.

      3. when i had my mitral valve repaired the guy in the icu next to me was a smoker in his 90’s who had some kind of multiple bypass operation after flying in from the middle east.

      4. “ESM, would you rather have your fate in the hands of unelected bureaucrats or an insurance adjusters whose job it is to save the company money by whatever means they can?”

        An insurance adjuster who is bound by law to pay for the care that I am entitled to by contract. When you are getting something for free from the government, you do not have contractual rights which can be enforced by a court of law.

        Warren: The implication of course is that a heart bypass operation for this fellow was a form of conspicuous consumption. Was it any worse morally than other forms of conspicuous consumption? How does it compare to flying around in a private jet or owning 5 homes and only living in (or renting out) one of them? Or how about spending $3K for an operation to save a cat or $1K to save an oil-soaked bird?

        Politically, there’s no way that the government will pay for a 90-yr old smoker to have a heart bypass operation. The real question is whether the government will make it impossible for him to pay for it himself. The UK evolved a two-tier health care system — an excellent, private one for rich people, and a shoddy, public one for not so rich people. There are many proponents of single payer health care in the US who see such a parallel, private system as a problem (because it drains health care resources from the public system) and advocate getting rid of it here.

      5. I see deciding who shall live and who shall die as a bit different from who shall fly a GV and who shall stay home, but otherwise agreed.

        Denying use of US facilities for US citizens covered by govt insurance while providing it here for foreigners with money would likely be highly unpopular, imho.

        For the time being, however, we can afford both.

        In real terms we can afford to keep people on life support indefinitely, until we reach our tolerance for the burning the fuel for the electricity and other real resources it takes to keep the machines and facilities going.

        Heck, Egypt probably spent a lot higher % of discretionary GDP building pyramids than we do keeping people alive. And that was for a few dead people.

        It’s about what makes us feel proud to be Americans more than it’s about available real resources.

      6. ESM: An insurance adjuster who is bound by law to pay for the care that I am entitled to by contract. When you are getting something for free from the government, you do not have contractual rights which can be enforced by a court of law.

        Gee, that makes me fell real good. That actually is the strategy that the insurance industry uses, and not just health insurers. If you want to collect what is owed to you, you often have to sue or at least deliver a credible threat you will. Of course, most people would never dream of that. It isn’t part of their worldview and insurance companies know this.

        At least the government is responsible to voters, in principle at least. Even the shareholders cannot oust CEO’s running control frauds.

      7. ESM, I happen to know something about the UK system for friends that live there. They do not consider it “shoddy.” Of these friends, so are very well-off and they don’t participate in the private system “for rich people.”

        On of these friends, a US citizen who is a resident of the UK and France was 90 at the time he was in in the US, where he is fully covered by Medicare and former employer’s supplemental, when he needed major heart surgery. This was not unexpected since he was told in the UK that eventually it might be necessary. He taken to a hospital in the Boston area, not too bad for US care, where is was told that he needed the operation. He said that he wanted to return to London to have it done. They said that it was too risky, so he said, OK. Imagine his surprise when he found that the surgeon doing the operaton was recently at the hospital in his London neighborhood and might have done the surgery if he had had the problem earlier.

        I was once in an auto accident in France and was taken to the hospital in an ambulance and stitched up for cuts, and discharged. No one ever asked me for a sou.

        I have friends who regularly go to Thailand, Singapore, and India for medical treatment because the care is excellent and the price so much lower than the US that it is worthwhile.

        That’s just a few of the stories to tell about which I have first-hand experience. Americans have strange notions about health care abroad compared with here.

      8. Warren: It’s about what makes us feel proud to be Americans more than it’s about available real resources.

        Right. In addition to economic issues, there are also political, cultural, moral, and philosophical issues that complicate areas of economic activity like health care that make health care different from discretionary markets.

        Markets like this are not perfect markets amenable to competition and price as the arbiters, owing to the superseding conditions that are imposed politically, culturally, morally, and philosophically. There is a long history of debate regarding this extending to the cradle of Western civilization in Greece in the Axial Age.

        Attempting to impose contemporary economic ideology on such areas presently ignores how we are, how we got here what shaped us, and why. It will not work politically owing to the values issues that complicate the matter and supersede exclusively economic criteria.

        Moreover, all human criteria are relative, there being no universal absolutes on which humans agree completely. Therefore, it is prevailing criteria that tend to persist. Not that criteria don’t change over time. They do, but only with considerable resistance. So I don’t see health care becoming a discretionary commodity market in the US. In fact, the trend is in the opposite direction as solidarity issues impinge more and more on market dynamics.

        For example, the present health care debate was over whether health care is a human right or a privilege of those that can afford it. Obama framed that way specifically, taking the former position, and McCain responded by taking the latter.

