one more thing

[solarbird]

One more thing.

Back during the early 2000s, when economists were talking about Japan and their long lost decade, there appeared to me to be a fairly solid consensus that the big problem was directly tied to the refusal of the LDP-led Japanese government to force banks to acknowledge their losses, instead propping them up, and creating an entire financial industry consisting of so-called "zombie banks." The carry-trade didn't help either, but that was more a later phenomenon, and we were looking at the original lost decade.

When the United States found itself in functionally the same position as Japan, facing an awfully similar situation - an imploded stock market, an imploded and massively over-invested properties market, massive default in banking, and so on - two things happened. One, the Bush-led US government did the same thing the LDP-led Japanese government did, and two, the consensus changed overnight from "propping up the banks was bad" to "they just didn't stimulate quickly or substantially enough."

And now the US financial system is filled with zombie banks, and the US dollar is becoming a bit of a darling to the carry-trade class.

Really, the biggest differences I see are that the US population has much more debt and much less savings going into this event than the Japanese had going into the start of their (first) Lost Decade, so is less able to weather a decade of this bullshit than were the Japanese of the time.

US dollar is up a bit today, btw. I don't know why.

Comments

[whip-lash.livejournal.com]

Really, the biggest differences I see are that the US population has much more debt and much less savings

This is much less true than you think. Japanese and American rates of consumer debt (http://www.mail-archive.com/pen-l@galaxy.csuchico.edu/msg51254.html) are surprisingly similar; Japanese public debt as a percentage of GDP blows ours out of the water (http://en.wikipedia.org/wiki/List_of_countries_by_public_debt), although we're working on that.

As for savings, the Japanese have much more thanks to being the greatest savers in the world for decades. But their savings rate has fallen back to "normal" levels (http://www.mof.go.jp/jouhou/soken/kenkyu/ron164.pdf) where ours has soared (http://www.bea.gov/BRIEFRM/SAVING.HTM).

We're probably in as strong a position to weather a decade of this bullshit as they were, which is fortunate, since I think we're in for a decade of this bullshit.

[solarbird]

Perhaps I am unclear.

Japanese savings rate going into their Lost Decade was dramatically higher than that of the US going into this recession. Of course Japanese savings fell afterwards; that's rather inevitable. That the US savings rate is climbing is indication of the amount of cutting back possible by those who have retained jobs. The difference is that those who have not retained jobs have had, on average, much less savings buffer.

[solarbird]

I have edited to clarify.

[rozasharn.livejournal.com]

That IMF guy who writes for Baseline Scenario was right: (http://www.theatlantic.com/doc/200905/imf-advice/4) Finance/Insurance/RealEstate has achieved regulatory capture of our entire government, so the party line has become what's good for cronies rather than what's good for the national economy.

[solarbird]

Yes. I've talked about the US being in this state a few times, but I'm too lazy to look up the examples. You can find it in both economics and politics posts, I think.

[phillipalden.livejournal.com]

I just finished a book called; "Bailout Nation," and that was one of the conclusions the author reached.

It's amazing that these guys know that history yet seem determined to let the U.S. have a "lost decade."