US economists have relentlessly harangued the Japanese for their supposed mismanagement of their post bubble era, which has lead to nearly 20 years of low growth, borderline deflation, with a not-much-discussed, robust export sector.
Along with others, we complained in the early days of the Fed/Treasury emergency response that they were taking one of the worst elements of the Japanese playbook, namely, trying to prop up the value of dud assets, rather than figuring out how to do more price discovery and ameliorate the attendant reaction (not damage, mind you, the damage was already done when the bad loans were made). Yes, the Treasury has made some capital injections into banks, but without cleaning up the balance sheets, the benefits are limited. Even with supposedly more aggressive action on realizing losses, our banks act a lot like their Japanese pre-writedown zombie counterparts.
So in yet another “putting lipstick on a pig” initiatives, the authorities, having unwittingly copied the heretofore-seen-as-failed Japanese playbook, are now trying to reposition Japan as a source of valuable lessons.
Trust me, you would never have seen anything along these lines two year ago, starting with the title of the New York Times story “Japan Offers a Possible Road Map for U.S. Economy.” Pretty soon, we’ll have our very own Ministry of Truth (I kid you not, read the article).
From the New York Times:
The Bank of Japan kept rates near zero for most of the last decade in an effort to end a long economic stagnation, and raised them only two years ago. Many economists say they believe that the zero interest-rate policy finally worked in Japan after regulators took aggressive steps that succeeded in restoring faith in Japan’s financial system and Tokyo’s ability to oversee it.
Now, with the Fed and President-elect Barack Obama turning to the same sorts of unconventional policy tools to battle the worst global economic crisis since the Depression, economists and bankers say they hope that Japan’s lessons are not lost on Washington. They say the United States needs to take the same kinds of confidence-building steps, and much more quickly than Japan did….
Yves here. Why does this remind me of that phase of the Iraq war when the US claimed the problem was not how the war (notice how we never say occupation?) was going, but the perceptions of the war within Iraq, and launched a PR campaign? That was such an astounding success that it gets nary a mention these days.
Back to the article:
Economists and former Bank of Japan officials say the biggest lesson they learned was that cutting rates alone has almost no effect when the financial system has fallen into a crisis as deep as the one Japan faced in the 1990s.
Japanese banks simply refused to lend in an environment where borrowers could suddenly go bankrupt, saddling lenders with huge, unforeseen losses. The Bank of Japan tried even more extreme measures, like using its powers to create money to essentially stuff cash into the nation’s commercial banks in hopes they would start lending again.
Exasperated central bankers found that commercial banks just let the money pile up instead of lending it out.
Economists say the United States faces a similar situation, after the sudden collapse in September of Lehman Brothers created fears of additional failures. Economists also fault Washington for its inconsistency in dealing with the financial crisis, leaving the impression that it does not have a clear strategy for dealing with ailing lenders.
In Japan’s case, economists and former bankers say, credit began to flow freely again only after 2003, when regulators adopted a tough new policy of auditing banks and forcing weaker ones to raise new capital or accept a government takeover. Economists said the audits finally removed paralysis in credit markets by convincing bankers and investors that sudden failures were no longer a risk, and that the true extent of problems at banks and other companies was finally being revealed.
Economists say Washington needs to do something similar to make banks and financial companies more transparent, and reassure investors that there were no more collapses like that of Lehman Brothers on the horizon.
Yves here. The need for writedowns along with recapitalization was the lesson of the widely-touted Swedish approach, in the wake of its early 1990s financial crisis. But Sweden went even further. It nationalized dud banks, replaced management, spun out bad assets into an independent company. That entity was deliberately overcapitalized, It was able to do triage on borrowers, liquidating ones that were goners, but more important, restructuring loans and often extending new credit to ones who looked viable.
Back to the Times, this time for comic relief:
Economists and former central bankers said another lesson from Japan’s experience was the importance of consistency. This became apparent in 2000, they said, during one of the bank’s more embarrassing episodes, when it raised interest rates, and lowered them back to zero a year later when the economy faltered.
It’s a little late to worry about consistency….
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Further real food for thought here:
http://www.financialsense.com/Market/daily/wednesday.htm
FWIW, I imagine Sweden’s problem was way smaller than ours; if their approach were feasible in our current situation, hopefully Geithner and Paulson would’ve utilized it despite ideology. Right? …
Anyway, I’d like to see more nuanced discussion about the situational differences and similarities rather than these broad-brushed, oscillating statements.
Since I’m cross by nature, I focus on the most interesting contrasts I see between the U.S. and Japan, which include domestic savings, current account balances, and the external climate. Because the contrasts are so significant, I hesitate to draw excessive parallels between our zombieconomy and their zombieconomy.
On the policy side, the US’ interest rate moves are actually not dramatically faster than Japan’s were, and have been proven largely irrelevant anyways. The real policies tested here will be quantitative easing and fiscal stimulus — again. While Japan tried both with mediocre results, their reflationary efforts were very small by comparison. Still, very little evidence was found for any successful transmission in the Japanese case, beyond lower short- and medium-term nominal interest rates. Just check their land price charts.
“While the transmission channels
cannot be specified, analyses find that the QEP had the effects of dispelling the funding
concerns of financial institutions…. The results show limited effects on raising aggregate demand and prices, despite realizing
more monetary easing than from merely reducing the uncollateralized overnight call rate
to zero percent.”
Second verse, same as the first; a little bit louder, and… ? Back to the NYT:
Many economists say they believe that the zero interest-rate policy finally worked in Japan after regulators took aggressive steps that succeeded in restoring faith in Japan’s financial system and Tokyo’s ability to oversee it.
I don’t buy it. First, there was only a brief recovery in ’05 and ’06. Secondly, there couple external factors that may have helped temporarily reflate Japan, factors known as their export sector matrixed against global tech and commodity bubbles and consumerism.
They’re falling back into the pit as I type, and the BoJ’s recent monetary policy meeting ran way long, which I find both hilarious and more encouraging than our uniform consensus.
Gruuuu… 脳味噌…
ndk,
I differ with you 100% on Sweden, It was barely getting any mention in the media or academic/economic blogs until very late in the game, which I am pretty sure is indicative of the attention it was getting in policy circles.
Paulson has been unwilling to impose ANY meaningful restrictions on banks relative to the TARP, which is as close as we have gotten to Sweden. He gave a conference call (for analysts, not media, but it was recorded and posted) and he made clear that even the modest restriction in the bill were mere cosmetics that were not meaningful in operation. That was clearly seen as a good thing.
