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US May Face Japan's "Lost Decade" Recession
inspector_monkfish
Posts: 9,276 Forumite
08:26 07Jul09 US May Face Japan's "Lost Decade" Recession-Nomura Economist
SINGAPORE--The U.S. is still in danger of suffering a sustained recession similar to that experienced by Japan during the "lost decade" of the 1990s and may have to maintain large budget deficits for several years to avoid a deepening crisis, Nomura's Chief Economist said Tuesday.
"My concern is that the U.S. is going through exactly the same as what we went through in Japan," Richard Koo told Dow Jones Newswires in an interview.
Koo, author of the 2008 book "The Holy Grail of Macro Economics: Lessons from Japan's Great Recession," said the U.S. economy is in danger of being stuck in what he called a "balanced recession," characterized by a corporate focus on "minimizing debt, instead of maximizing profit."
To avoid this and offset the current collapse in private spending, he said the U.S. government should keep a strong level of public spending on a sustained basis and resist the temptation of removing stimulus when some signs of growth appear.
Koo said that large levels of public spending had kept the Japanese economy afloat during the "lost decade" and beyond. In the absence of such policies, he added, the Japanese economy would have crashed under the weight of the deflating real estate bubble, instead of remaining basically flat.
SINGAPORE--The U.S. is still in danger of suffering a sustained recession similar to that experienced by Japan during the "lost decade" of the 1990s and may have to maintain large budget deficits for several years to avoid a deepening crisis, Nomura's Chief Economist said Tuesday.
"My concern is that the U.S. is going through exactly the same as what we went through in Japan," Richard Koo told Dow Jones Newswires in an interview.
Koo, author of the 2008 book "The Holy Grail of Macro Economics: Lessons from Japan's Great Recession," said the U.S. economy is in danger of being stuck in what he called a "balanced recession," characterized by a corporate focus on "minimizing debt, instead of maximizing profit."
To avoid this and offset the current collapse in private spending, he said the U.S. government should keep a strong level of public spending on a sustained basis and resist the temptation of removing stimulus when some signs of growth appear.
Koo said that large levels of public spending had kept the Japanese economy afloat during the "lost decade" and beyond. In the absence of such policies, he added, the Japanese economy would have crashed under the weight of the deflating real estate bubble, instead of remaining basically flat.
Please take the time to have a look around my Daughter's website www.daisypalmertrust.co.uk
(MSE Andrea says ok!)
(MSE Andrea says ok!)
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Comments
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inspector_monkfish wrote: »08:26 07Jul09 US May Face Japan's "Lost Decade" Recession-Nomura Economist
SINGAPORE--The U.S. is still in danger of suffering a sustained recession similar to that experienced by Japan during the "lost decade" of the 1990s and may have to maintain large budget deficits for several years to avoid a deepening crisis, Nomura's Chief Economist said Tuesday.
"My concern is that the U.S. is going through exactly the same as what we went through in Japan," Richard Koo told Dow Jones Newswires in an interview.
Koo, author of the 2008 book "The Holy Grail of Macro Economics: Lessons from Japan's Great Recession," said the U.S. economy is in danger of being stuck in what he called a "balanced recession," characterized by a corporate focus on "minimizing debt, instead of maximizing profit."
To avoid this and offset the current collapse in private spending, he said the U.S. government should keep a strong level of public spending on a sustained basis and resist the temptation of removing stimulus when some signs of growth appear.
Koo said that large levels of public spending had kept the Japanese economy afloat during the "lost decade" and beyond. In the absence of such policies, he added, the Japanese economy would have crashed under the weight of the deflating real estate bubble, instead of remaining basically flat.
Hmm. The lost decade was characterised by massive Government deficits and propping up failing banks.
The US (and UK) policy response to a crisis which on the face of things may be similar? Massive deficits and propping up failing banks.
Maybe something else should be tried this time.0 -
Hmm. The lost decade was characterised by massive Government deficits and propping up failing banks.
The US (and UK) policy response to a crisis which on the face of things may be similar? Massive deficits and propping up failing banks.
