But why Jp did not make it given they got a good social security system there?
Admittedly speaking, we r not having a good social security system, we need to pay for education, for pension, for healthy care as well as a skyrocketing property price, all of which is biting a big pie of our disposal income, forcing us to save while preventing us from spending. And that is why i am bearish at the so-called transition of economy.
That has been a thought of mine, for a while; However, i was just wondering the example of Jp, which looks to me like the tomorrow of China, more and more, and more as the current situation unfolds, since both of these 2 countries r heavily relying on the exporting business, should say addictive to if you allow me.
But one of the differences is, Jp has a good, much better in a lot of sense, social security system than China, so good that sometimes people r calling it too good and stable a system by sacrificing the vitality of their corporations. However, for the past almost 2 decades, why has not there been a good transition from an export-driven economy to a domestic consumption driven one if they got a good social security system ready and not too much to worry if they wanna spend?
1. Continuing deflation, which has form a vicious cycle of self-fulfilling people's expectation of deflation?
2. Inability of its monetary policy as a result of liquidity trap, hmm... Should not be the key IMHO.
What else? and why did not they make it?
I think, as we discussed last time, we might be entering into a fundamentally hypo-deflation as a result of our over-capacity, since the ultimate consumers got a tons of work to do to bring its long term saving rate back to the mean, if not overshooting, while we r basically now stimulating our economy by creating more over-capacity.
Am I too bearish? Or am I wrong somewhere? And what is more important, is why Jp did not make it?
From David Cui:
回复删除I think in a way, Japan made the transition. I don't have the exact number but I think its portion of domestic consumption as % of GDP has gone up since the crisis, as I know that private saving rate has come down. Why Japan didn't make it as a whole, i.e. total GDP, was due to balance sheet repairing as a result of the asset bubble. Corporates have been paying down debt rather than reinvesting in new capacity.
What happened in Japan was that consumers drew down their savings to consume although their income was cut as a result of slow corporate sector. So savings rate was down not by choice but by necessity.