05-18-2013, 12:46 AM
Well, by far the most interesting macro-economic 'experiment' is going on in Japan right now. The trouble with deflationary policies if there is already a high debt burden is that the debt burden becomes bigger in real terms, as nominal GDP rises much slower, or even falls (much of the eurozone is finding out this reality as we speak).
Japan is taking this bull by the horns, at least 15 years too late (which has increased the risks considerably) and are now desperately trying to get nominal GDP (which has essentially been stagnant since 1990) growing again in order to reduce real debt burdens.
The first signs are promising, but jury still out..
For those interested, there is an excellent intro on this in this weeks Economist:
http://www.economist.com/news/briefing/2...e-previous
Japan is taking this bull by the horns, at least 15 years too late (which has increased the risks considerably) and are now desperately trying to get nominal GDP (which has essentially been stagnant since 1990) growing again in order to reduce real debt burdens.
The first signs are promising, but jury still out..
For those interested, there is an excellent intro on this in this weeks Economist:
http://www.economist.com/news/briefing/2...e-previous