Status is a Beyatch

Interesting conversation Bill Mitchell had with a Japanese economics “professor” (professes to know some economics).

I made a few notes, not too many.

Japan Slips in GDP/Per Capita Ranking — so what?

The professor harped on a bit about how Japan had a “lost decade”. Bill explained well that it’s hard to see in Japan any real loss of output. Their population growth is stagnant, so their GDP growth rate will not be anything near to say Australia which has a faster growing population.

Professor Satoshi Fujii then pulled up (livestream! so kudos!) some data showing the GDP/N rankings. Japan, he said, had “slipped dramatically” over the 00’s. Bill (and me) are like,.. “big deal, so what?”

This is half-joking, because you know what it’s a big deal. Japanese culture suffers from as much inferiority complex as USA sports culture, they have the be the gdamn best… otherwise it’s not a real sport. Only the Japanese suffer the inferiority complex more than others in industrial economics measures. They have a culture of needing to produce the best products. They’ll get miffed if the Germans do something better. (Not to be stereotyping whole cultures, just telling it like I sometimes see it.)

In other words, Satoshi was overstating the “lost decade” of Japan relative to other nations who are also running neoliberal austerity policies, but he was quite right to claim Japan have irretrievably lost potential output, but not only over the last decade, over all decades so far.

I was reminded also of the research by Trill van Treeck on why Keynes’ vision of a 15 hour work week by 2000 has not been realized. The main reason is the psychology of conspicuous consumption. People wanting to “keep up with the Jones’”. You can also call it The Rat Race.

Worrying about relative status is a b*tch. Note how sociologist van Treeck explains why Keynes’ vision of a 15 hour work week is possible but has not actualized here: Varieties of the Rat Race: Conspicuous Consumption in the US and Germany . The wealthy nations caught Veblenitis, aka affluenza, aka ratraceitis.

Is the Another Minksy Moment Brewing?

This is hard to answer. In the USA circa January 2023, the GOP party holding power want to vote to not raise the Congress “debt ceiling” — the stupidest notion in macroeconomics ever. (They still think their government is using other people’s money.)

Bill Mitchell pushed back on this a bit. He claims central bankers have understood how to avoid a purely financial crisis (one that does not begin in the real economy, so not with war, famine, plague or whathaveyou). They know how to prevent another Great Depression (they proved this in 2008) and they probably have learned how to stop another Great recession (2008). The issue in 2008 was the central bank bailed out Wall Street, not Main Street.

There is no guarantee next time a Minksy upwards instability occurs the central bankers will bail out Main Street, but they at least have learned bank bail-outs do not cause inflation. Confidence in the banking system is thus probably only a day away these days, and hence probably forever after.

This squares with Warren Mosler less pessimistic comments in a forum on eurozone pessimism in a panel at the 2nd European MMT Conference . The specific segment where Mosler talks about the slow reluctant progression of the EU towards supporting member nations is at about the 40 minute mark , and then he pretty much repeats around 48 minutes in . The EU is “almost already there” with nascent MMT awareness, even if it (a) took a crisis, and (b) they still do not admit MMT is the reality, and (c) they still have not got the progressive buffer of labour, the Job Guarantee. The EU has “backed in to the ‘right’ answer, through a serious of crises…”

The risk of rapidly rising household debt levels is thus no longer purely Minsky, but is an investment risk, not a system-wide risk. In the next Minksy fragile period it will likely be the case a lot of asset prices will tumble, but they’re also likely not going to drop too precipitously, only the assets that are truly “junk” will go to zero.

The lesson for investors is simple: do not take the risk on junk assets. Avoid the ponzi schemes, and avoid even the speculative assets. Trade safe, and wait out a recession.

For the DougBot project we aim to get a feel for when a recession is about to be triggered. If the central banks obey the Sahm Rule then nothing too bad is going to happen. At least not until the real economy hits a brick wall, like water, soil, fossil fuel, or fisheries depletion.

The phrase “too bad” is of course relative. The tragic thing is low income households have “bad” happening all the time, needlessly, through no fault of their own, due to government austerity policy. Why needless? They’re not the one causing any inflation.

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