Posted on 07/30/2011 5:24:38 PM PDT by bruinbirdman
No, no, heavily indebted economies of Europe won’t collapse. They will enter a prolonged stagnation like Japan did in the 1990s, dragging the rest of Europe along. The US economy won’t collapse either. It will also slide into Japanese-style stagnation, dragging along emerging economies that have been thriving on its large and robust consumer market to sell their products—I call it the Japanization of the world economy.
The parallels between what happened in Japan in the 1980s and the 1990s and what happened in the US in the 2000s and the early 2010s are too similar to ignore: The blow and burst of residential and commercial real estate bubbles followed by massive monetary and fiscal stimulus that kept Japanese and US economies off the cliff, but failed to sir them back to their long-term growth path; leaving governments in both countries in heavy debt loads.
While not ignored, these parallels have been, unfairly, disregarded by mainstream economists and analysts alike, arguing that the US and Japanese economies are different in several respects. One difference is the role and the importance of the Federal Reserve vis-à-vis Bank of Japan. The Federal Reserve has a tradition of independence from the government, and therefore, can act faster rather than later when there is a clear and present danger for the economy. Yet the Bank of Japan began to act about six months after land prices began to slide, while the Federal Reserve was debating whether there was a real estate bubble six months after it burst.
Another difference is that American markets and most notably the banking system are more flexible and more responsive to crises than Japanese markets. This premise, however, doesn’t provide a magical
(Excerpt) Read more at blogs.forbes.com ...
Does, or did Japan have a FSA(free shit army) as large as ours is?
Japan has a largely homogenous population and smaller country. We don’t. The results will be different.
The preponderance of the J population towards manners, patience and sacrifice is HUGE —you saw this at Fukushima.
I love this country, but we not only lack this group-centric mentality, but the past 50 years has produced people who think the government must give them everything —even bus rides.
Just look at Katrina —THAT is more what is in store for us.
The subject of this article is certainly a stretch.
Forbes.com format these days is different. From what I can gather, they solicit these blogs as a means to find/test new content for the magazine. This article appears to fall short if that is the author's intent.
yitbos
Economic growth in heavily indebted nations causes inflation which raises interest rates...
so heavily indebted nations don’t allow growth.
The surest way for them to prevent it is simply to increase their indebtedness.
Raise that debt ceiling boys! Whip Inflation Now!
The parallels between the 2 collapses have been eery. Here was the funny thing in Japan: early on there was denial that there had been any collapse, and then they, too, started lying about a recovery.
The more it became clear there was no recovery the more and more shrill those declarations become; even weird, Twighlight-zonish broadcasts about, “Remember the collapse..?! Gosh that was a doozy...!!”
Sure everyone remembered —cuz they still hadn’t the chance to forget.
I’m seeing all that this time around, also.
Maybe we’ll start hearing denunciations of those who “sabotaged” the “recovery”?
In the past week I’ve had 4 friends laid off. The media keeps saying that we’re doing better, but I’m pretty sure we’re doing worse. But they won’t say that while a Democrat is in the White House.
What it means is that in order to keep interest rates low enough so governments can borrow forever ad infinitum...business climate needs to be sufficiently hostile so business won’t be so good it challenges government for money.
The socialists sure heard it in the 2010 election defeat. So they just nationalized the health industry on the way out their lame duck door.
yitbos
The most consonant conditions between the two countries and debt deflations have been:
1. The willingness of the political powers in the countries to give the bankers a free ride and to socialize the bad debts incurred.
2. The participation of the central bank in creating a liquidity trap afterwards.
After that, the issues start to diverge.
Putting aside the differences in cultures, there’s a huge difference when we look at the debt:gdp ratios. In Japan, they owe most of their debt to themselves. In the US, we’re rapidly approaching a point where huge tranches of debt are owned outside the US. This is what brings down third world nations - huge blocks of debt owned outside their borders.
Next big difference is the size of the fraud. In Japan, yes, they had banking fraud and corruption. Here, we have Fannie/Freddie, corporate fraud, banking/financial fraud, companies who are banks in industrial drag (eg, GE) participating in the fraud, etc.
Lastly, the population of the US is heavily in debt. In Japan, they are born savers.
Would a new President in 2012 bring about enough of a change in the hostile business climate to make a difference?
Lastly, the population of the US is heavily in debt. In Japan, they are born savers.
I agree the Japanese are very frugal and very good savers.
I do have to point our one thing though. Inflation is the silent thief of savings. Especially when the rate of inflation is greater than the interest rate on savings account.
In which case it makes more sense to spend the money earlier on tangible items and property that have a chance to accrue value.
Real Estate was one such place until the Feds and the Bankers destroyed it. And I am sure we can all name other things that used to have value and now have lost it.
One thing that I see still maintaining and gaining value are guns and ammunition.
Absolutely right.
America is not Japan, when we attempt to prop up our economy through zero percent carry trade we will fail. We are a net importer, our citizens are deeper in debt individually than our government, and we have a constant inflow of illegal immigrants sucking down taxpayer benefits. Japan is locked down like Fort Knox, the people live off their savings and a continuous reduced standard of living, and they keep afloat through their export business. It is always encouraging to see the media prestitutes say “don’t worry” about 100% debt to GDP because Japan has 200% debt to GDP and we will be just like them. Of course Japan is going to go down in flames to, because no one beats an exponential curve and all ponzi schemes collapse when they can no longer grow.
Every major debt deflation in US history has been tied to real estate mis-valuation. Whether it was railroad land, farmland, residential real estate... it always seems that real estate becomes the issue where people are willing to pay far, far too much for it when they have available credit.
There have been debt deflations and market disruptions in stocks and commodities before, too, but in the end they’re smaller and more quickly resolved because the instruments aren’t as illiquid as real estate.
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