Is the U.S. Economy Turning Japanese? (Is America repeating the mistakes of Japan's Lost Decade?)

Wall Street Journal ^ | 10/27/2009

[SeekAndFind]

Happy days are here again in world stock markets. Yesterday's profit-taking notwithstanding, the Dow Jones Industrial Average is flirting with 10000 and the S&P 500 is up 60% from its March low. Still, if risk-seeking behavior has returned to financial markets, much of it is funded by borrowing increasingly cheap U.S. dollars. There is also very little evidence, if any, that consumption and employment are really recovering in America.

With the U.S. government stepping in to keep markets from clearing, today's U.S. economy in many ways resembles the post-bubble Japanese economy of the 1990s. Ultra-loose monetary policy and low demand for credit, combined with high unemployment and consumer deleveraging, could lead to a prolonged slump.

Consumption, which still accounts for 71% of total nominal GDP in America, is still weak, and there remains little reason to expect it to pick up in a healthy fashion. Aside from the well-known and related issues of high household debt and negative equity in houses, the latest U.S. employment data have highlighted the still dismal state of the job market. Average weekly earnings of production workers rose by only 0.7% year on year in September as the average number of weekly hours worked fell to a record low of 33 hours. This marks the lowest annualized weekly earnings growth since the data series began in 1964.

Meanwhile, there's an unhealthy reliance on government for growth in America's increasingly command-driven economy. This is clear from the severe slump in car sales post "cash for clunkers." U.S. auto sales declined by 35% month on month in September to an annualized 9.2 million. It's also clear from the enormous role now played by government in the residential mortgage market. Government-guaranteed mortgages accounted for 98% of total mortgage-backed security issuance in the third quarter.

[Last Dakotan]

Do we get Sony, Toyoda, Honda, Mitsubishi, Brother, Subaru etc, etc out of the deal?

Why is it the Japanese can have five profitable auto companies? They must be doing something right.

[sickoflibs]

Not all the ‘mistakes’. Japan is a producer/saver, America is a consumer/borrower. So trying to stimulate more consumption in Japan is different than trying to stimulate consumption in an economy that is already almost pure consumption.

Ironically democrats idea of Green jobs talks the language of turning us back into producers, as flawed as it is. The problem with the government produced green jobs is that they are forced on the taxpayer, much like current government jobs.

You want to produce something consumers actually want, not just what some elected politican claims we need.

[MainFrame65]

Stocks (priced in DOLLARS) are rising because dollars (priced in gold, silver, or other tangible goods) are falling. We fail to recognize this because we are accustomed to a relatively stable dollar. We can hope that we will return to it, but don’t count on it!