Maybe something else should be tried this time.
yes, like low interest rates maybe ?
oops, too late....Please take the time to have a look around my Daughter's website www.daisypalmertrust.co.uk
(MSE Andrea says ok!)0 -
inspector_monkfish wrote: »yes, like low interest rates maybe ?
oops, too late....
It's possibly worth noting that even 20 years after the end of the boom in Japan, house and land prices are still high by international standards despite precipitous falls.0 -
Maybe something else should be tried this time
Yeah like massive government deficits that we can't fund !!!'In nature, there are neither rewards nor punishments - there are Consequences.'0 -
The USA has the double-whammy that they've just started 4 years with an a shameless actor/1st lady straight out of the Tony/Cherie book of hucksters and charlatans.0
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amcluesent wrote: »The USA has the double-whammy that they've just started 4 years with an a shameless actor/1st lady straight out of the Tony/Cherie book of hucksters and charlatans.
That can't be right. St Barack is some kind of mix of JFK, Martin Luther King and Nelson Mandela shurely?0 -
It's possibly worth noting that even 20 years after the end of the boom in Japan, house and land prices are still high by international standards despite precipitous falls.
It's also worth noting that the length of mortgages is substantially longer in Japan than the west. Some are available with terms of 100 years. So if you die, your children inherit the property and debt.
An interesting way to trick the young and keep property prices inflated...
PS: Generali your sig reminds me of that joke "did you ever notice that anyone driving faster than you is a maniac, and everyone driving slower is an idiot?"0 -
It's also worth noting that the length of mortgages is substantially longer in Japan than the west. Some are available with terms of 100 years. So if you die, your children inherit the property and debt.
An interesting way to trick the young and keep property prices inflated...
True although strictly speaking it isn't a mortgage (death pledge) if the debt doesn't die with you.
Mortgages are getting longer. When I was a kid I think 20 years was the norm. Mrs Generali's parents paid off theirs in 8 years with just one of them working (despite having 3 kids).PS: Generali your sig reminds me of that joke "did you ever notice that anyone driving faster than you is a maniac, and everyone driving slower is an idiot?"
I've come across some great quotes recently. One was from Pope John Paul II - "An excuse is worse and more terrible than a lie, for an excuse is a lie guarded. I really like that although I'm not sure why.
Another from the same bloke was "Stupidity is also a gift of God, but one mustn't misuse it".
I like your joke too. The old ones are the best ones!0 -
True although strictly speaking it isn't a mortgage (death pledge) if the debt doesn't die with you.
Mortgages are getting longer. When I was a kid I think 20 years was the norm. Mrs Generali's parents paid off theirs in 8 years with just one of them working (despite having 3 kids).
My parents got by easily with dad working and mum looking after us 4 kids.
Nowadays both partners are expected to work to afford a home, which often means child-care for the kids. 2 incomes and longer mortgages (25 or 30 years), mean a much bigger capital base that the average person has to negotiate.
Great for the older generations who already own their homes and investment properties. Bad for X/Y-ers and their kids. The social implications of a shift towards both parents working are hard to quantify but need to be considered.I've come across some great quotes recently. One was from Pope John Paul II - "An excuse is worse and more terrible than a lie, for an excuse is a lie guarded." I really like that although I'm not sure why.
Another from the same bloke was "Stupidity is also a gift of God, but one mustn't misuse it".
I like your joke too. The old ones are the best ones!
Here's another good oldie:
"He who laughs last didn't get the joke."0 -
My parents got by easily with dad working and mum looking after us 4 kids.
Nowadays both partners are expected to work to afford a home, which often means child-care for the kids. 2 incomes and longer mortgages (25 or 30 years), mean a much bigger capital base that the average person has to negotiate.
Great for the older generations who already own their homes and investment properties. Bad for X/Y-ers and their kids. The social implications of a shift towards both parents working are hard to quantify but need to be considered.
If house prices are going to remain at their current levels, then these younger generations are going to have to discover hitherto largely unseen virtues of thrift to be able to continue to bid up house prices.
If they just say, 'Oh well, looks like I'm gonna have to rent then' then investors will have to take up the slack.
Given that once interest rates normalise, even at current prices houses are a pretty bad investment as BTL that seems unlikely to me. But then to continue the quotes, 'There's one born every minuite' (or 'Never give a sucker an even break').0
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