And even if Paulson had been willing to nationalize banks (highly unlikely), Bush would not have backed it. Particularly pre-election.
I’ve read a lot of Geithner’s speeches, he is the textbook example of Buiter’s “cognitive regulatory capture.” Constitutionally unable to see that the industry needs to be leashed and collared, for its good as well as the public’s.
Ha! I just read the NY Times article and said to myself, “What a load of CRAP! I wonder what Yves has to say about it…” And lo! Thanks for reaffirming my well-placed faith in you to continue to talk sensibly in this otherwise fog of nonsense.
Yves,
you raise the question that has been gnawing at me from the beginning. I built my belief system on the propaganda of the past: the Japanese were unwilling to write off their post bubble assets because the government was too close to the business community (Japan Inc.)
I really believed that the ‘anglo-saxon’ model was a modern equivalent of economic darwinism.
So it seemed so utterly obvious to me that we would let the bastard assets fail. I had to learn (from you and others) that government had a role in crisis, and thus the swedish model came as the most anglo saxon form of this socialist deal with the devil.
But something went really wrong. You do an excellent job of shining your flashlight on the evidence (now the NYT is carrying who’s water?) but that is not scratching my itch.
Why? Why? Why?
I am not buying into the conspiracy theory of regulatory capture/Goldman sachs borg government. (Although it is the best standing explanation).
My best hunch is that war plan is obsolete upon first contact with the enemy, and that warriors quickly move to the solutions with the fewest unknowns. In this case they are simply hoping to put humpty dumpty back together by pouring cash into failed businesses. Everything else is too murky for them to comprehend.
I actually would prefer a conspiracy explanation. At least then I could be angry at somebody.
ndk,
Sorry for sounding cranky, I am SO upset with how the officialdom has comported itself that I overreact when its conduct is defended.
They really were massively behind the curve (not to abuse that cliche). They made NO effort to get a grip on the nature and depth of the crisis (it would have taken a full bore effort, with lots of data gathering and analysis, given how many opaque OTC markets were involved).
Instead, they had emergencies, went into emergency response, and assumed everything had been solved until the next crisis erupted. They were not considering large-scale, systemic responses until the Sept. 2008 meltdowns.
bg,
One of my favorite sayings is “Never attribute to malice that which can be explained by incompetence.”
We had the Bushies, not exactly known for high executional skills, and a Fed full of otherwise bright people badly blinded by ideology. A toxic combination.
yes, I would be happy to blame it on bad group think, except:
1. Obama picked Geithner (which feels eerily like FDR rebranding Hoovers experiments as the new deal)
2. Krugman is on board.
3. There is no screaming from the economists at Harvard, Chicago…
I differ with you 100% on Sweden, It was barely getting any mention in the media or academic/economic blogs until very late in the game, which I am pretty sure is indicative of the attention it was getting in policy circles.
It wasn’t trotted out publicly as a solution, you’re right. You ascribe that to pure ideology, and there’s a strong foundation for that. But there was some real noise. It’s such an obvious analogy that it can’t have been dismissed out of hand. We also had our own RTC, which was under Bush the Elder. There’s no way it wasn’t considered at all. It may have been rejected for cultural reasons, and Paulson has had pretty strong control. No way to know.
But I think there’s a lot to Rogoff/Reinhart’s “only more so”. We’re unable to put FNM/FRE on Treasury’s balance sheet. Why, when they were created by the USG? Is that just cognitive bias too? Could we really put C/JPM there, beyond the extent to which we’ve already implicitly done so?
I still think a strong reluctance to endanger the Treasury and create an upward impulse to interest rates is a more important factor than anyone admits.
Sorry for sounding cranky, I am SO upset with how the officialdom has comported itself that I overreact when its conduct is defended.
I come here explicitly for cranky. Please, feel free to unload. :P
“Never attribute to malice that which can be explained by incompetence.”
I’m also very cautious about assigning incompetency to others who have much greater data, resources, and knowledge than I do, regardless of bureaucracy or prior demonstrations of idiocy. There are often very good reasons for doing transparently stupid things.
?! is my favorite chess annotation, by far.
yes, I would be happy to blame it on bad group think, except:
1. Obama picked Geithner (which feels eerily like FDR rebranding Hoovers experiments as the new deal)
2. Krugman is on board.
3. There is no screaming from the economists at Harvard, Chicago…
You missed the memo, bg. We’re all Keynesians when running massive fiscal deficits to our benefit is a plausible argument.
cognitive regulatory capture to cognitive media capture to cognitive capture of political representation to cognitive academic capture to…
Not exactly an enormous leap of admittedly fallible logic. We’ve had enormous bust-outs, naked breach of contract, misrepresentation, price-fixing/collusion, concentration, war profiteering, influence-peddling…
To speak of officialdom as “behind the ball” is gross understatement. To say as BG does that it is merely a move to a solution that requires the fewest unknowns (a valid, but limited explanation) is generous.
Further to the point, if “Never attribute to malice that which can be explained by incompetence” holds true, would one ever properly attribute malice? Would the temptation to adopt a more cognitively-resonant, career-friendly conclusion guarantee the result?
Oh how I yearn for the days of partisan, subscription-funded papers. At least we could be certain of press malice.
IgnorantMike
ndk,
I still keep coming back to one basic point (and forgive me for harping): there was NO effort to get a comprehensive view what was afoot. Having frequent chats with interested parties is NOT the same as a Brady Commission style investigation. And as I have groused before, the 1987 market meltdown was a piece of cake, analytically, compared to this mess.
You cannot make competent decisions lacking a good understanding of the situation at hand (at best, you might get lucky). Instead, we have treatment by analogy (to the Great Depression and Japan) without even much consideration that the situation of the US now differs markedly on important axes from either situation. And that’s before we get into how different the financial markets and institutional arrangements are.
What they did was tantamount to launching a war without having even a map of the terrain or doing reconnaissance.
What they did was tantamount to launching a war without having even a map of the terrain or doing reconnaissance.
They may have tried to map out general implications of explicit Swedish action, and judged the risks there to be less than those of the other route.
A cursory understanding of the shape of the blob is possible, but who can possibly understand our financial system’s opaque and convoluted internals? I hate to drudge up the past, but do you feel confident anyone could know ex-ante what would happen with a LEH bankruptcy? I sure didn’t anticipate such carnage, and despite some protestations that they had no buyer and few options, I suspect the Fed and Treasury didn’t either.
