Category: Equitablog

If Elizabeth Warren and Simon Johnson had names–or a name–of a better candidate than Antonio Weiss who would take the job of Undersecretary of the Treasury, they would have a much stronger case than they do.

To argue for Janet Yellen over Larry Summers as Fed Chair was not silly. To argue for Elizabeth Warren over Michael Barr as CFPB Director was not silly.

To argue for an empty seat over Antonio Weiss is, however, a much, much harder lift to make…

Daniel Strauss:
Sen. Warren Tears Into Defenders Of Poetry-Loving Obama Treasury Nominee: In leaving Lazard, Warren noted that Weiss would receive a golden parachute of about $20 million. “For me, this is just one spin of the revolving door too many. Enough is enough,” Warren said. “The response to these concerns has been, let’s say, loud. First his supporters say ‘come on, he’s an investment banker so of course he should be qualified to oversee complicated financial work at treasury. But his defenders haven’t shown his actual experience that qualifies him for this job at treasury.” One of the more substantive arguments against Warren’s opposition to Weiss is that he’s as good as could possibly be gotten in a nominee for a top treasury position. Warren said she has supported qualified people with ties to Wall Street but that’s not what Weiss is…

They need an alternative candidate or candidates. Badly.

but new evidence suggests that yet another piece of the law is working exactly as it’s supposed to. A key provision of the Affordable Care Act that was designed to keep insurers from overspending on administrative costs or else be forced to rebate premiums to customers looks to be succeeding in not only reducing those costs but in lowering premiums. A new report from federal health officials, which concludes that health spending had grown at a historically slow rate in 2013, says the so-called MLR provision is helping drive the broader easing of spending growth in the industry.

The medical-loss-ratio requirement mandates that insurance companies spend at least 80 percent of premiums on actual health benefits. It is one of the various provisions intended to help shape the behavior of insurance companies, making the market more efficient and cost-effective for consumers. Administrative costs are kept down, meaning that more of people’s money is going to real care. ‘The medical loss ratio requirement and rate review mandated by the ACA put downward pressure on premium growth,’ officials from the federal Centers for Medicare and Medicaid Services wrote in their report. Overall private insurance spending, of which premiums are a part, grew at a 2.8-percent rate–the lowest since at least 2007.

As Larry Levitt, vice president at the non-partisan Kaiser Family Foundation, put it to TPM in an email: ‘That is how it’s intended to work.’

Must- and Shall-Reads:

• Ratna Sahay and Preya Sharma:
  Emerging Markets & Volatility: Lessons from the Taper Tantrum
• Bruce Bartlett:
  The Joint Economic Committee in the Early 1980s: Keynesians versus Supply-Siders
• Jason Zengerle:
  The Civil Rights Movement Is Going in Reverse in Alabama
• Larry Elliott:
  Revealed: how the wealth gap holds back economic growth
• Peter Sacco:
  Venezuela’s Plummeting Bolívar Dips into Hyperinflation

1. (Via Corey Robin:)
   Alfred Kazin (1989):
   THE NEW REPUBLIC: A PERSONAL VIEW:
   “I am just a vear older than THE NEW REPUBLIC and have been writing for it, on and off, since I was a 19-year-old City College senior in 1934…. What I read in the front of the book is informative, saucy, in tone terribly sure of itself. It gives me no general enlightenment… no inspiration…. I wish I conld think of TNR as moving beyond post-leftist crowing—-beyond a certain parvenu smugness, an excessive familiarity with the inside track and the inside dope, and, above all, beyond that devouring interest in other journalists that confines so many commentaries out of Washington to triviality. I wish I could think of TNR as moving beyond the bristling, snappv, reactive common-sense of the disenchanted liberal. There are worlds within worlds, even in Washington, that are [not] apparent… to the wearilv clever, easily exasperated, heirs and guardians of the liberal democracy that is the one tradition we seem to have left.”
   

