So far, Abenomics has been going really, really well.
By signaling that the Bank of Japan has changed, that it won’t snatch away the sake bottle just as the party gets going, that it’s going to target sustained positive inflation, and also by signaling that some fiscal stimulus is forthcoming despite high levels of debt, Japanese authorities have achieved a remarkable turnaround in short-term economic performance.
But will this short-run success end up being self-defeating? This, from a recent article in the Financial Times, really worries me: “Japan’s economy expanded at a significantly faster rate in the second quarter than initially reported, increasing the chances that Shinzo Abe, prime minister, will press ahead with a contentious sales tax increase — albeit one that would be offset by more government spending.”
Look, maybe Japan can sustain growth in the face of this tax increase. But maybe not. Why not wait until growth is firmly established, and in particular until expected deflation has been solidly replaced with expected inflation? Delaying the sales tax increase would be, I would argue, the prudent thing to do even in purely fiscal terms.
One of the serious consequences of Japanese deflation combined with the interest rate’s inherent zero lower bound has been that Japanese real interest rates have until recently been significantly higher than those in other advanced countries — a matter of considerable concern when you have a very large inherited debt.
Getting those real rates down (and, to a lesser extent, eroding the real value of existing debt) matters a lot to the long-run fiscal picture; it’s just foolish to endanger progress on that front in the name of fiscal responsibility. Yes, Japan is going to need more revenue eventually. But reflation should come first. It’s a really bad sign that this is even being discussed right now. Uncertain at the O.E.C.D.
One of the distinguishing features of economic discourse since 2008 has been the remarkably destructive role played by most, though not all, international technocrats. In the face of high unemployment and low inflation, key institutions — the European Commission, the Bank for International Settlements and the Organization for Economic Cooperation and Development — have consistently called for policies that would depress advanced economies even more.
What’s been interesting about these recommendations is that they do not, as you might expect, come from a rigid application of conventional economic models. Conventional models, after all, say that contractionary fiscal policy is contractionary, and should not be undertaken at a time when those adverse effects can’t be offset with looser monetary policy. And for sure, conventional models don’t say that you should raise interest rates in the face of high unemployment and low inflation. Yet somehow people at these institutions decided that tightening both fiscal and monetary policy was the thing to do, making up stories on the fly — I wouldn’t call them models — to justify their demands.
I guess we should just call these people “crats,” since the “techno” got thrown out the window and replaced by intuition, or something. Anyway, the O.E.C.D. is either the worst or the second-worst offender — the B.I.S. gives it a run for the (tight) money. According to the O.E.C.D.’s own estimates, the “underlying primary balance” of the euro zone as a whole has gone from significant deficit to significant surplus since 2009, a swing of about 4 percent of gross domestic product.
Given what we now know about multipliers, this should have depressed G.D.P. in the euro zone by at least 5 percent, and probably more, relative to what would have happened without austerity. And sure enough, the euro zone has done very badly, with a protracted recession and now weak growth even when it’s growing.
So what could explain this? Why, it must be “uncertainty,” according to the chief economist of the O.E.C.D. What else could it possibly be?
Help us Prepare for Trump’s Day One
Trump is busy getting ready for Day One of his presidency – but so is Truthout.
Trump has made it no secret that he is planning a demolition-style attack on both specific communities and democracy as a whole, beginning on his first day in office. With over 25 executive orders and directives queued up for January 20, he’s promised to “launch the largest deportation program in American history,” roll back anti-discrimination protections for transgender students, and implement a “drill, drill, drill” approach to ramp up oil and gas extraction.
Organizations like Truthout are also being threatened by legislation like HR 9495, the “nonprofit killer bill” that would allow the Treasury Secretary to declare any nonprofit a “terrorist-supporting organization” and strip its tax-exempt status without due process. Progressive media like Truthout that has courageously focused on reporting on Israel’s genocide in Gaza are in the bill’s crosshairs.
As journalists, we have a responsibility to look at hard realities and communicate them to you. We hope that you, like us, can use this information to prepare for what’s to come.
And if you feel uncertain about what to do in the face of a second Trump administration, we invite you to be an indispensable part of Truthout’s preparations.
In addition to covering the widespread onslaught of draconian policy, we’re shoring up our resources for what might come next for progressive media: bad-faith lawsuits from far-right ghouls, legislation that seeks to strip us of our ability to receive tax-deductible donations, and further throttling of our reach on social media platforms owned by Trump’s sycophants.
We’re preparing right now for Trump’s Day One: building a brave coalition of movement media; reaching out to the activists, academics, and thinkers we trust to shine a light on the inner workings of authoritarianism; and planning to use journalism as a tool to equip movements to protect the people, lands, and principles most vulnerable to Trump’s destruction.
We urgently need your help to prepare. As you know, our December fundraiser is our most important of the year and will determine the scale of work we’ll be able to do in 2025. We’ve set two goals: to raise $150,000 in one-time donations and to add 1,500 new monthly donors by midnight on December 31.
Today, we’re asking all of our readers to start a monthly donation or make a one-time donation – as a commitment to stand with us on day one of Trump’s presidency, and every day after that, as we produce journalism that combats authoritarianism, censorship, injustice, and misinformation. You’re an essential part of our future – please join the movement by making a tax-deductible donation today.
If you have the means to make a substantial gift, please dig deep during this critical time!
With gratitude and resolve,
Maya, Negin, Saima, and Ziggy