Epic Recession

This is an analysis paper based on Jack Rasmus’s Epic Recession – Prelude to Global Depression. I have posted here part of my analysis. If you’re interested in reading the full paper as a sample writing of mine, please email me. Contact information can be found on the About Page.

Abstract:

Ever since the 1989 Economic Bubble Collapse in 1989, Japan’s stock, unlike the Great Depression, start to fall gradually rather than catastrophically. The Nikkei 225 stock index, a stock market index for the Tokyo Stock Exchange, bottomed out at 2003. Japan has experienced the Lost Decade during the 1990s. And the economic trend during those years seems to closely resemble Jack Rasmus’s description of Epic Recession, confirming the theory.

Analysis: Data & Methology

The analysis looks at several characteristics that are defined by Jack Rasmus in Epic Recession – Prelude to Global Depression, which will act as the indicators that will confirm the theory of epic recession. I will present data from stock market, GDP, unemployment rate, export, and industrial production to support my argument. At the end of the analysis, I will present data that will place Japan’s economic trend since 1992 into a Type I Epic Recession.

Here, I will post only one of the Characteristics Indicators as a sample.

Industrial Production, Exports, & Stock Market as Depth Indicator:

Japan’s export has boomed since the 1980s. In 1991, Japan produced 9.7 million automobiles, making it the largest automobile producer in the world. With 46% of the output exported, automobile parts become the largest part of Japanese export. However, due to its recession in the 1990s, and protectionism of other nations for their own automobile industries, especially Germany and United States, Japan’s export growth has significantly declines in recent years – a decrease of 27% according to Bloomberg. Furthermore, due to increasing foreign competition for export caused by global recession, Japan – heavily dependent on export – experienced declines in trade worse than the global average.

According to Jack Rasmus’s Epic Recession – Prelude to Global Depression, during Japan’s Lost Decade, the industrial production has collapsed about 40%. Furthermore, Japan’s industrial output during February of 2009 was 25% lower than at the equivalent stage in the Great Depression. And as mentioned at the beginning of the paper, Japan’s stock market plummeted after the burst of the asset bubble. In the latter part of 1990s, Japan’s stock fluctuated greatly. The Nikkei index fell below 13000 in 1998, and peaked at almost 19000 at the end of 1999. These gains, however, mostly disappeared in 2000. And as equities fell globally following the September 11, 2001 terrorist attack, the index fell below 10,000 for the first time since 1984. Japan’s stock market index has been declined 60% in the past two decades, along with more than 20% decline in both exports and industrial production, though not as severe as Depression, confirms the theory of Epic Recession.

Type I Epic Recession:

A “Type I” Epic Recession, defined by Jack Rasmus, takes the form of an initial financial crisis, followed by contraction of the real economy, which becomes an extended economic stagnation. Not only the Japanese economic cycle has followed Epic Recession’s common “W”-shape trend – decline, growth, then decline, but also the boom-bust process of Type I recession, in which the financial and consumption fragility develop and deepen due to the growth of excess liquidity that feeds the speculative investing. Delayed responses by monetary authorities to lower interest rate to combat deflation have delayed the stabilization of the banking system, allowing deflation-defaults to deepen further. Furthermore, weak stimulus to encourage consumption in a culture that has been traditionally rooted in frugality and saving failed to recover, extending the length of stagnation. By keeping unemployment relatively low to maintain a slow growth in GDP, Japan has avoided Type II Epic Recession, which can potentially lead to Depression. However, by keeping GDP growing, Japan has fallen into greater debt and a prolonged period of stagnation, trapping itself in Epic Recession.

Results:

Throughout this paper, I have examined the economic trend of Japan since 1992, fit the available data into the definition of Epic Recession, and confirmed the theory. Since 1992, Japan’s debt has drastically increased. Even though GDP has increased slowly, unemployment rate rose and stock market fluctuated. A series of unsuccessful recoveries led Japan into a decline-expand-decline economy, fitting this period of economical stagnation into a Type I Epic Recession.

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