Fear of unintended consequences, particularly after encountering unintended consequences, is an excellent way to found a zombieconomy. I have no idea what would happen if the Treasury officially blessed FNM/FRE with full-faith-and-credit.
So, I don’t blame our overlords for not having a good map of this terrain. I certainly blame them for letting the terrain get this fluid and warped in the first place. Regulators and policymakers royally f’ed up for at least 10 years solid leading up to this and probably longer than that. A regulator utterly losing control of the situation is truly inexcusable.
so we have it down to three arguments:
YS: They didn’t even try, because they already had an ideologically based framework.
BG: They had to do something, so they did the simplest thing.
NDK: They know something we don’t.
“there was NO effort to get a comprehensive view what was afoot”
– that is consistent with all 3 theories.
“We’re all Keynesians when running massive fiscal deficits to our benefit is a plausible argument.”
– that sounds consistent with my argument (simplistic)
I feel group decision making, organizational intellegence and historical memory are poorly studied, and we the same patterns of decision making that got us into the crisis are continuing despite clear understandings of the consequence. (this is why I dislike my hypothesis)
If economies are naturally unstable, so must be societies.
Imagine if Paulson and Bernanke were planning the Normandy invasion. The Allies would be doomed. They can’t even plan 2 weeks ahead. What is their plan for all rest of the big players that are insolvent? Do you think they really have a plan? The good news is that if we keep lowering the bar enough, we are guaranteed to suceed! :-)
ndk,
Lehman is the poster child of the Fed/Treasury’s failure to do adequate information gathering.
The reason they let it go was they assumed that it has only a $10 billion hole in its balance sheet, and was not a big CDS writer (like Bear) and therefore could be sacrificed.
But Lehman also nearly went under when Bear did. Morgan and UBS were next on the watch list. The Fed and Treasury went through a mad weekend scramble trying to figure out where Bear stood and came up with a very crude number. At first, everyone though JPM did a great job of snookering the Fed with the $29 billion backstop. Dimon later (six weeks or so later, when the dust started to settle and he had spent some time with the operation) told everyone who would listen that he regretted buying Bear.
I don’t think this was to divert negative press about the backstop. The media had moved on. I think he found the losses were worse.
Regardless, having been put through that weekend, knowing other banks were vulnerable, it should have been top priority to get a better grip on the real solvency of these banks.
The reason that Lehman produced such nasty knock-on effects was it had a $100 billion hole in its balance sheet, not the $10 billion that the market, and the authorities assumed. As far as I am concerned, its public financial statements were a fraud and Fuld should be in jail. The regulators were COMPLETELY asleep at the switch, and after the Bear meltdown, this was INEXCUSABLE.
The Treasury did send teams (subcontracted from Morgan Stanley) into Fannie and Freddie. There are independent boutiques who do forensic work on trader frauds (including ones involving derivatives) could have done the same for Lehman (and you’d have to to GS and MS to keep from tainting Lehman).
ndk,
“I hate to drudge up the past, but do you feel confident anyone could know ex-ante what would happen with a LEH bankruptcy? “
I remember that weekend like it was yesterday. Time slowed down like it would in a car crash.
Look into the history. Yves said 2 things (I paraphrase):
1. she predicted Paulson would let LEH fail.
2. she predicted armegeddon(not her words), but admittedly was not very specific about which buildings would get destroyed by which tornado.
I think there were plenty of people in the know about the interconnectedness of the financial system, and how the dominoes would have to fall – worldwide. Besides Yves, there is Roubini, Krugman, Buiter, Evans Prichard.
I was actively short Lehman based on writings from the above list, and was incorrectly trying to fill in the gaps on the order of the chips falling. (I must have missed the AIG memo.)
There was an active cohort who understood the train wreck unfolding.
keep listening to them. I am.
Lehman is the poster child of the Fed/Treasury’s failure to do adequate information gathering.
The reason they let it go was they assumed that it has only a $10 billion hole in its balance sheet, and was not a big CDS writer (like Bear) and therefore could be sacrificed.
I think the Fed and Treasury were much less cavalier than you do. Here’s some excerpts from a contemporaneous account:
Policy makers fear its losses could ripple through the financial industry at a time when banks and securities firms are trying to overcome $500 billion in write-downs.
One observer briefed on the situation described the session as a “game of chicken” between the government and the heads of the major banks….
If there are no bidders for Lehman Brothers, these banks say they can collect their collateral and liquidate the troubled firm’s assets…. Mr. Geithner, who led the session, firmly stood his ground. He told the banks that this was about fixing the system and preventing the crisis from worsening.
Even back in October it was clear that the hole was an order of magnitude larger than $10b.
I can’t believe based on this information — and you know I’m no defender of Geithner nor his bailouts — that the Fed didn’t have some inkling the situation was really bad. I think they still underestimated the degree of bad, and the others in that process underestimated it far more.
“The reason that Lehman produced such nasty knock-on effects was it had a $100 billion hole in its balance sheet, not the $10 billion that the market, and the authorities assumed”
Yves,
It was commonly known the extent of LEH level 3 assets, and also the mark-to-market rate that most of those assets were getting in the market (thanks to MER). I did simple math then that the hole was bigger than Bears, and the $30B was the likely size of Bears hole.
I know that I am not as smart as that last paragraph sounds (i.e. I really had no special knowledge of the particulars). I also remember that there was still an active dispute about whether mark-to-market represented value or distress.
People in the know HAD TO UNDERSTAND that 10B was not the size of LEH hole. Of course there are lots of people who believed Madoff and Fuld, but Paulson had access to provable data. he had to.
I remember that weekend like it was yesterday. Time slowed down like it would in a car crash.
Look into the history.
Yep. She had the best coverage by far, bg, and did an excellent job. That’s why I raise her coverage old posts as the best example that it really wasn’t possible to judge what would happen at that time.
Nevertheless, it’s quite clear that Fed and Treasury were fighting the hardest to make something happen. The banks were the most cavalier, and as you note, anyone with any clue could see things were quite a bit worse than $10B.
I don’t acccept the incompetence theory. Nor regulatory capture. What I think makes most sense and explains everything past, present and future is public purpose, which by definition is the reverse of private (you, me, and every other non-state actor). Minus the Treasury backstop and Bear would have been wound up without hurting JPM. Minus the bailout and AIG’s criminal fraud would have crashed the CDS pyramid. Minus the full faith and credit scam, GSEs would not have enabled the MBS nonsense.
