
Originally Posted by
John Grey
"..with your breach into the exchange rates justification have completely missed The point of the need for a diversifying industrial strategy for the future."
No, I did not miss it, but I did not want to give a complete economics lecture. Now I do, and excuse if trying to keep is short, make sit complicated.
Let’s start with some basics….
The theory behind our kind of economics is, that every country produces what it does best, and sells it to the rest of the world. That way (in theory) a worldwide economic balance is achieved and everybody profits. It works as long as everybody stays within certain limits and as long as the world economy sustains a certain growth (which is a different story).
Since the appearance of economic neo-liberalism everything has changed. Maximization of profit, no, of short term profit, is all that counts. That disturbs what little balance exists worldwide and the whole system begins to crumble.
As an example, the Euro has problems, because the balance was lost. Germany became export world champion because its wages remained way below the other European countries instead of being increased. That way its products were manufactured cheaper than anywhere else. Manufacturing companies flourished, but jobless rates went up.
Accumulating over the last years, other countries, Greece, Spain, Italy and a few more incurred a huge trade deficit, because they imported a lot more, than they produced for export. They had to take up more and more credit, which was given by the international banks. Then there came the point of no return, and Greece was the first one there, when it all became obvious, that they were so deep in debt, that they could no longer borrow new money to pay the old debt. To re-finance an old debt, you have to take up new credit, at a higher cost though. The banks were very much aware of this when they began to give those credits, but they convinced the governments that they are “too big to fail” and the taxpayer had to guarantee the rotten credits. That is what is meant, when the Krugmans of the world say that the financial world now dictates politics to the governments. And that is what we have in Europe and the US.
Now, the debtor countries have to save and save, at the order of Germany who otherwise will have to pay most the upcoming defaulting bills, but saving and saving will of course not accelerate growth in an economy, it will drag it down even more. That is Europe for you at the moment, on its way to a crash…..
Back to Japan. Japan has had enormous trade surplusses for decades, but it held on to the money, financed debt with it or bought van Goghs, instead of putting it back into the world economy, and consuming other country's products in return for exporting cars and electronic goods. For example by freely allowing food imports to give the japanese people its share of the economic succes of Japan Inc.
Not just rice, I used that as an example, as it is the staple food in Japan. This morning I was shopping for apples, and there is not a single apple to be had in Tókyo below 200 Yen, that is two Euro. For 2 Euro in Europe you can buy at least a whole kilo of apples, because they do not make a living off protectionism as they do in Japan. There apples grown all over the world and somewhere at any time of the year, and they can be imported at reasonable prices But protectionism does not allow for the well being of the people, it only allows for profits for a corrupt minority.
Because of Japan’s politics of protectionism, and its resulting permanent trade surpluses, the value of the Yen has now increased to an absólutely desasterous level. The present exchange rate means exported Toyota cars produced in Japan, would fetch less Yen, than they cost to make here, THAT is why they are produced in Thailand and several other countries.
But, moving the production to Thailand is of course again counter productive, as people who loose their jobs building Toyota cars in Japan, will no longer earn the money which they can then spend in Japan to keep the economy moving here, or buying any of the re-imported Toyotas. Which in turn… aso. aso. aso. This is Toyota’s way of maximizing short term profits, which will come back to haunt them.
It is the same as in Greece. The country needs huge investments to push start growth in their economy, so they can earn the money needed to pay back their debts. Instead politics forces them to save and cut, which in future will enable them even less to repay their debt. We all will be able watch the collapse of the Euro in certain regions over there in the near future and the costs for everyone that will bring….
As all of this could be seen coming many years ago, and many people saw it, I also was one of those who changed their money into Yen, (and I even had another reason to move to Japan). When I first came here, I got almost 170, now I would get 90, so I already almost doubled the amount of Euro I had then, with no risk or work involved… And I know when I will have to change them back, before the bottom falls out of Japan’s economy. As everybody already mentioned, the Japanese have no products to sell, other the Prius. Their electronics industry has already left for Korea, China and Taiwan. It’s Lenovo and Acer now, instead of Sony and Toshiba, as you can read in today’s news. Once the Japanese have used up their credit, their 200% debt to GNP rate will catch up with them, unless a miracle happens.
And finally, back to the rice. It was the sum of all these stupid greedy little protectionist's tricks that in the end, which is almost now, add up to trade imbalances that are no longer controllable, and now will have the obvious consequences… expensive consequences.