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Comment by modo_mario | Hacker News Reader

Japanese economy was getting too big for the US's tastes.

The housing crisis and stagnation followed a tradewar after which the US forced it to do technology transfers, limit exports to the US, take a minimum amount of american imports in industries, etc and forced it to pick up a shitty monetary policy.

The thing is. Japan kind of had to roll with it. Exporting to the USSR was a nono, other markets like china were not nearly as developed yet and western Europe being another export market was joining the US in it's efforts. Additionally they weren't allowed a standing army but did have the US military around.

China has less of those restrictions.

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> and forced it to pick up a shitty monetary policy.

I think this was the real killer. There’s a bestselling book on that in Japan, Princes of the Yen (and documentary on YouTube).

I'm kinda watching China now for this. If they take a hit to their numbers, but use this as an opportunity to cut the deadwood and zombie companies, then they are going to be outshining the rest of the world in relatively short order, because nobody else in the world is willing to take the pain in the short term for the long-term advantage of forcing their economy to be productive.

If they, like everyone else in the world, paper over the problem, bail out their financial industry, and kick the can down the road, well, they may still become #1 but it will be much less threatening to anyone else, and it will be much less certain, and depending on how deep they go, yeah, seeing the sort of stagnation Japan did is on the table.

Which way will they go? I have no idea. They seem to lie as big as any other country in the world about their economic progress, which would suggest covering over the problems and propping up zombies just like the West is doing. But they might have leadership that can see the advantages in the long term of letting the economy actually experience the pain it needs to align itself properly.

Eventually you end up in a place like we are in America, where we've kicked the can down the road so many times that the requisite short-term pain to fix the economy would be almost terminal, if not outright terminal.

>I'm kinda watching China now for this. If they take a hit to their numbers, but use this as an opportunity to cut the deadwood and zombie companies, then they are going to be outshining the rest of the world in relatively short order, because nobody else in the world is willing to take the pain in the short term for the long-term advantage of forcing their economy to be productive.

This makes no sense. If there is a magical investment that would pay 10% interest then companies would jump all over it and borrow money leading to the usual inflation boom which is followed by interest rate increases. Considering the total lack of negotiating power of labor and the fact that workers are competing for jobs rather than companies competing for workers it doesn't appear that the problem is a lack of productivity. To be blunt, there is too much productivity, too many people are working and saving too much instead of actually spending their money. In fact, most people want to work less but they do so by saving money for an early retirement.

>Eventually you end up in a place like we are in America, where we've kicked the can down the road so many times that the requisite short-term pain to fix the economy would be almost terminal, if not outright terminal.

There is no such thing as a "requisite short-term pain to fix the economy". Is it really that hard to understand that an economy is reaching saturation and has no need for further exponential investments?

"There is no such thing as a "requisite short-term pain to fix the economy". "

It's a pity HN doesn't permit direct messages, because I suspect you'd be hearing from me in less than a year about this bold prediction.

Our economy is an absolute clusterfuck held together only by the absurd productivity modern technology has enabled. We've got zombie companies barely paying their debt load, a economy that is increasingly unable to employ people, supply chains breaking down as the result of decades of very stupid decisions and misallocations, an insane amount of parasitism in our financial services sector which has long since abandoned its proper role as servant of the economy and become its master. We're entering the final phase here where the Fed must raise interest rates to control the inflation that is the result of their already-ill-advised "stimulus" policies to paper over the other failings of the financial sector, and they must not raise interest rates because it will render the government's debt load unsustainable, to say nothing of the private sector's debt load.

We're not merely "not merely growing exponentially", we're contracting quickly and hard. The only reason you don't realize this is that there's this one indicator going up, which is the stock market. On every other indicator the economy is flashing red lights, but the stock market goes up and the Pravda keeps banging the drum about how wonderful the economy is (ignore the increasing shortages, shrinkflation, and unemployment numbers citizen, don't trust your eyes and personal experience trust us) so people who aren't paying attention don't notice.

There's a very, very good reason my post wasn't a triumphalist one about how inevitable it is that China will in fact just go like Japan and the US/West will remain dominant. The truth is the entire world economy is being held together by duct tape and lies. China may be a bit bolder than us in its lies... then again I can't discount the possibility that I'm just underestimating the success with which my own culture is able to lie to me as well. Because lies coevolve with the ones being lied to, the lies in other cultural meme ecosystems are often much easier to discern than the lies told to you in the one you live in.

The fix to this situation requires that a lot of debt that exists now is not going to be serviced, which is to say, defaulted on. Since we've been fixing the problem of "X can't service the debt" by loaning them more money and increasing the debt even more, we've been digging in deeper and deeper and increasing the pain necessary to fix things. We seem to be reaching the point where the situation is going to fix itself regardless of what we do, pushed on by the pandemic response.

Indeed, it could be pivotal depending on how they handle it. I'm no fan of the CCP's authoritarianism, but part of me is hoping they do the hard right thing, write off the bad debt, resolve the zombie banks and companies, take the short-term hit, and then quickly recover.

It seems that a peer competitor benefiting from doing the hard right thing seems like the only thing that could force the US govt back on track at this point.

Did the US really force it to pick up a shitty monetary policy?

I love this phrase you've crafted. If only we could force China into picking up, like... no less than 14 shitty monetary policies.....

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