Wonkbook: How Japan proved printing money can be a good idea

By Matt O’Brien Everybody knows that you can’t get rich fro… | Sponsored by Uber
The latest economic and domestic policy from Wonkblog
(Kiyoshi Ota/Bloomberg News) By Matt O’Brien Everybody knows that you can’t get rich from just printing money. Except for the part where sometimes you can. Take Japan. Its unemployment rate has fallen to a 22-year low of 2.8 percent — yes, you read that right — due in large part to all the yen it has created the past four years. Money might not grow on trees, but it can get spit out of a central bank’s computer. Let’s back up a minute. How did Japan get to the point where it needed to give itself the economic equivalent of a defibrillator? Well, back in the early 1990s, it was the first country to go through the boom, bust and stagnation cycle that the United States, Europe and most of the rest of the world have gotten to know and hate so well. Japan managed to avoid a full-fledged depression thanks to all of its infrastructure spending, but it couldn’t escape a “lost decade” — a fancy way of saying that while it did grow, it didn’t grow much. As economist Brad DeLong points out, Japan didn’t just stop catching up with the United States for a few years, but for the last 25. This is both better and worse than it sounds. Better, because once you adjust for the fact that Japan’s working-age population has been shrinking, it has grown at least as fast as we have in per-capita terms over the past 15 years. But worse because even then it never made up any of the ground it lost. It had become permanently poorer. This wasn’t supposed to happen anymore. Economists, as Nobel Prize-winner Robert Lucas put it in 2003, thought that the “central problem of depression prevention” had been “solved.” They had supposedly learned enough from the 1930s to keep the economy from entering another doom loop of debt, deflation, and default. Until, that is, Japan showed that they hadn’t. It had a problem that had not existed for 60 years. Read the rest on Wonkblog.

Top policy tweets

Most Recent Posts from Wonkblog
Women just aren’t that into the ‘marriageable male’ anymore, economists say
‘Women couldn’t be very choosy in the past.’
How Japan proved printing money can be a great idea
Money doesn’t grow on trees. But Japan figured out something even better.
Trump’s tax plan was aimed at creating a simpler system. So far, it has triggered a lobbying bonanza
The showdown starts in earnest this week.
Recommended for you
The Energy 202
Your daily guide to the energy and environment debate.
Sign Up »
©2017 The Washington Post, 1301 K St NW, Washington DC 20071

Related posts