      9. Warren:As if it matters when it comes to actual policy what side of the issue those politicians say they are on…

        That’s unfortunately true. Politicians will be politicians. 🙁

        However, national debate does matter regarding such issues, because most people have deep feelings about such things but they never actually make them explicit. Making them explicit and considering them as a society moves the ball.

        Most people in the center are multidimensional, unlike unidimensional people at the extremes. They have mixed feelings, hold contradictory ideas, and live by different standards in apparently separate aspects of their lives, such as business and domestic.

        The notion of human rights has been a developing one over the ages. In particular, the West has pioneered this approach to justice and law. There has been and continues to be an evolving dynamic between the personal and interpersonal, self-centered and altruistic, particular and universal regarding this.

        Taking a position that makes everything else subservient to economic considerations, especially when that position is based chiefly on self-interest ignores that dynamic. Economic reasoning can illuminate aspects of the debate but cannot dominate or replace it.

        Now that evolutionary theory is out of the bag, there are two fundamental choices. The first is to pursue the survival of the fittest, which is the “law of the jungle,” or to take the broader view that human society is highly complicated and that “we are all in this together.” That is to say, as a species our survival and progress is dependent on choices we make, either chiefly as individuals driven by the natural tendency to maximize utility, or primarily as a species that realizes its shared destiny and its challenges.

        “We must, indeed, all hang together, or most assuredly we shall all hang separately.”
        Benjamin Franklin, to the Continental Congress, before the signing of the Declaration of Independence. That was the “declaration of interdependence.”

    2. Sure, invest in preventative care, prenatal care & primary care so that the emergency room is not the first choice for the uninsured, an arrangement which helps no one, rich or poor, insured or not. And the borrowing part is not necessary.

      1. There have been many studies done concerning the economics of preventative care, and they show that more is generally not cost-effective. I’m not saying that it’s not worth doing when you factor in human suffering, but in pure dollars and cents terms, we would spend less money on health care if we used less preventative care than we do now.

        As for emergency room care, have you ever thought about why emergency room care “costs” more? Shouldn’t it cost less? I mean patients are queued up and can be treated one after the other with no delay, all of the idle resources of the hospital (which are considerable after hours) are available for use, and the staff is generally made up of young, underpaid doctors working ridiculously long shifts. The extra cost of emergency room care is an accounting fiction. Hospitals use the emergency room as a dumping ground for all kinds of ancillary and amortizable costs so that they can claim emergency room care is expensive and thus their expense for uncompensated care is really large.

      2. I concur on the emergency room care, ESM. I was having dinner with my life partner recently on a Saturday evening, when I noticed that she had a a red swollen ear. Looking at it, I concluded that it was cellulitis, which is an infection that is easily curable is caught early but can be life threatening if left untreated too long. My mother had spent a week in the hospital due to cellulitis some time ago, so fortunately I knew about it. I later had gotten it myself from a wasp sting, so I was doubly alert. (Interestingly, $300 for an ER in California for me in 2006, and $600 in Iowa in 2010 for her in 2010. That’s some inflation!)

        I insisted that we go to the ER immediately, since that was the only option. The ER doc confirmed my suspicion and prescribed an antibiotic that quickly knocked it out, although mild effects persisted and she almost needed to be seen again.

        Anyway, when the bills arrived it was over $600, not including the expensive antibiotic. Fortunately, she is covered by Medicare and supplemental, otherwise that would have been an unexpected hit. I am sure that people who don’t have insurance would be reluctant to seek early treatment, and waiting until Monday to see a physician might land them in the hospital, which would cost thousands.

        As far as preventive care goes, I am suspicious of studies that measure this using cost-benefit analysis as it is presently done. From what I know of the medical system, we aren’t even using best practice in treating desease when it manifests. I believe that we need to rethink medical delivery completely, as well as medical investment and payment.

        Higher quality and less expensive medical care can be delivered much more effectively and efficiently. Many other countries are paying less and getting better outcomes. There is too much focus on money in the US and who is going to get it. This is tilting the playing field away from efficiency and effectiveness, and toward exploitation of the system.

        As far as preventive medicine goes, the no brainer is make access easier and cheaper. Waiting too long to seek treatment greatly increases the costs and decreases the outcome. Everyone should be able to get their questions answered immediately and they should be as familiar with the service as calling 911. Then there should be easily accessible urgent care centers for referral of cases that need immediate attention that aren’t ER material. ER’s should be reserved for emergency medical treatment that requires that type of expensive facility and staff.

        We also know the primary early indicators of many serious illnesses that are manageable if treated early, such as hypertension that leads to heart disease and elevated blood sugar that is a percursor to diabetes II. These are simply tests that should be performed on everyone at least yearly. This could be done in variety of ways that don’t even require going to a medical facility. A digital database could be used to keep track of everyone’s health where ever they may travel quite easily and inexpensively. These are relatively inexpensive investments that would pay for themselves many times over not only in preventing disease but also producing a healthy and fit population.

