What’s that they say about how the definition of insanity is doing the same thing over and over and over again without it working?
Yeah, well in Japan, after pushing over two decades of non-success from the government’s massive borrowing and attempts to inflate the economy through stimulus, the new government is trying something novel: non-stimulus.
BreakingViews reports on the new government’s drive to cut spending and back off rom Japan’s insane debt that stands at 217% of GDP. The idea: remove any doubts about the country’s ability to pay its debt, and help instill confidence that way.
Of course, Japan is not the US. The US still has the world’s reserve currency, so paying our debt isn’t much of an issue, although it has really taken hold in the mind of the public as a serious threat to our longterm prosperity. Also, Japan is a nation of savers, whose citizens could spend more if government spending were pulled back. The US is just tapped, with consumer credit constantly shrinking, so even less government spending wouldn’t likely result in fresh demand domestically.
Still, if the policies of the last 20 years aren’t working, it seems like a no-brainer to try something completely different.