2. Peter Orszag:
   The Battle Over Douglas Elmendorf–and the Inability to See Good News – NYTimes.com:
   “Senator Kent Conrad… asked Mr. Elmendorf whether the legislation was likely to curb the growth in health costs, as its advocates asserted. ‘From what you have seen,’ Mr. Conrad asked, ‘do you see a successful effort being mounted to bend the long-term cost curve?’ Mr. Elmendorf’s answer was clear. ‘No, Mr. Chairman,’ he said. ‘We do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for health care costs.’ For anyone who remembered health care history, the moment was ominous…. Congressional Democrats knew that the budget office had the loudest voice, and their staff members got to work… to nudge the health care system away from paying for the quantity of medical care rather than the quality. Ultimately, the C.B.O. judged those provisions to be substantive. The Affordable Care Act would reduce the deficit in the long run, the budget office forecast…. A central plank of the anti-Elmendorf case is the notion that his budget office has underestimated health care costs. Senator Pat Roberts, the Kansas Republican, went so far this year as to call for a hearing on the subject. In reality, the Congressional Budget Office–like nearly every other group of health care analysts–has overestimated medical costs. We’re in the midst of a historic slowdown in the growth of medical costs…. The Affordable Care Act–specifically, those provisions meant to reward quality, like one that tries to cut down on needless hospitalization–plays some role in the slowdown”
   

3. Sam Ro:
   Crude Oil Cost Of Production:

4. Ryan Avent:
   The Fed prepares to make a mistake:
   “ON FRIDAY my colleague noted that while job growth in America is hustling along, inflation remains well below the Fed’s target rate…. I think… the Fed is close to making a big mistake…. Set aside potential downside risks (from a Russian financial crisis, or renewed euro-zone troubles, or a Chinese hard landing, or lord knows what else) and just focus on the dynamics within the American economy. Almost since the Fed announced that it was officially targeting an inflation rate of 2%, as measured by the price index for personal consumption expenditures, actual PCE inflation has run below the target, and often well below. It remains below target now…. You’d have to be mad to think that inflation will average 2% over the course of this business cycle. The Fed has been content to let inflation rest below target for most of the last four years…. The longer the Fed fails to hit 2% on average the more likely the public is to expect below-target inflation on an ongoing basis…. And while inflation is low interest rates will remain low…. The risk to waiting to tighten is so comparatively small. That’s the worst bit. In a year or two people will find themselves wondering why the Fed made this particular error, and there simply will not be good answers to give.”
   

5. Ta-Nehisi Coates:
   The New Republic: An Appreciation:
   “My first editor at The Atlantic came from TNR, as did the editor of the entire magazine. More than any other writer, TNR alum Andrew Sullivan taught me how to think publicly. More than any other opinion writer, Hendrik Hertzberg taught me how to write with “thickness,” as I once heard him say. A semester in my nonfiction class is never quite complete without this piece by Michael Kinsley. TNR’s legacy is so significant that I could never have avoided being drawn into the magazine’s orbit. Even if I had wanted to…. The family rows at TNR’s virtual funeral look like the “Whites Only” section of a Jim Crow-era movie-house. For most of its modern history, TNR has been an entirely white publication, which published stories confirming white people’s worst instincts. During the culture wars of the ’80s and ’90s, TNR regarded black people with an attitude ranging from removed disregard to blatant bigotry. When people discuss TNR’s racism, Andrew Sullivan’s publication of excerpts from Charles Murray’s book The Bell Curve (and a series of dissents) gets the most attention. But this fuels the lie that one infamous issue stands apart. In fact, the Bell Curve episode is remarkable for how well it fits with the rest of TNR’s history.”
   

Should Be Aware of:

• Daniel Drezner:
  The insane narrative you are supposed to believe about the torture report
• Bloomberg View today announced that Justin Fox will join the opinion and analysis site on January 5 as a columnist covering corporate strategy and trends, innovation and the broad business landscape
• reported.ly
• Chris Dillow:
  Inequality and Productivity
• Alec MacGillis:
  Chris Christie’s Rise and Fall: Chris Christie’s Entire Career Reeks: It’s not just the bridge
• Michael Hobbes:
  Development Ideas that Work: Pay for Results and Data Analysis

1. Robert Waldmann:
   “Google will protect me from any loss from the creation of the New New Republic…. I will google ‘Jonathan Cohn’ and find him wherever he is…. Most New Republic writers didn’t stay at The New Republic. It was a gateway and Martin Peretz was not a good gatekeeper…. I think the real sincere genuine lament is for the loss of influence of TNR…. This is an expression of the liberal principle that debate should be exclusive and that participation in debate should be based on patronage by those who inherit (or marry) wealth. Or, to totally lose it… those who mourn the passing of the Old New Republic absolutely reject liberalism as such. They are not Burke mourning the passage of the age of chivalry. But they come as close as anyone can in these fallen times.”
   

