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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 is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.

4 Comments

  1. Speaking of comparing the US and Japanese economies…

    I looked at both housing collapses, overlaying them on top of each other. If the US follows Japan’s lead, housing prices could fall a lot more:

    http://www.planbeconomics.com/2009/11/13/japans-housing-stabilizing-after-17-down-years/