About American economy by professor

Now, it is good time to talk about American economy. The present American economy is the best in the 19^th century. Economicgrowth rate will be 8% in 1988, job is growing, income is arising, and the unemployment rate is the lowest in American history. It is also good time for university students. Most of them get 2 or 3 job offers. In fact, there is shortage of workers in America. Despite the good economic circumstance, people worry about future. There are two worries. One is about inflation. There is no inflation sign in America yet. People are so nervous about it. The other is about Asian economy. Economical difficulties in Korea, Marisa, Indonesia are worried a lot, but the most worry is what is wrong with Japan. If there is difficulty in Japanese economy, it will cause a big problem to US. Especially, weak Japanese banking sector is dangerous.

In the long run, education is problem. The present strong economy is based on information technology. People work with computer, so they have to be able to work with it. To do it, people need education. The gap between educated people and not educated becomes so wide that it makes pressure to society. Moreover, improvement of technology could be too fast for people to get used to it in the future.

It is interesting that American economy is strong now even though it was not strong when I was a university student. Europe economy is not strong. Europe is the capital of unemployment. Although European Union may be important for Europe, most American think it dose not affect American economy so much. Most people think Asian economy will be stronger than Europe, especially China and Japan, and it will link to strong American economy. America is a big and powerful country, get a lot of attentions from the world, so other countries are criticizing America. Because America dose not pay attention to rest of America. Nowadays, many countries are criticizing Japan. It is because Japanese rich and strong like America.

Question 1 what is the reason that American economy is so strong now?

It is because of dramatic increase of productivity. Now, increasing productivity is faster than during 1940 to 1960. Economy is grown because of productivity, innovation, and re-engineering. Before, GM, IBM, US Steel were the most important companies in America. Now, they are information companies, which are INTEL, Microsoft, NETSCAPE, relying on productivity.

Question 2 how did the US government set financial deficits in order?

There are two types of government in the US, the US government and 50-state government. Every state government has their own tax, low, custom, holiday and so on, and also they have power to spend it. Each state must balance their budget. On the other hand, it is not balanced in National government. They spend more than taxes, so they have to sell national loan. Since 1993, they have been able to shrink their budget. This year, it is balanced and 7 years to future, they will not need to borrow money. In 1980, Japan said to us "shrink your budget". It was helpful for America because it forced the government to reduce debt. Moreover, Bill Clinton decided to rise tax in 1993. Of course it was unpopular, but finance was balanced. One more important thing is the end of cold war. America thought they were no more threaten and were able to reduce one-fourth military budget. Now, economy is growing, companies are paying more taxes, then, deficit disappeared. America has an experience, so America can lecture to other country.

Questions 3 How long will American bubble last?

America is not bubble at all. A bubble occurs if price is rising. Real price is fairly stable in America. Stock market is growing because companies are just more profitable. The US economy could slow down if two things that I mentioned before happen.

Question 4 what is the reason for Japanese bad economy?

The biggest problem is banking system. A few days ago, The Japanese governments and US did cooperation for foreign exchange market. What was happened to \ was coming back down again because people worry about banks. They think Japanese government is too slow to fix them. Weak banks make economy weaker. It is like a cancer. It is impossible for Japan to recover their economy without fixing them. If Japan solves the problem, consumer will get confidence and fiscal stimulates will be effective. American often say "Good news and Bad news". In Japan, bad news is banking system. On the other hand, good news is that Japan is rich and strong enough to fix banking system by itself.

Why does not Japanese government move quickly to fix banking system?

Banking system requires confidence and good reputation. To fix the banking system, we have to accept that banks are weak. That may cause panic, so government worry about it. If government say some banks are dangerous, consumers lose confidence, and it is embarrassing for government. America is more risk taking culture, and people are suspicious about their government. In 1980, banking was problem in the US too. Many banks collapsed like the present Japan. Then, American government founded Resolution Trust Corp RTC that checks weak banks and is able to kill them. What it did was to eliminate 200 weak banks and recovered consumer confidence. It did not require much tax, but certain attitude. American say Japan should make it earlier, because it is easier than later, and they have got an experience.

Question 5 It is said that principle of equality is Japanese system. On the other hand, American is Competitive？

American is different from Japanese. Most of them come from other countries to start new life. This created the culture of chance and individualism. People are free to succeed, but also free to fail. In Japan, I was surprised that every single stop is announced in train. Not in America. You are supposed to know where you are going. One reason why Japanese like equality is that Japan is homogeneous society. America has to take account for other culture. Either does Japan and Japanese government needs to find an acceptable way for Japanese society to fix banks as quickly as possible?

Question 6 Is it true that American students tend to work in a small company?

Big company is no more attractive for them. People work in a big company to save money to start their own business. It is the most common in information industry. People say Japan is group-oriented society and America is individualistic. However, America is also group-oriented society. People belong to a university that they are graduated and church. It is common that people do business with someone who went same university. University is the center of business. Universities expect people to run their business and donate money to them.

Question 7 How do you think about the relation between Japan and America in the future?

I think it will be same. America say to Japan what to do and Japan do not care. Japan says to America and Amerced not care too. Although governments continue to disagree, business relation is good. One potential change will be China. China is becoming strong. Japan will be between China and America and have to balance their power.

Question 8 Bill Gates is the richest man in the world. How do you think about it?

Good for him. He quitted his university and made the company. American do not like rich people whose parents was rich. America has opportunity way of thinking. Every company succeeds after thousands of failures. It is worth being respected. Furthermore, rich people donate their money for good will to be seen using good money.

Question 9 Why is the cost of university so expensive?

It is really expensive, about $5000 - $100000, because there is no subsidiary for universities. However, payoff of university is so great, and it keeps good standard of education. University graduates earn 80% more than high school graduates do, so it is personal investment. Most American universities are in small towns and have to provide places where students live.