IS AMERICA GOING THE WAY OF JAPAN?
Nouriel Roubini
Forbes, February 5, 2009
William Pesek, a savvy Asia columnist for Bloomberg, reports, in his latest column, views about the structural crisis faced by Japan that I first outlined in a 1996 paper, "Japan's Economic Crisis." Thirteen years later, Japan is entering another severe slump, one that looks like even worse than that of other advanced economies. In the U.S., Europe and some other advanced economies, along with China, the second derivative of growth and of other economic indicators is approaching positive territory (i.e., growth is still negative, but GDP may be falling at a slowing rate). In Japan, it is still highly negative. There, the fall is accelerating, resembling a free fall--a severe case of stag-deflation.
The sad case of Japan's free fall is a cautionary tale of what happens when a high-flying economy has a real estate and equity bubble that goes bust, avoiding (for too long) doing the painful structural reforms and clean-up of the financial system that is necessary to avoid a lengthy, L-shaped near-depression. Japan had over a decade of stagnation and deflation, then a mild, sub-par growth recovery that lasted only three years, and is now spinning into another severe stag-deflation.
Keep alive zombie banks and zombie corporations with balance sheets and debts that haven't been restructured, as in Japan, and you end up in an L-shaped near-depression. Let me explain why the U.S. and the global economy face the risk of an L-shaped near-depression if appropriate policy actions are not undertaken.
First, note that Japan made many policy mistakes that the U.S. should and could avoid. Japan cut policy rates two years after the bust of its asset bubble, while the U.S. eased monetary policy aggressively after August 2007. Japan went into quantitative easing and reversed its zero interest rate policy too slowly; it waited two years after the bursting of its bubbles to do a fiscal stimulus (and reversed it too early with a consumption tax). The U.S. did one--albeit a failed one--last year, and is doing another large one now. Japan created a convoy system of zombie banks and corporations that were restructured too late, while the U.S. may become more aggressive in cleaning up the financial system. Japan had structural rigidities, like lifetime employment, that slowed down the adjustment, while the U.S. has flexible labor markets, with workers who have lost jobs moving fast to new sectors and regions where jobs are abundant.
Forbes, February 5, 2009
William Pesek, a savvy Asia columnist for Bloomberg, reports, in his latest column, views about the structural crisis faced by Japan that I first outlined in a 1996 paper, "Japan's Economic Crisis." Thirteen years later, Japan is entering another severe slump, one that looks like even worse than that of other advanced economies. In the U.S., Europe and some other advanced economies, along with China, the second derivative of growth and of other economic indicators is approaching positive territory (i.e., growth is still negative, but GDP may be falling at a slowing rate). In Japan, it is still highly negative. There, the fall is accelerating, resembling a free fall--a severe case of stag-deflation.
The sad case of Japan's free fall is a cautionary tale of what happens when a high-flying economy has a real estate and equity bubble that goes bust, avoiding (for too long) doing the painful structural reforms and clean-up of the financial system that is necessary to avoid a lengthy, L-shaped near-depression. Japan had over a decade of stagnation and deflation, then a mild, sub-par growth recovery that lasted only three years, and is now spinning into another severe stag-deflation.
Keep alive zombie banks and zombie corporations with balance sheets and debts that haven't been restructured, as in Japan, and you end up in an L-shaped near-depression. Let me explain why the U.S. and the global economy face the risk of an L-shaped near-depression if appropriate policy actions are not undertaken.
First, note that Japan made many policy mistakes that the U.S. should and could avoid. Japan cut policy rates two years after the bust of its asset bubble, while the U.S. eased monetary policy aggressively after August 2007. Japan went into quantitative easing and reversed its zero interest rate policy too slowly; it waited two years after the bursting of its bubbles to do a fiscal stimulus (and reversed it too early with a consumption tax). The U.S. did one--albeit a failed one--last year, and is doing another large one now. Japan created a convoy system of zombie banks and corporations that were restructured too late, while the U.S. may become more aggressive in cleaning up the financial system. Japan had structural rigidities, like lifetime employment, that slowed down the adjustment, while the U.S. has flexible labor markets, with workers who have lost jobs moving fast to new sectors and regions where jobs are abundant.
(...) [artículo aquí]
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