2. Tim Duy:
   Fed Updates Ahead of FOMC Meeting:
   “Bottom Line: Fed is still positioning to begin normalizing rates in the middle of 2015. The data is less of an impediment with each passing day. The time to eliminate the ‘considerable period’ language is fast approach. The press conference calendar argues for next week. Honestly, I hope they will skip this meeting in favor of the January meeting just to prove that every FOMC meeting is a live meeting. Alas, I think they believe they need the press conference to temper any adverse reactions from market participants. Finally, I am wary with the consensus view that the oil price decline in disinflationary. Open up to the possibility of the opposite. Look back to what you believed in 2011.”
   

Mr. Elmendorf’s answer was clear. ‘No, Mr. Chairman,’ he said. ‘We do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for health care costs.’ For anyone who remembered health care history, the moment was ominous….

Congressional Democrats knew that the budget office had the loudest voice, and their staff members got to work… to nudge the health care system away from paying for the quantity of medical care rather than the quality. Ultimately, the C.B.O. judged those provisions to be substantive. The Affordable Care Act would reduce the deficit in the long run, the budget office forecast….

A central plank of the anti-Elmendorf case is the notion that his budget office has underestimated health care costs. Senator Pat Roberts, the Kansas Republican, went so far this year as to call for a hearing on the subject. In reality, the Congressional Budget Office–like nearly every other group of health care analysts–has overestimated medical costs. We’re in the midst of a historic slowdown in the growth of medical costs…. The Affordable Care Act–specifically, those provisions meant to reward quality, like one that tries to cut down on needless hospitalization–plays some role in the slowdown…

Sam Ro:
Crude Oil Cost Of Production:

…is hustling along, inflation remains well below the Fed’s target rate…. I think… the Fed is close to making a big mistake…. Set aside potential downside risks (from a Russian financial crisis, or renewed euro-zone troubles, or a Chinese hard landing, or lord knows what else) and just focus on the dynamics within the American economy. Almost since the Fed announced that it was officially targeting an inflation rate of 2%, as measured by the price index for personal consumption expenditures, actual PCE inflation has run below the target, and often well below. It remains below target now….

You’d have to be mad to think that inflation will average 2% over the course of this business cycle. The Fed has been content to let inflation rest below target for most of the last four years…. The longer the Fed fails to hit 2% on average the more likely the public is to expect below-target inflation on an ongoing basis….

And while inflation is low interest rates will remain low…. The risk to waiting to tighten is so comparatively small. That’s the worst bit. In a year or two people will find themselves wondering why the Fed made this particular error, and there simply will not be good answers to give.

Must- and Shall-Reads:

• Simon Wren-Lewis:
  The Imaginary World of Small State People
• Robert Waldmann:
  Overshoot 2% Inflation
• Nick Szabo:
  Origins of the Joint-Stock Company
• Richard Crump et al.:
  Interest Rate Derivatives and Monetary Policy Expectations | Survey Measures of Expectations for the Policy Rate
• James Narron et al.:
  The Panic of 1819: America’s First Great Economic Crisis