We’re at the stage where all the bridges have been burned. There are no private actors left standing. We turned Swedish or maybe Labourite British. Next stop nationalization, starting with GM.
Yes, thank you very much Uncle Sam for saving the world by using your balance sheet to pay for the bills chocked up by players at the poker table. And by the way, in case you do not know that your bankruptcy is drawing closer, you might want to just start spending the other $3 trillion that you do not have.
so we have it down to three arguments:
It’s probably a confluence of factors. But I think ideology was and is the primary driver. The original TARP proposal is the best evidence. There was not even the least pretense to sharing the pain in the text, or holding anyone responsible, or being subject to any kind of oversight. It was not the proposal of a group of people who believe in good governance, just raping the taxpayer.
I had some hope that the Obama administration would apply the “Swedish model” to current situation. But the group of insiders he has assembled for the economic team has pretty much eliminated it. It’s important to have people who are familiar with the system in the mix, but some less conventional thinkers (or more conventional as “innovation” is what got us in this mess) are need at this critical time.
My outstanding question is still whether or not Bernanke really believes in the general approach taken so far, or if he has just been trying to do whatever he can within the context of the Bush administration.
A wonderful post and comments by Yves and BG especially. Thanks very much.
The only way I might differ a little is to wish they had let AIG go under along with Lehman, then nationalize the banks [but too big a philosophical step] and write off all the bad assets, and start fresh. I have to agree with Yves that we are following in Japan’s footsteps.
Japan’s lost decade is the best possible outcome for the US and probably the best that can be hoped for. Zombie corporations and government supported industries sucking the life out of profitable real economy. Cronyism, corruption, money printing, and impoverishment of the working class.
Beware the Treasury-Financial Industrial complex. The hallmark of the swaggering government of Cheney/GWB/Greenspan is the delusion that these guys are industrialists who arrived just in time too save America from the socialist tendencies of the FDR America. Of course, these phonies owe their wealth and power to their status as bureaucrats, who were purchased by industry.
This idealogy has been carried into the rescue operations, where the banks are seen as the fundamental, wealth creating cornerstone of the economy, repeating the Japanese mistake. The value of the banks extends only to their ability to be a super trustworthy conduit of efficient money allocation to the real, consumer and saver based economy.
Supply side economics should, by now, have been exposed as idealogically bankrupt. The credit bubble was the Fed and Treasury response to the worst of the Japanese mercantilist exports to the rest of the world, deflation. The toxic combination of mercantilism and credit has created hyper-leverage through the carry trade.
The deflation of the trade deficit has overwhelmed the income, and now the accumulated wealth, of the US consumer. Keynes recommended stimulating consumer demand in the trade surplus countries, savings and austerity in the deficit countries, and depreciation of the deficit currency to reverse the import/export imbalance. The trade imbalance must be addressed.
The idealogically-based battle to delay inevitable equilibrium rebalancing of the twin deficits is the fundamental underpinning of todays economic plight. The fertile ground of ten years of fiscal, monetary, and regulatory stimulus has spawned a malignancy so powerful that it is bringing the world economic system to it’s knees.
We are back to trying to recreate the “new deal” which began with disinfecting the putrified banking system, instituting financial regulation that protects the industry from itself, powerful progressive taxation to protect the wealthy from themselves, and restoration of middle class income and savings wealth, the true foundation of American and world wealth.
Thank you, Yves.
Is this discourse the narrowing of focus, to define the actions of all involved and assign a value to them. I feel, it is just as important to define the personality’s both individual and group/culture in this case. There seems to have been quite a few enablers to the effect, finance markets and the political landscape are experiencing. Almost as if they were of the same family and shared genetic/environmental pre-dispositions.
To me this is much more than a monies matter, which is just a side effect of the actual disease.
Wall St and DC are very small towns and as some know, there are very few secrets in a small town. So what was the impetus to play small time with the coming calamity. All the indicators were out there for all to see many years ago, yet all that had the power/influence looked the other way or only gazed at it obliquely. I can only conclude that they knew but, decided to rake as much in as they could, to be stored away as lifestyle retention.
I see very little in common with Japans condition and ours. Their landmass/population create a completely different set of problems than ours, not to mention history/culture. So i find little help in looking that way. We need to find our fix, designed not only to remedy the banking sector but, to reinvent the way we view our selves (unity/common cause). Kennedy understood this concept sans the Russian component. Why not go to Mars now or set up the moon base and build infrastructure. It would require large factory’s, science MBA/PHD and skilled workers, hint Auto industry. Also this would help off set the decline in the Military industrial sector. The human spirit is a funny thing, if it is allowed to whither in a climate of detersive self-ism it has no direction. Where if given the chance to see a goal that all can contribute in will grow and enrich life for all. Lets get outside the box in a big way. We can do infrastructure and go to Mars. Bring everyone in China, Japan and Europe, everyone. We are the original explorers you know, its in all of us.
Skippy
As long as they keep playing with currency, interest rate, core asset pricing, nobody will know what the actual market sustained price of those thing. As a result
a) everybody has to prepare for wild price gyration. (look at currency and loan cost) That means draining even more cash from already weak sale. Or worst: people simply wait it out.
b) nobody can calculate what is the price of anything (fuel, shipping, currency, raw material, etc)… Are they going up? are they going down by a lot? What will my competitors do? Will market able to absorpt the price fluctuation?
I think what they should have done:
1. Let price of base asset/banks falls to real market supported.
2. close down those scam hedge funds and CDs.
3. Give workers temporary relief while price reequilibrate.
4. Once things equilibrate. Then start “bailing” out. because at this point the system is stable and we know who need what precisely.
“Once things equilibrate. Then start “bailing” out. because at this point the system is stable and we know who need what precisely.”
Exactly! Let the dust settle and then start bailing. Much less effort and resources are wasted. What we have now is a defense of the interests of the bailers (to stop bailing now would be an admission they were wrong hitherto) and the elite (who want to protect their particular place in the sun).
Reality bites. In the beginning the US government did try to follow that old tough guy advice that they’ve given to other countries, but it was too painful.
Given the past awareness of the problem, I don’t think the propping up of overvalued houses and companies is incompetence.
Just like in Japan the strategy is to prop up valuations and hope the economy improves somehow to the point of eventually justifying them.
Of course it’s too painful. Like in Japan, exactly like in Japan. The debt/lost money is connected to the very powerful. Doing the right thing means destroying the status quo and exposing many crimes.
Exact SAME thing. In fact Japan was in a lot better position, since they have positive trade balance and budget surplus.
