Tuesday, March 30, 2010

To A Man With A Hammer...

...everything looks like a nail.

According to the bio provided at the end of the page, Mr. George Melloan is a former columnist and deputy editor of the Wall Street Journal editorial page and the author of "The Great Money Binge: Spending Our Way to Socialism" (Simon & Schuster, 2009). In an opinion article printed in his maternal publication, he tries his hand at linking his and the Wall Street Journal's personal hobby horse to the Kamei draft revision of the postal reform law.

It is not a pretty sight.
Killing Postal Reform Won't Help Japan
The Hatoyama government is cloaking fiscal profligacy in populist cant
Wall Street Journal

It was perhaps inevitable that the opponents of Junichiro Koizumi's 2007 privatization of the Japanese postal savings system would some day regain power and scuttle his bold reform. Indeed, that was one of the first moves by the Democratic Party of Japan when it ended the postwar dominance of Mr. Koizumi's Liberal Democratic Party in the general election last summer. LDP defectors who had opposed privatization aided the DPJ victory.

Postal service privatization, intended to proceed gradually over 10 years, was halted last November by the DPJ. Last week the government of Yukio Hatoyama announced that the state will not complete privatization but instead will retain a controlling interest in Japan Post Holding Co. Moreover, it will try to expand the system by doubling the limit on the size of postal savings accounts and nearly doubling the ceiling on postal insurance policies.

While cloaked in populist cant, these measures are coldly calculated. Populist governments need money—lots of it—and for decades before Mr. Koizumi embarked on reform, the postal savings system provided the government with cheap financing. A high percentage of its massive $3.3 trillion in assets are government bonds.
The whole, which you can access by clicking on the title link, is a tour-de-force of guilt-by-association.

Given his readership, Melloan would probably have succeeded in this exercise conflating the People's New Party with the Hatoyama government, the postal reform law revision with government spending plans for the upcoming fiscal year and total national saving with personal saving.

Melloan exposes the vacuity of his argument, however, in a paragraph that only Liberal Democratic President Tanigaki Sadakazu could believe (because when Tanigaki was Finance Minister, he said something similar):
Japan's financing strategy has other weaknesses. The government has managed to keep the yen strong despite its heavy borrowing not only because of its high savings rate but also its ability to build up a huge foreign currency reserve through its traditional focus on producing for export. It recently surpassed $1 trillion in reserves, second only to China.
Therein magic must lie.

The Bank of Japan/Finance Ministry's purchases of U.S. dollars, reducing the amount of dollars in the market and increasing the amount of yen, drives down the price of the yen against the dollar, keeping Japan's exports competitive in dollar terms. In the end, however, all that it does is make the yen stronger, which weakens the Government of Japan's ability to finance its debts long term.

Ingeniuous. Counterintuitive and contrary to the laws of supply and demand -- but come on, this is the Wall Street Journal. The rock of American business. On basic economic issues, it must be right.

Yep. Right. Far right.

This is not an op-ed about Japan. It is not even an op-ed about the United States, though that was clearly Mr. Melloan's intent. It is about no place extant on this small blue-green planet.

Be careful with that hammer, Mr. Melloan. You could hurt yourself.


Jan Moren said...

The WSJ editorial page left the real world years ago. Apparently the rest of the paper is still high-quality and fairly unbiased. I haven't read it for a long time myself though.

PaxAmericana said...

Seconding what Janne said, some folks use the WSJ editorials as a sanity test: If you agree with them, you need help. A bit harsh, perhaps, but they really do stretch things to the point that they have strayed into the taint that the Washington Times has with its Moon connection. Unfair to most of the writers there, but understandable.