1. David Beckworth:
   Monday Morning ‘Money Still Matters’ Round Up:
   “It’s the Domestic Demand Stupid! Ramesh Ponnuru reminds us why worrying about “currency wars” is misguided when economies are depressed. It completely misses the point…. It is not the depreciation that matters, but the boost to domestic demand from easing monetary policy. Unfortunately, not every central bank is interested in stabilizing domestic demand as noted next. Monetary Policy Differences Explain a Lot. Martin Wolf looks across the global economy and finds a common factor behind the variation in economic growth: the stance of monetary policy…. The Nominal GDP Targeting Glass is Half Full…”
2. Matthew Klein:
   Did Japan actually lose any decades?:
   “After adjusting for population, real household spending grew more from 1990-2013 in Japan than in every country in our sample except for Sweden, the UK, and US. Moreover, the UK and US only managed to pull off their superior consumption growth with the help of huge unsustainable debt bubbles and ‘wealth effects’, while Japanese consumers had to contend with sinking asset markets and stagnant nominal wages. So much for the idea that deflation kills the impulse to shop! If we start the clock not in 1990, however, but in 2000, Japan looks even better…. Now, one could argue that some of this is as much a reflection on the severity (and mishandling) of the aftermath of the excesses in other countries as much as it is a testament to the strength of Japan. But even if we use the cherry-picked time frame of 1990-2007, real consumption per person still grew more in Japan than in Germany and Switzerland, and almost as much as in France and Austria…”
3. Paul Krugman:
   Shinzo and the Invisibles:
   “Brad DeLong is puzzled by… Ken Rogoff[‘s]… warning that Japan could face an attack from invisible bond vigilantes if it doesn’t quickly tackle long-run fiscal issues. I’m puzzled too… The truth is that I said such things about the US back in 2003. But I was wrong…. Rudi Dornbusch’s ‘overshooting’ model…. Invisible bond vigilantes. Suppose… they suddenly demand that Japanese 10-year bonds offer a rate of return 200 basis points higher than US 10-year bonds. You might be tempted to say that Japanese interest rates will spike–but the Bank of Japan controls short-term rates, and long-term rates are mainly an average of expected short-term rates, so how is this supposed to happen?… Instead, the yen would depreciate now so that investors can expect it to appreciate later. And this yen depreciation would be expansionary…. The invisible vigilantes would be doing Japan a favor if they suddenly materialized and attacked! I’ve had many discussions with smart people about this, and have never gotten an explanation of why it’s wrong; we usually end up with something like a warning that Japanese deflation might suddenly turn into uncontrolled inflation, which seems unlikely and certainly isn’t the way the warnings are usually phrased–we’re supposed to worry about turning into Greece 2010, not Weimar 1923. You might think that what we’re talking about is the lessons of history–but as far as I can tell, there are no historical examples of countries with debts in their own currency facing a Greek-style crisis…”
4. Robert Skidelsky:
   Speech on the Autumn Statement, in the House of Lords, 4th December 2014:
   “What happens to the budget is determined by what happens to the economy, and what happens to the economy is not all within the Treasury’s control. But it’s equally important to remember, that what happens to the economy is largely determined by what happens to the budget. This could hardly not be so, as government spends about 40% of GDP. Ever since I started writing and speaking about these matters in 2010, I have been predicting that the Chancellor would not meet his budget targets. The reason I gave was that the pursuit of those targets in itself slows down the economic growth on which their achievement depends. Why? Because it slows down the rate of spending in the economy, and growth depends on spending. The cuts have hit the spending, and the spending has hit growth. So it’s not surprising that the Chancellor finds himself with a projected deficit of £91.3bn this year, when in 2010 he promised to ‘balance the budget’ by the end of this parliament. According to the OBR, the discrepancy between the projection and outcome results from ‘unexpectedly weak performance of tax receipts’. Perhaps it was only unexpected to the experts at the Treasury. In fact, it was the logical consequence of growth being so much below what was expected between 2010 and 2013, and of what has been happening to the labour market since…”
5. Charlie Stross:
   On the lack of cultural estrangement in SF – Charlie’s Diary:
   “In the previous discussion thread, someone mentioned having a problem with one particular far-future (well, set 400 years hence) SF novel that disrupted their reading of it so badly that they ended up giving up on the book…. I think it’s worth taking a look at it, because it’s one of my own pet shibboleths…. These are not bad authors and they don’t write terrible books: that’s part of what makes the problem so jarring for me. And the nature of the problem? It’s that the stories they’re telling are set in a far future… in an interstellar human polity…. And yet the civilization they portray can best be described as ‘Essex suburbia goes interstellar’… or… ‘Whitebread Middle American Suburbia to the Stars’… gender politics, religious framework, ideologies, fashions(!) and attitudes… has become a universal norm. And nothing else gets much of a look in…. You can make an argument for writing SF in this mode in that it allows the lazy reader to ignore the enculturation issue and dive straight into the adventure yarn for which the SFnal trappings are just a brightly-coloured wrapper. But I still find it really weird to read a far-future SF story that doesn’t deliver a massive sense of cultural estrangement, because in the context of our own history, we are aliens. Imagine yourself abducted by a mad Doctor in a time machine shaped like a blue Police Box (itself an anachronism in today’s smartphone-networked world) and dumped on the streets of your home city a century ago, in 1914…. How familiar are you going to find things? The answer is actually ‘not very’…. You speak a dialect of the local language, it’s true. But you have some words or terms that nobody recognizes (‘atom bomb’), some words that have changed meaning radically thanks to the spread of technical neologisms (‘virtual’, ‘computer’) or social change (‘queer’, ‘n—–‘), and there are other words and slang that you probably don’t recognize…. The architecture and layout of cities will be vaguely familiar…. Some things will be mildly disorienting…. Some items will be disgusting (horse shit everywhere, and the flies they attract). It may be hard to tell the difference between a shop front and somebody’s living room, if you get away from the market stalls. And it may be hard to tell the difference between a contemporary crack house and the typical living conditions of the early 20th century poor…. Foodstuffs you expect to find are unavailable and exotic (bananas, kiwi fruit, curry), and stuff nobody in their right mind would eat is routinely sold (tripe, kidneys, beef hearts) and eaten…. Don’t ask about medicine…. You don’t want to know what passes through conservatives’ minds in 1914…. It’s worth noting, incidentally, that much of the social change that led up to the current cultural matrix was driven by technological change. Better medicine and family planning… which bananas… cheaper than potatoes, people aren’t worn out unto death by fifty, civil rights for people who aren’t rich white males… you probably aren’t dying of tuberculosis. So why do repeatedly we see the depiction of far future societies with cheap interstellar travel in which this hasn’t bought about massive social change as a side-effect (other than the trivial example of everyone having a continental sized back yard to mow)? Seriously, I feel that if I’m writing far-future SF, I’ve got a duty to at least try and portray a plausible society.”

