Parallels between US and Japanese economies
In the video below, Marshall Auerback gives a even-handed analysis of the parallels between the US and Japan on Fox Business with Brian Sullivan.
Demographic trends, GDP trends and deleveraging trends are all similar. But, Marshall goes further by pointing to the misallocation of fiscal resources, the emergence of crony capitalism and the likelihood of zombie banking which he saw in Japan and is seeing now in the U.S.
Another similarity is low interest rates. One issue Marshall didn’t take on when asked about low interest rates by Brian is how this policy not only reduces the cost of capital, but also decreases investment returns, encouraging the carry trade and excessive risk.
When looking at how we are avoiding the mistakes of Japan, I didn’t find the arguments as convincing because it’s early days yet. But, there is hope.
The segment runs just over 5 minutes.
About Edward Harrison
- CDS contracts and the implosion of several Eastern European economies 30 Apr 2009
- Credit deflation and the Japanese problem 16 Jun 2008
- Unscathed Japanese banks on the prowl 22 Jun 2008
- Bernstein: America is turning Japanese 24 Mar 2009
- The Japanese Problem is now ours 13 Jun 2008