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Archive for August, 2012


Japanese Genius

Our brilliant planners in Washington, from Bernanke to Geithner and all the deep thinkers at the White House, have been able to distill and drink of the genius shown in Japan as it produced a couple of decades of recession. Although Japanese unemployment rates are typically about half of ours at the same point in the business cycle, the Japanese recession essentially doubled their rates. Yes, they have had low levels of inflation and even some deflation. Sound familiar? Their nominal interest rates have been near zero. How does that sound?

Note the Japanese QE in the late 1960s as well as more moderately excessive rates of monetary growth through 1990. From that point on, monetary growth has often been very, very small in Japan. Is this our future?

Japanese deficit financing really took off about 1990 and has risen to remarkable levels since then. While you might think that it is hard to find a sizable, developed nation that compares unfavorably with Japan in this regard, the USA is it.