Should Be Aware of:

• Digital Einstein Papers Home
• Anita Sarkeesian:
  Watch: 25 men explain why it’s so difficult to be a woman in gaming
• Glenn Greenwald:
  Talking to James Risen About Pay Any Price, the War on Terror and Press Freedoms
• In world first, researchers convert sunlight to electricity with over 40 percent efficiency

1. Simon Johnson:
   Antonio Weiss Is Not Qualified To Be Under Secretary For Domestic Finance | The Baseline Scenario:
   “In coming years, the overall stance of US fiscal policy will matter a great deal for long-term interest rates, with one key issue being whether domestic and international investors remain convinced that our debt-GDP ratio is on a sustainable path. (James Kwak and I wrote a book on this topic.) Based on the record, there is no indication that Mr. Weiss has the skills likely to help put us on such a path (yes, fiscal policy is determined by Congress as much as by any administration–but the Under Secretary is an important part of the decision-making mix). And there is a legitimate concern about Mr. Weiss’s qualifications which, ironically and perhaps inadvertently, was raised by Mr. Sorkin himself, when he conceded, ‘that Mr. Weiss doesn’t have a lot of experience in the regulatory arena, and at least part of the role he is nominated for involves carrying out the remaining parts of the Dodd-Frank overhaul law.’ The negative fiscal implications in that statement are potentially first-order…”
2. James Hamilton:
   New estimates of the effects of the minimum wage | Econbrowser:
   “Michael Wither and his adviser Professor Jeffrey Clemens… ‘Over the late 2000s, the average effective minimum wage rose by 30 percent across the United States. We estimate that these minimum wage increases reduced the national employment-to-population ratio by 0.7 percentage point’…”

…warning that Japan could face an attack from invisible bond vigilantes if it doesn’t quickly tackle long-run fiscal issues. I’m puzzled too… The truth is that I said such things about the US back in 2003. But I was wrong…. Rudi Dornbusch’s ‘overshooting’ model…. Invisible bond vigilantes. Suppose… they suddenly demand that Japanese 10-year bonds offer a rate of return 200 basis points higher than US 10-year bonds. You might be tempted to say that Japanese interest rates will spike–but the Bank of Japan controls short-term rates, and long-term rates are mainly an average of expected short-term rates, so how is this supposed to happen?… Instead, the yen would depreciate now so that investors can expect it to appreciate later. And this yen depreciation would be expansionary…. The invisible vigilantes would be doing Japan a favor if they suddenly materialized and attacked!

