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Wednesday, August 17, 2011
Are we Japan in the 1980's?
Not to be a Debby Downer but has anyone noticed some of the similarities between the U.S. and Japan? Yes, the RE bubble was bigger in Japan, and Japan is smaller, yada, yada, yada, my concern is not the magnitude but the similarities of the attempted grand solutions. Japan tried Massive QE, Yen weaking, and huge amounts of the magical dust called “infrastructure spending” to stimulate growth, check out Hamada, Japan Marine Bridge. Nothing worked and all Japan got was Debt level in excess of 150% of GDP. Now the best solutions the U.S. can come up with are the same solutions attempted 15 years ago? We look to be heading down the same path, with Zombie banks and we are using the same excuses for resisting cutting, we can’t stop spending, “if we cut spending now it will push us into a recession” and you can repeat this same line for the next 5 years, we will have little growth and we will end up with Debt to GDP near 200% just like Japan. (I think this is why I feel the S&P is on the right path, we cannot grow out and if you don’t grow deficits matter) The time is upon us, it is time to man up a take some pain, rip the band aid off it will heal faster.
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