        There also needs to be positive and negative reinforcement of behavior known to promote health and cause costly illnesses. This is already being done to a degree with tobacco and alcohol taxes, but lots more can be done, too, not only with respect to individuals but also industries that profit from enticing people into unhealthy behavior. There can also be a system of “points” to be accumulated for healthy behavior, having regular checkups, and so forth. These point could be tax deductions, for example, or else positive tangible rewards.

        When rural China had a medical problem due to lack of personnel, the government developed the “barefoot doctor” program and trained a lot of paramedical providers. The US military does something similar with its medical corp. Small units don’t have doctors, for example, but rely on corps-people. Now, nurse practitioners are being trained to provide may services that previously required a licensed physician.

        There is a lot that can be done along such lines. We just need to set goals and meet them. Funding is never really the problem. MMT analysis shows how it is usually a faux issue because there is no lack of productive resources. They just aren’t being used well, or innovation is being constricted due to existing interests.

        That scratches the surface.

        “Efficiency is doing things right, and effectiveness is doing the right thing.” (widely attributed to Peter F. Drucker, but I have not been able to locate a citation to the original source)

      3. I should have mentioned public health along preventative care, which from a quick googling is too narrowly defined in such studies as you mention. I would throw narrowly-focused studies by economists in a garbage can. I think demographers, public health specialists have a different and more rational point of view.

        Emergency rooms crowded by desperate people, staffed by drowsy doctors, don’t provide good care for anyone, which is what I mentioned, not the immediate cost. The real economic hit is that the US “system” provides inferior care, inferior health, for exorbitant total cost. Sick and dead people are less productive economically. “Reducing future health care spending” could mean as a proportion of GDP. To paraphrase Keynes, focus on the care (as the rest of the world does more) and the costs will take care of themselves.

        Comparing the US healthcare “system”, to Britain’s NHS, for far more expenditure it gives worse outcomes on disease incidence and life expectancy for even rich white Americans (top 1/3 income) than poor white Britons (bottom 1/3 income). If we exported our way of doing things to Somalia, we would surely manage to increase disease and lower life expectancy even there.

        By the way, I looked up that Drucker quote and found it in a book of his sayings, edited under his supervision, but without an original source I could see on google books. So it isn’t apocryphal, but it still hard to cite correctly.

      4. Tom: I agree our health care system is mess, but it is because of the price distortions created by the 3rd party payer system. Have you ever noticed that dental care is actually pretty sane and pretty good? It’s because we accidentally evolved a system where dental insurance doesn’t actually pay for anything useful! Same goes for cosmetic surgery and laser eye correction.

        Calgacus: I agree there are some pretty simple public health policies that could be put in place that would dramatically improve health in the US, although many of them involve taxing unhealthy behavior and they won’t fly politically. But the idea that we would save money by subsidizing visits to doctors I think has virtually no statistical support whatsoever.

        “Comparing the US healthcare “system”, to Britain’s NHS, for far more expenditure it gives worse outcomes on disease incidence and life expectancy for even rich white Americans (top 1/3 income) than poor white Britons (bottom 1/3 income).”

        This is completely false. The US health care system gives by far the best outcomes of any in the world for most diseases. And when you strip out infant mortality (which is measured more conservatively in the US than any other country) and deaths due to violence and accidents, the US has the highest life expectancy in the world.

      5. Those UK-US rich/poor comparisons are from a Harvard School of Public Health study, saw it quoted in Dollars and Sense & in Harvard Magazine. Agree about the infant mortality, think that study mentioned it too, but US overall outcomes are shameful and inferior. That moving to a single payer system would save money and improve care, that killing the parasitic for-profit health industry, would work better is backed by overwhelming evidence, and supported by most health professionals.

        Looked at some reports on the preventive care measures. Was not impressed. They didn’t even mention one that leapt to my mind: prevention of bedsores, which can easily be lethal, and the caring for which takes up a significant fraction of hospitals’ budgets. Google showed a Dutch study which confirmed what I knew. Simple mechanical prevention – using air mattresses with a pump, costs about $100, prevents them. Why is this done nowhere, why don’t preventive care studies mention it? Why is MMT not accepted everywhere? Answer: Humans are stupid. Google is smarter. 🙂

      6. Simple mechanical prevention – using air mattresses with a pump, costs about $100, prevents them. Why is this done nowhere, why don’t preventive care studies mention it?

        When my mother was bed-ridden about ten years ago, her doctor did prescribe this (it worked), and Medicare paid for it. Maybe that’s not standard policy though.

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