Voters Take Heed: Japan’s Economy Is In A 20-Year Deflationary Spiral

Posted on October 17, 2010

0



Sobering story by Martin Fackler on the front page of  The New York Times, Sunday, 10-17-2010. The headlines:

Japan Goes From Dynamic to Disheartened

Retrenchment Offers the West a Grim Vision of the Future

The Great Deflation

Coping With Decline

Summary: “Since about 1989, Japan fell into a slow but relentless decline that neither enormous budget cuts nor a flood of easy money has reversed.”

Japan’s gross domestic product in 2010 is about the same as in 1991, $5.7 trillion. Translation:  Japan has had zero economic growth in two decades. None.

Can you imagine two decades of zero economic growth and zero job growth in the U.S.? Economists are warning that it could happen here, and in Europe.

Deflation “becomes a vicious, self-reinforcing cycle: as prices fall further and jobs disappear, consumers tighten their purse strings even more and companies cut back on spending and delay expansion plans.”

“The U.S., the U.K., Spain, Ireland, they all are going through what Japan went through a decade or so ago,” according to economist Richard Koo.

Here’s the takeaway for U.S. voters: The economic crisis is SERIOUS. It is DANGEROUS. It could last 20 years. In this election, voters cannot allow themselves the cheap thrill of childish anger.

Voters must vote with their heads, not their emotions. To do otherwise would be foolhardy.

The stakes for the future of the U.S. economy are high.

— John Hayden

Advertisements