Posts
Friday, April 29, 2011
Real events have economic consequences
I see shifting production possibilitires curves (or IS curves or aggregate supply curves) everywhere. But we live in such a financialized world that we believe monetary policy will solve everything. But Japan is facing real consequences from the earthquake. "Only a day after S&P signalled fresh concerns about Japan’s economy, official data on Thursday showed a far sharper plunge in March industrial production than the consensus 10.6 per cent – a whopping 15.3 per cent fall from February – while March household spending slid an annual 8.5 per cent. Kaoru Yosano, Japan’s economy minister who famously spoke in January of his “dreadful dream” about the national debt burden, was “stunned” by the industrial production figures, according to the Nikkei newspaper. No wonder. Yosano had told the FT just days after the March 11 magnitude 9 earthquake, that the disaster would have little impact on Japan’s economy." Real factors of production matter and it takes time to reproduce them and reallign them after a major disaster.
Subscribe to:
Post Comments (Atom)
It is quite unfortunate what natural disasters and nuclear meltdowns have done Japan recently. Japan has come upon the worst crisis since World War II. I don't see how the economy minister can stay so optimistic in his comments when they need to rebuild not only infrastructure but the morale of the people. The 1995 Earthquake damage was estimated at $100 billion. Japan spent roughly 3.4 trillion yen in three extra budgets for disaster relief and reconstruction after the quake.The progress of this country will be a long road but I hope that they can come together the way they did after last financial collapse after the 1995 Kobe earthquake.
ReplyDeleteInteresting article. I cant help but wonder what type of loses some insurance companies took on this disaster?
ReplyDelete