Professor Elam

Monday Jan 31, 2011

We are discussing Dr. Deming's theories on Total Quality Management in cost class today. Yet

Japan is entering its third lost decade, what happened?

Japan peaked at a nosebleed 37,500, and now is barely 10,000. Too much debt and speculation, the banks refused to write off the bad loans, the country is aging. At first I put the Shanghai SSEC on this same chart but it did not do justice to what has really happened. I also went to a linear rather than a log scale. The latter which is shown has each box the same size. A log scale shows changes in constant percentages. Now look at China over the same period.

This is the Shanghai or SSEC index. Note that the SSEC did not even exist when Japan peaked. China spiked just as Japan did in 1989 but has resumed an uptrend, can that last?

But wait, China is a managed society, Japan is far more capitalist and democratic. China has managed to keep the growth curve going by constructing empty buildings. The construction counts as growth but the buildings sit empty. China has a real estate bubble. Note in this article that China ranks 89th in ease of starting a business there due to its state owned economy. There has never been a manipulated economy that lasted very long, just ask Hugo Chavez. He has devalued his currency twice in the last two years.