I’ve had many discussions with smart people about this, and have never gotten an explanation of why it’s wrong; we usually end up with something like a warning that Japanese deflation might suddenly turn into uncontrolled inflation, which seems unlikely and certainly isn’t the way the warnings are usually phrased–we’re supposed to worry about turning into Greece 2010, not Weimar 1923. You might think that what we’re talking about is the lessons of history–but as far as I can tell, there are no historical examples of countries with debts in their own currency facing a Greek-style crisis…

1. Fixed exchange rates and sticky prices: This is Greece. The bond vigilantes demand a higher real return. Prices and exchange rates are both fixed. So the bond vigilantes get a higher real return in the fixed-value foreign numeraire, a higher real return in domestic currency, and a higher nominal return in domestic currency. This is a deficient-demand depression.
2. Fixed exchange rates and (largely) flexible prices: The bond vigilantes demand a higher real return, and so go on a capital strike against funding domestic investment projects until they get it. An excess supply of labor and goods drives domestic nominal prices and wages down until the expected real appreciation of the currency pushes returns high enough to satisfy the bond vigilantes and they cease their capital strike against funding domestic investment projects. But in the meantime–while the capital strike against funding domestic investment projects continues–the economy is in a deficient-demand depression.
3. Floating exchange rates and (largely) flexible prices: The bond vigilantes demand a higher real return. The real value of the currency bounces down so that thereafter real appreciation supplies it.

The problem appears to be on the nominal side. The nominal value of the currency falls as the shock hits. But domestic prices and wages measured in domestic currency rise as import prices rise. In order to reach equilibrium, the value of the currency has to fall farther and faster than domestic prices and wages rise in order to lower the real value of the currency and so set the stage for the real appreciation we need to anticipate in order to be in equilibrium. That process–the rise in domestic nominal prices and wages, and the larger fall in the nominal value of the currency–may derange the price system and so disrupt aggregate supply. The new equilibrium may be one in which the real depreciation of the currency is expansionary in the sense that it tends to push real aggregate demand above potential output. But the economy may nevertheless be in depression, if the process of getting to the new equilibrium has entailed nominal price swings large enough to have been sufficiently disruptive to the market-mediated division of labor. Weimar 1923.

In order to avoid such supply-side disruption to the market-mediated division of labor, the central bank may respond to such a shock by raising domestic real interest rates to generate a deficient-demand depression in order to moderate the rise in the domestic nominal value of prices and wages, thus moving partway back to case (2). The problem is that case (3) is one of extreme nominal devaluation coupled with domestic inflation, while case (2) is one of nominal fixity in currency values coupled with domestic deflation, and it is not clear how the halfway house fits together.

1. Floating exchange rates and (largely) flexible prices: This is the Dornbusch base-case: The bond market vigilantes bounce the nominal exchange rate down until expected appreciation is sufficient, and so the attack of the bond market vigilantes is expansionary. France 1923-1927.

Note that these chains of argument do not rest too heavily on the assumption of rational expectations in exchange rate markets. If expectations of exchange rates are static, the real depreciations needed to restore equilibrium when the bond market vigilantes attack are larger: they need to provide higher returns not through expected future capital appreciation but through the fact that profit margins on exports are very large if your currency is substantially undervalued in real terms. But it is still a true fact that in the base, Dornbusch, case, an attack of the bond market vigilantes is expansionary.

Now we may not be in the base, Dornbusch, case. Raghu Rajan, for example, clearly thinks that India is not. He believes that India is in case (3): that if the bond market vigilantes attack he cannot let the nominal value of the currency bounce down until real appreciation satisfies them without unleashing a disastrous domestic wave of inflation. Perhaps he thinks that Indian domestic nominal prices and wages are tightly coupled to import prices, so that the gearing between nominal depreciation and real depreciation is very loose. Perhaps he thinks that international financial speculators–the Gnomes of Zurich… no, that’s not right any more, the Djinn of Dubai Jim…–have, over some considerable range, not rational but rather extrapolative expectations of exchange rate changes so that the required real depreciation would itself be so large as to temporarily destroy India’s integration into the international division of labor.

The fact that Raghu Rajan does not think that Krugman’s (and my) Dornbusch logic applies to India today gives me pause. But, even with pause, I cannot see for what reasons Krugman’s (and my) Dornbusch logic would not apply today to Japan.