It's time to stop debating whether the U.S. is becoming Japan, Bloomberg reported.
The U.S. already is Japan with near-zero interest rates, a broken financial system and politicians who don't seem to realize the severity of the economy's plight. The only question is whether the U.S. will be so lucky.
Lucky? Japan? Well, yes. For all its rigidities and idiosyncrasies, Asia's biggest economy never fully collapsed. It never got near a depression, nor did deflation get out of control the way many analysts predicted following the implosion of the 1980s bubble economy.
The nation's slide had a hydraulic quality. While asset prices plunged, the economy drifted lower at a glacial, almost managed pace for a decade until growth returned in 2002. Homelessness and crime ticked up a bit, yet Japan didn't unravel. Households merely adjusted and lived off their savings. Even though considerable pain ensued and untold wealth was destroyed, Japan muddled along.
U.S. politicians who today say stimulus efforts are too big aren't paying enough attention to the lessons from Japan.
The Federal Reserve certainly is. Yet in a credit crisis, government spending is far more potent than monetary policy. None of this is to say Japan's crisis-management was state of the art. Japan acted too slowly at first. It never had an exit strategy. Growth is still reliant on free money and the largest public debt in the developed world.
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