I expect we are going to enter lost decade exactly like japan. (Look at the automobile bailout. it’s a sign. Everybody knows what the right thing is, but they prefer to fight the usual politics. Union vs management, and keep making SUV + asking for bailout.)
Status quo inertia.
btw, this is what the japaneses are thinking about current US problem.
http://japanfocus.org/_Kaneko_Masaru_and_A_DeWit-Subprime_Learning__Positive_and_Negative_Lessons_of_the_Japanese_Bubble_for_Americans
So perhaps another negative lesson for America from Japan is that injecting even massive public funds is not in itself sufficient. The proper assessment of toxic assets via a close scrutiny of their value is clearly required, as is proposed by the FDIC (and appears about to become law). But perhaps more important even than that, there must be serious inquiry into management wrongdoing. Systemic failures require systemic solutions, lest the symptoms continue to fester and manifest themselves in periodic and perhaps increasingly large crises. In other words, if one is going to use the state, then its pecuniary as well as punitary arms need to be used with a comprehensiveness and intelligence that not only deals with the technical aspects of the crisis but also the natural political resistance to bailing out rich and irresponsible people whose actions contributed to the crisis. The latter clearly have to be made to pay, in the fiscal and legal senses of the term, lest the path to recovery be constricted by political fallout.
It’s always seemed fairly obvious to me that anyone attributing Japan’s all-too-brief recovery to internal policy was making a pretty large assumption. The recovery coincided with a record increase in demand by the U.S. for consumer electronics and autos and by China for advanced industrial goods, i.e., the best of all possible worlds for Japan (outside of a higher fertility rate perhaps.)
Even still, Japans growth only briefly reached above levels that were above barely recessionary.
If this turns into a severe recession, I doubt anyone in Tokyo come 2030 will be using the term lost decade. The brief recent expansion will probably be seen as a blip.
There are much deeper problems in this country than economic ones. The economic ones are a consequence of the deep ones. One of the most important deep problems in this country is the loss of the ability to recognize truth, and the willingness of the population to listen to (or read) contradictory postions by the same people held up as consistency. An important and powerful segment of this society (and a powerless but large one too) has come to regard ‘agreeing with the powerful’ as truth. When the powerful say up is down they nod and lecture the rest of us — usually with plenty of self righteous, arrogant, nasty, petty viciousness. When the leaders say down is up, they nod and lecture the rest of us with identical displays of wretched character. Vast portions of the societal apparatus participate in and amplify this process whether out of a desperate fear of losing market share (CNN) or a genuine religious fervor — fox. The NYTime would love for us to forget their role in the destruction of this country, but we will not.
The fact that even now, even as the entire edifice is revealed for what it is, after the trap has sprung, and the purposes of the lies and machinations of the powerful are revealed, many, many people, still insist on inserting the cliche slogans invented in support of those lies shows just how much trouble we are in. We cannot possibly begin to right the ship until the causes of the problems are recognized. “government is always evil” is one of the most stupid, most insidious lies they have promulgated. Any people who believe that deserve exactly what they get — annhilation as a culture followed by absorption into a new and subservience to… a new government. America enjoy a period of fabulous wealth and economic stability precisely because we had a decent balance of forces in our society both within government and between various actors in the society including government. Those who want us to hate government have never experienced a world without it, and have their own agenda and petty personal vendettas motivating their hatred.
The society of America has been under sustained attack by insidious forces whose goal has been aggrandizement of personal power and wealth. They have now succeeded. They have spread lies, and hatred, mistrust and enmity throughout the society. Anyone who cannot tell a lie from the truth is doomed in the nightmare world which they have now unleashed upon us.
Small correction:
Japan’s TWO lost decades turning into three.
I think we will be lucky to wind up “emulating” Japan. Japan managed its “lost” decades without major social disruptions and we are unlikely to manage our crisis without them.
I’ve been reading the revised “Return of Depression Economics” and Krugman says there was no one more prepared for this crisis than Bernanke and that even so he has been consistently “behind the curve”. The extent of and rapidity of the collapse of the “shadow” banking system gets most of the blame.
Using myself as an example, I think the whole exercise is doomed, because the premise of it, that we can return to our past level of "prosperity", is based on a chimera. My assets (my home and my 401k) are both down about 50%. Now maybe they will come back, but I find it hard to believe my house will regain its past value anytime soon. And I've read that the S&P hasn't had a true gain (above inflation) in 8 years. So a lot of my loss is "paper" but money is paper and I now have a lot less. It really doesn't make sense for me to borrow to remodel or rennovate my house. Maybe I could live for the moment and go on a very expensive vacation (how much would flying to Europe help our economy?), but I was going to retire in 3 years. If I am to retire in even 5 years, it means pulling in my spending even more.
And the 1 thing that would give me some confidence, namely some kind of return from government bonds, is completely missing. I think the lack of return on government bonds is one of those hidden perverse incentives that occurs but is unrecognized. Not being able to save destroys confidence – it doesn't make people spend.
Federal Reserve Chairman Bernanke’s reckless, unilateral spending of many trillions of taxpayer dollars to bailout financial institutions provides little help for the US economy. Bernanke’s latest attempt to save face involves allowing private hedge funds, unregulated by the Fed, to have access to the $200 billion dollar Term Asset-backed Securities Loan Facility (TALF) program. http://www.ft.com/cms/s/0/989db158-ce30-11dd-8b30-000077b07658.html The US finacial ruling class acts with impunity and is laughing at us.
Probably 3 years ago, I was bitching to people about The BOJ and the low, if not, zero interest loans that were behind the tsunami wave of Cheap & Easy sub-prime credit related fraud — linked to all the derivative bullshit that relied on a tsunami of smoke & Mirrors (see Madoff).
It seems only fitting that Obama will now use the BOJ Playbook to blow smoke into the smoldering embers of the pea & shell game that relies on re-packaging garbage debt into new pristine financial instruments that are re-blessed by the same rating agencies and the tsunami of government-backed fraud — which will guarantee a deeper, wider and darker black hole that will at some point (within the next ten years) wipe out the entire global financial system. Thank you Obama for that change!
