4 Lessons from 4 economies – France, Greece, Japan and Zimbabwe

This is a superb article from Greg Mankiw.

What are the lessons from these four countries? The objective of the article is to understand lessons for US economy. He connects the lessons superbly. First the lessons:

  • Zimbabwe – the winner of the worst econ0mic policy in 2000s. Shows how loose mon pol leads to hyperinflation
  • Japan – How once the competitor to US has lost out the race thanks to its slow and timid approach to solving the crisis (this blog does not buy it. The current crisis shows even you are real quick off the blocks to solve the crisis, it may not really help)
  • Greece – How quickly it descended into crisis. Greece example shows that if you have faulty policies and economics, you can only fool markets for sometime. After that markets fool you..
  • France – France has lower incomes  and higher tax rates than US. Economists debate whether higher taxation in France and other European nations is the cause of the reduced work effort and incomes there.

Now the connections?

Is US headed the Zimbabwe way as it prints so much money. Well Fed and others are actually worried that it might be headed Japan way given the similar shock and leveraged economy. The crisis has led to high deficits/debts in US economy. Markets have so far discounted all this but same was the case for Greece as well. Once they get a whiff they punish you severely.

Finally what is the connect with France. Well, if US does not fix its expenditure it will have to raise taxes. That will serve as a natural experiment as how people react to rising tazes? Like French do they work less and instead sip coffees?

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2 Responses to “4 Lessons from 4 economies – France, Greece, Japan and Zimbabwe”

  1. Stock Tips Intraday Says:

    All i want to say is that the title of the article says it all. Hitting the bulls eye it precisely and that too in simpler terms makes it pretty clear that what could be the end results if US fails to learn from the mistakes of the others.

  2. populareconomicsblog Says:

    Professor Mankiw betrays his conservative bias as Bush II’s chief economic advisor, and so a supply-side, fresh water economist. He and most economists won’t or can’t discuss why Japan’s growth recession has lasted so long, and why ours will continue unless we reinstate Glass-Steagall, install the Volcker Rule, or some such brake on those financial entities too big to fail. Japan problem is and always has been, kereitsu, or the tightly interlocked ownerships of banking, corporations and government entities. That mean they are the first of major economies that suffered from TOO BIG TO FAIL entities they were afraid to shut down. We will be in the same boat, if we don’t break up our own too-big-to-fail entities. Harlan Green

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