Avoiding a Japanese Decade

[steven johnson]

With US Banks being unwilling to sell bad assets and take a loss and bankers not quenching their taste for risk, if there is another bank crisis, it will be a lot harder to get Congress to approve another bailout. Public opinion and thus congressional opinion has lost sympathy with banks given their unwillingness to give up their high flying habits.

The Japanese didn't leave their decade of stagflation until they fixed the banks. It seems to be a difficult pill for the US to swallow. Conservative pushes to close the budget gap without fixing the banks may set the US up for the second leg of the Japanese mistake, stopping the economic stimulus too soon.

...in the 1990s. A bursting housing bubble there sparked a banking crisis that was followed by a decade of economic stagnation.

The Japanese government lacked the resolve to do what was necessary. It failed to fix its banks and stopped its early fiscal stimulus before recovery had taken hold, leaving the economy all too vulnerable to outside shocks, including the Asian currency crisis and the dot-com collapse in 2001. Japan’s annual growth rate — which had averaged 4 percent since 1973 — slowed to less than 1 percent, on average, from 1992 to 2003.

...In 1997, after three years of tepid growth, the Japanese government stopped its stimulus: it raised a consumption tax, ended a temporary income tax cut, increased social security premiums and nipped recovery in the bud.

Japan’s other blunder was its unwillingness to fix its banks. Regulators did not force banks and indebted firms to recognize trillions of yen worth of bad loans. Banks trundled along like zombies, squandering credit to keep insolvent firms on their feet. When the Asian currency crisis hit, many undercapitalized banks toppled over.


Avoiding a Japanese Decade

[benld74]

1. UHH too late Einstein,we're already in it!

[Doctor_J]

2. The ship has already sailed on that

we're already years into it, and our government as well "(lacks) the resolve to do what (is) necessary"

[Demeter]

3. The Japanese Decade Is Now 20 Years Old

and they've been farting around all along. They haven't taken their losses or put down their zombies--they've drained their citizens of savings, jobs, and hope. Pretty soon they will drain their lives.

And we've already had a decade of loss, in case you hadn't noticed. We are facing the SECOND decade already, and Obama and the Boys from Goldman have no intention of changing course.