Now a moment of prayer: Dear God, please allow the Madoff's of this world to be blasted into darkness by The LHC and please allow these evil bastards to not have the capacity to re-form or re-package or re-invent themselves into new politicians and leaders of this most corrupt world which we currently dwell in. I further ask that Wall Street be hit by a Noah's Ark-like flood that will wipe out all the evil people there that have been given XMAS bonuses and may they all so have a pox upon their families for a few generations and while your at it, can you twist their DNA to turn them into non-flying pigs who are unable to re-group into new organized entities, and thus, may they labor for garbage and remain in the mud …
Amen
” Eric L Prentis said…
Federal Reserve Chairman Bernanke’s reckless, unilateral spending of many trillions of taxpayer dollars to bailout financial institutions provides little help for the US economy. “
Excuse me for being thick, but how are these “taxpayer” dollars. The fed doesnt raise any taxes. It just taxes through the backdoor- inflation- and this is paid by anyone who holds US dollars, not just people paying taxes to the US govt. Which means the chinese and the japanese are also paying.
Key Topic Today is nonperforming loans!!!!
1. The previous policy required financial institutions to park 30-35 trln yen in current account deposits at the central bank, well above the 6 trln yen required by law.
2. ( 09.14.2005) Under its quantitative monetary policy the BoJ seeks to keep short-term interest rates around zero by flooding the short-term money market with excess cash, in a bid to stimulate economic activity and end years of deflation.
Its primary tool for doing so is targeting a range of 30-35 trln yen in the outstanding balance of current account deposits of commercial banks held at the central bank. But as it has had difficulty in regularly meeting the target this year, it recently began to allow the amount to temporarily drop below the range when market conditions warrant.
3. When the Bank of Japan initiated quantitative monetary policy easing in March 2001, it expected portfolio-rebalancing effects to help spur the economy. But as stated by Governor Fukui (2003), the expected stimulus to the economy did not seem to materialize:
…… one of the effects expected from the introduction of quantitative easing wasthe so-called “portfolio rebalancing effect.” The Bank thought that, even when the marginal value of liquidity services became zero, people would start to rebalance their portfolios by investing in assets with higher marginal values whether these were real or financial assets, if the Bank increased further its provision ofliquidity. The aim of this process was thus to generate positive economic momentum, acting, for example, to push up asset prices. So far, however, theeffect has not been widely observed. (Fukui, 2003)
One reason why the portfolio-rebalancing effects were seen as ineffective was that the capital positions of the private-sector financial intermediaries had been impaired by an accumulation of nonperforming loans following a fall in asset prices and a prolonged recession. As a result, financial institutions may have become more reluctant to take on portfolio risk.
Quantitative Monetary Easing and Risk in Financial Asset Markets
Cheap & Easy Tsunami of EVIL
I had imagined a financial elite that, inordinately perhaps, enriches itself during periods of economic prosperity. This is a tax, if you will, on broad-scale prosperity, a necessary toll. As sure as taxes.
I had not considered an elite that turns to preserving its ‘boom time’ earnings during hard times by such unconscionable methods as nationalization and socialization of risk. The rich suddenly look unvarnished, almost ridiculously in love with their mansions. They are not capitalists, have no ideological purity –just vanity plates with ‘laissez-faire’ stamped on them. Suddenly there is absolutely nothing to recommend the rich. Too indolent even to mount an ideologically consistent position, they are craven, they are nakedly opportunisitc, they are greedy. Period.
We are condemned to “at best” follow Japan because we’re beyond the runup and are already in the bust.
You know, an “ounce of prevention” and all that.
One difference between Paulson and the Roosevelt administration was when they gave the money to banks, they took real shares, and often control of the banks. When the banks refused to lend, there were sudden management changes!
@VoiceFromTheWilderness, 12:43
Righteous!
But I wish to pick a small nit with your point of view. Government doesn’t have to be evil or ineffective, but with regulatory capture in full effect, it surely will be for the forseeable future. Obama has all but come and out said on national TV, “I ain’t changin’ shit in the status quo because I ain’t got any real power; any change, will have to come from below.”
That change from below won’t be coming because of the carefully cultivated cognitive capture of the populace which you, and I, and no doubt many others, have observed for years.
We’re now at a point where the average person not only accepts the endless series of quick-looting-raids-disguised-as-fixes as inevitable, but good governance. I stopped taking Bush bashers seriously months ago because they’re just looking for their handouts.
The only reason to participate in the political process for the Bush/McCain supporters, as well as the Bush bashers, is to transfer some of that stolen money to their own districts or industries, rather than striving for a fair process where one isn’t choosing between stealing or being stolen from.
This is a sick, perverted society, and I can’t wait for it to be wiped out.
Then the libertarians will find out just how awesome life without a strong central government really is. They’ll be the biggest schmucks in any society they’re in, saying, “You can’t do that! That’s a breach of contract!” as the rabble rousers direct the crowds to steal their precious Stuff.
Is it too much to ask that the reporter define the terms “worked” or “right” somewhere in the article? Or that he call Ken Ohmae or someone to tell him what rubbish this piece is?
Said it on a previous Japan-comparesque post a while back and will say it again; Japan did and is doing just fine all things considered. It’s a relatively well-behaved society, mostly clean public places, unusually polite people and fantastic food. Even all the turmoil with their political leadership lately is non-consequential to the average citizen. There’s a lot that can be vastly improved there as with anywhere, but overall, we should be so lucky even in the best of times, let alone facing the worst of times. If we’re going to get all in an uproar about avoiding outcomes, maybe best to worry about turning into Russia or some of the darker regimes of history.
@spare some change @4:40 :
I share your distate for this society. I have done my best to succeed on its terms, i.e. not to be a doormat here, and I have a few scalps to my credit. But I wish it were not necessary.
If they’re going to play this game, I will try to win it. But there are better games to play.
Reset is fine with me. I do want to keep my house, and everyone’s health, the rest we can worry about later.
If American society is forced to endure the Shock Doctrine sort of economic social adjustments, I trust people will not let it occur.
I dare say we are about to find out.
Thanks to all for sharing….
I was talking to a lobbyist friend recently, who is pretty well connected to lead congressional staff and has been in the business as a staffer/secretary for a while. He mentioned how Geithner has been in the bank’s pocket for a while, and he was a conciliatory pick to keep the banks happy as they see him as their insider.
I’m on the side of institutionalized corruption in the meanwhile. Prop the banks and the wealthy part of society up, let mass society deal with inflation, while they have their assets propped up.
Let’s start calling it what it is, the financial sector is the heart of American corruption/imperialism. If we don’t start calling it what it is, we won’t shock people, we won’t unsettle people. The economy and higher and higher unemployment will make things apparent to the disaffected. Jesse (of Jesse’s Cafe Americain is worthy of your blogroll, IHMHO), and I think getting more directly political would aide a movement in journalistic coverage. $200 billion, of which hedge funds (hedge funds!) get access of fed loans. Bullshit. I scream bullshit, complete bullshit. I’m usually quite guarded in my speech, but this is not right. If we don’t start making noise, we will not get capitalism 2.0 in Taleb’s sense, we need utility-style banking.
