So, discredit the treasury view then. Ad hominem arguments are not convincing.

Finally the great upheaval is coming. The foolishness of past growth is revealed.

You say “Most of Japanese growth happened in the late-19th century and early 20th, in which import substitution was the favored system. These are just facts.”

I am sceptical, but this is potentially interesting. Perhaps you could point us to said facts.

The debate about stimulus between Krugman and Fama etc was adversarial and unproductive, and I would be interested in having a civilised discussion here about it. I thought Krugman did a poor job of answering Fama’s point about where the extra output is supposed to come from, but one has to respect the empirical evidence that stimulus does seem to increase output. The trouble is that it seems to be difficult to have a scientific debate about this issue because any question is taken as a partisan position. I thought that Clive Crook in the FT was spot on about the present dysfunctionality of academic economics.

heard the latest about the korean economy? wpould have thought the slight easinag of the yen situation would have solved the repayment pressure (considering many korean firms actually financed their loans in yen last year). Rumours shaking the markets revolve around the possibility of a currency crisis engulfing the koreans, which brings to mind the question, could and would the japnaese and chinese come to the rescue in meaningful time. Yves’s highlighting of eastern europe’s pre carious state was certainly alarming, one wonders if the eurozone might not be dragged in further by the currency crisis that seems to be enveloping the region. Looks like the credit crisis has not just developed into a global financial crisis but rather into a financial chimera.

I very strongly disagree. If you increase savings and those savings go into gold bars or treasuries, this is bad. If you increase savings and these savings go into starting new businesses and creating jobs, this is good.

What matters is not the amount of savings, but what happens to those savings. If people start saving more money, and those savings go immediately to create new businesses and education, this is good. The problem with broken banks is that without good banks, the savings gets absorbed fixing old problems rather than going into new things.

The reason you want to encourage savings is that policies that encourage savings take several years to establish, and you can’t just switch on and off marginal propensity to save.

Don: And I’m sure you could find some that would argue that Japan’s export-led growth model was not a template for other Asian economies, but they would be equally mistaken.

Facts are facts, and people who claim that East Asian nations copied Japan just don’t understand economic history.

The orthodoxy in economic thinking in East Asia was import substitution untilthe early 1960′s, and Taiwan moved out of import substitution to export growth because it didn’t have any other choice in the matter. Taiwan didn’t have domestic capital to fund intensive import substitution, so it had to move to an export oriented economy for lack of any other alternatives.

Most of Japanese growth happened in the late-19th century and early 20th, in which import substitution was the favored system.

These are just facts.

This also misses the point that the Japanese economy looks very little like the South Korean economy, the mainland Chinese economy or the economies of Hong Kong or Taiwan.