So Japan didn’t get their act together until 2003? They have been kicking our buts with their car manufacturing and many other manufactured goods. Where does that put us? Oh, right, bailouts.
@artichoke and spare some change,
I share your disdain for the game. Those that have control of the levers, do so from their fortifications. It is stacked and rigged in their favor full stop. No election process or uprising of any kind can root them out of their fortifications and they will farm the populations of humanity for their gain or pleasure. Those that play by their rules or don’t threaten them may receive small gifts from above.
How much faster and sharper do television sets have to be. Oh yeah, laser will now replace LCD and Plasma, so we can throw out that old technology in to some third world toxic waste dump. Case in point i have a 85 Toyota 4×4 which i rebuilt from the ground up, to take my kids into the bush and see the real world. Funny that i am always helping out people with brand new land cruisers and land rovers as some oxygen sensor has glitched up and stranded them 100s of kilometers from no where. Now if i have a problem a screwdriver or wench is all that is needed. We make stuff just to turn around and toss it out in a few years out of fashion or because of its only built to last 5 years (intentional design flaw), so the company can sell more stuff. But it’s all about jobs, jobs and more jobs. Its all about eye and mind candy for the masses, industry employs only the best minds to find the right buttons to push in the consumers brain. Drugs and consumerism are about triggering the reward centers in the brain. In this case we have perverted the coarse of evolution, that which was developed to insure our survival has been manipulated to bring about our demise.
We have about 50 years before we have a real Easter Island moment. Yet we sit around wondering how to kick start a failed system back into life. So we can hasten the the moment of real collapse. Most societal collapse occurs when the planet shudders and said society’s are in a weakened state of their own making. Meso American, Easter Island, Roman, south Western native American culture etc. These examples are small in comparison to what is on offer, Planetary collapse. Just think what will happen when the Himalayan rivers only run half the year, then turn to dust the other half. Why are all the Bees and amphibians dieing off. First its reported as pollution and then natural Disease, but finally is shown as pollution weak-ed, made vulnerable to natural causes.
600 hundred years ago the Japanese kicked out the Priests and the Jesuits. For their influence on the country, as the were the point men sent into transform the culture there for Western profit. The Japanese ruling class then established rationing of natural resources to the population in order to survive. Only after enough time, diminished collective memory and fear of the power the West had accumulated that they felt it necessary to reengage or be trampled/vulnerable. To this end we the Western culture are intent like our fathers the Romans, the intent for only one goal. Expansion for the sake of non changing cultural identity. We must change, grow and shed that which no longer serves us as a species. This is not a fight for ologys/ism but for the continuation of our species. There is no more room left to run away to. No more easy solutions, cheap fast fixes, pay for it later programs.
We are but kids that have made a mess in not only our room, but the hole house and the parents have left us all alone to gamble the family wealth at the casino. They may not come back either as they have put us up as collateral far into the future, so they can try and win back all their loses. If they don’t win they will be put to low paying labor with interest to pay it all back and when they die, they will come for us and our children to spend eternity under the yoke of hyper consumerism.
So we can toss the broken toys and their packaging too ever increasing Depths.
Our masters must be very pleased with our placidity/conformity. We have become toothless and claw less in protest, reduced to grumbling Oliver Twists in the house of the poor, more please sir.
Yves, you recently apologized for showing a modicum of emotion. I for one applaud you for it, for it was tempered with intellect and not some ranting of the mentally challenged(not their fault bad programing). You only point out the disparity of the day and by those that make it so. It is, they that fuel anger not the other way around. I have not seen one occasion where you have displayed egotistical/manic/self interest in any matter. If those that find themselves uncomfortable with your statements or optics, too the cause and effect of this mess. I would recommend a mirror of internal reflection and find the source of that discomfort and reconcile them selves with it. It is their actions that bring down the house around us not the opposite.
The ancestor in me does rage against those that would subjugate me to their mold and it is a challenge to temper it with intellect/knowledge/giving it due course. I for one don’t really want to find a good cave to raise my family in or for my future generations with adequate water and food sources. The wealth of a society does not rest in a living room, garage or bank account, but in societies ability to tend to is citizenry through health, education and a reasonable life to love and Cherish each other.
History will repeat, but at ever increasing strength till we really bite the big one, unless we tack course and find a new reason for being here. I for one am vexed at the walls i must climb/rise above/break down just to clasp my brothers/sisters hand and say who are you and how are you and can we be good to each other.
Out of breath and probably soon out of my mind by watching this made for tv reality we have made for our selves.
Skippy
Circling back to the Lehman thread, I have a great deal of difficulty believing that Paulson & Co, knew how bad things were. His actions speak otherwise.
1. Fuld was calling Paulson every day, sometimes more than once a day, with status reports on his fundraising the six weeks before the firm went under. If the Treasury knew Lehman was in bad shape, Paulson should have told Fuld that he needed to get one of these deals done (Fuld kept botching deals by seeking too rich a price).
2. Paulson assembled a bunch of banks to come up with a private sector solution the weekend before the BK. If Paulson had known how bad things were, he should have been able to scare them, a la LTCM, into a "share the burden" solution. The fact that he did not go that route but instead was seeking single buyers or at most combos of 2-3 buyers (as opposed to playing the doomsday card and scaring them all into ponying up) says he did not see Lehman as being a complete sinkhole. He disputed the banks' view that they needed a subsidy to take the Lehman garbage barge on.
The Deflation Myth:
http://changealley.blogspot.com/2008/12/deflation-myth.html
He mentioned how Geithner has been in the bank’s pocket for a while, and he was a conciliatory pick to keep the banks happy as they see him as their insider.
I have absolutely no trouble believing that. I don’t think Geithner’s in it for the money, either. He likes the praise, fame, and heroism. Those are much more powerful incentives than monetary rewards, and more easily manipulated, to boot.
If the Treasury knew Lehman was in bad shape, Paulson should have told Fuld that he needed to get one of these deals done (Fuld kept botching deals by seeking too rich a price).
I’m pretty sure Treasury was pushing hard to get a merger done. That’s Geithner’s America’s Funniest Home VIdeos trick, after all(and I continue to believe he was the leader of the endeavor, as he had been since LTCM). If bailouts über alles were the goal, the best criticism is probably that they didn’t hit the taxpayer hard enough, fast enough. This was pre-TARP, after all, and may have — well, delayed the need for such a program by a month or two.
If Paulson had known how bad things were, he should have been able to scare them, a la LTCM, into a “share the burden” solution.
I have no idea why this didn’t happen. Even if Paulson didn’t favor such an outcome, Geithner clearly did. Why did the banks have such optimism that Armageddon wouldn’t result, when they had deep knowledge of the market and their own books?
He disputed the banks’ view that they needed a subsidy to take the Lehman garbage barge on.
That was a clear mistake, I agree. Can’t explain that one, in light of how much larger an intervention was obviously necessary in the bankruptcy’s wake.
Annon 6:01, I agree.
Richard Koo did a presentation at CSIS back in October, in which he talks about lessons learned in Japan. Worth a listen (audio is plenty as the video doesn’t show his slides).
Some points re US v J:
Demographics – given high drop-out rate we don’t have as much advantage as one might think.
Dynamics – I lived in Tokyo ’87-’98 and even in the height of the boom it lacked the dynamics of the US regarding start-ups etc.
Debt – The LDP ran it up with fiscal stimulus to construction in their rural voter base (1 rural voter = 7 urban voters by supreme court ruling). US could avoid that, NO new construction projects just maintenance and upgrades, NO picking winners just tax carbon and oil such that $100 barrel is minimum.
Denial – The Japanese were really sold on the idea that their system was the champ, and took forever to realize that real estate and equity wealth was really gone. US has been arrogant but most commoners (can’t speak for other) have known that house as ATM for basis of economy is house of cards.
Dollar – The yen is minor reserve currency but the US dollar is the world standard. I subscribe to The Eonomist’s line that this is because of large, liquid and well regulated capital markets. A few more Madoffs combined with more Fed and Treasury fumbling are on the horizon, and there’s bound to be a limit.
Without price discovery, how are we going to know the price of an asset. Even a dud asset will have a price .. albeit lower, but not acknowleging the dud asset, the price will never be discovered …
similarly without acknowledging the bad debts .. how will be ever know how strong or weak the balance sheet is..
Both put together increases uncertainty and makes for a complete fiasco by …
1. buyers not knowing what price to pay for an asset, thus making them reluctant to buy even if they have cash — reduced demand
2. lenders do not know how to value the asset thereby not being able to assess the risk they are reluctant to provide credit against the asset —- reduced credit
Couple this with job losses, falling asset prices — shares, house, retirement funds, neck deep in debt-customer, general unwillingness of consumers to increase credit …
you have the deflation …
price discovery of the asset (despite its accompanying pain) should be the first step towards recovery, not increased liquidity, reduced rates … you tell me do you any of this will increase demand or credit … I don’t think so…
Can someone make Fed, Treasury or US Govt understand this????
killben – there-in lines the circular argument; to restore lending you must first have price discovery and certainty but given the volatility of the markets, establishing an asset price is neigh on impossible. And down it spirals.
I’m dumbfounded that governments are fixated with massive stimulus packages knowing full well that history is not on the side of success and in many cases only exacerbated the problem they were aiming to fix. Generally, these packages are governments over reaction to be seen to be doing something rather than nothing even thought the results are dubious but politically rewarding with the voters.
The Australian government’s stimulus package has just come on stream and on cue, off to they shops they went and bought worthless non productive crap. Long term, there will be little to show for this splurge other than a blip in the quarterly GPD figures and a spike in personal debt. Money well wasted but worth it’s weight in gold politically. A very wasted opportunity.
Glen @ 1:12
Without the bailouts, how would executives loot the system one last time? That’s what the bailouts are about, the government officials administering them might really believe the bailouts will work, but they get all their advice from industry insiders who are definitely not innocent.
Skippy
On the subject of corporations using our instincts against us – that’s why commercials are so heavily used. Our most powerful instinct is to copy other people’s behavior, if you see smiling people in commercials using a product you will want it for yourself.
You have to rise above your animal instincts no matter how uncool it makes you look in the eyes of your neighbors. This is why I totally agree with others on this blog that the system and a lot of the people in it need to be destroyed.
Unfortunately the government is actively working against the Prudent Savers because the Useless Eaters aka Consumers Behind Bars outnumber them, and the government needs their votes. Bread and circuses in the 21st century. The collapse of the Roman Empire seems so vivid to me now, I can imagine the agents and their motivations so clearly these days.
For those complaining about how prudent savers are about to be cheated … why don’t they go and spend some of their savings to buy a house or three, now? Prices have come down a lot (I won’t call a bottom, but it could be close) and there’s plenty for sale in many markets.
artichoke
The problem for the Prudent Saver is that you don’t own a house, even when the mortgage is paid off, you always pay rent on it. So you buy a house for $200K cash, a 50% discount from two years ago, and have $100K left in the bank; aha, savvy buyer! Two years later the liquidity has made its way through the hose and everyone is getting soaked; your house is assessed at $2 million and you’re paying $50K a year in property taxes. Ugh, no good.
We’re entering a period of extraordinary financial instability and it is difficult for Prudent Investors or Savers to plan for the future. No wonder everyone’s staying in cash – which is Prudent, until it suddenly isn’t.
Maddening.
Addendum to above:
Perhaps the most Prudent investment of all is a passport and some language tapes. Or then again… I knew a guy who proudly announced four years ago he was moving to Iceland to escape the financial catastrophe he saw coming. Wonder how that’s working out for him.
@anon 2:02 and the later, i prostrate my self before your enjoyable whit, ROFL.
Skippy
Japan!!! Evil Japan!!! They kept their unemployment down lower than the US’s and our pundits had to denigrate them for keeping “most’ people happy and prosperous. Truly, the real estate bubble there was a farce as ours got to be…only the US has a huge advantage in real estate in having so much of it…but those “mcmansion’s” have got to come down another 20 percent.
I am not buying until the dollar really sings. Sorry, bankers and realestate folks, got cheap rent now and am going to marry into a nice place. Moving into together is going to be the US pattern now…grads out of college and grad school (and high school) are going to be moving back home…older folks like me will just have to get along better with others to share space.
Wage Deflation!! Forget about credit, and home sales. Solve the loss in wages or else other economic measures are moot.
Japan did good! I hope China gets smarter and copies them more than the US…or rather copy the US of the late 1800’s. Focus on their domestic market. The US needs to do the same. But w/o war talk and protectionism.