“There has been a political and intellectual arrogance in San Francisco the United States that it won’t happen to us,” said Adam S. Posen, a senior fellow at the Peterson Institute for International Economics in Washington. “We shouldn’t be so smug. You can get there without being Japan.”
∙ U.S. Hears Echo of Japan’s Woes [New York Times]
∙ Promoted From Comment To Post: Satchel Does Deflation [SocketSite]
Could we PLEASE have a Japan-style “lost decade”? 3% unemployment sounds pretty damn attractive right about now.
Was/is “Satchel” the same person as “LMRIM”??
…and whatever happened to them/him/her?
Brian wrote:
And from the article, linked above:
Immigration is a double-edged sword. The article mentions the credit side of the ledger, “the youthful labor and fresh ideas that can bring”, but leaves out the debit side, the fact that because of the high immigration rates we have (as well as other factors), to return to more or less full employment in 5 years:
Emphasis added. And when the baby boomers decide to raise the retirement age after the last of their cohort has already entered retirement and cut medicare benefits to control the deficit, the U.S. will have “created generational tensions” of its own.
Brahma – I’ve noticed that too….the boomers really have looked after themselves at the expense of later generations haven’t they. Its pretty depressing being a Gen X’er now-a-days. Not as well off as the parents but expected to pay for their full retirement benefits AND dig deep and give up our benefits to make sure the finances for Gen Y and later are not as bad as what we have now.
Let me break it down for you:
The positive aspects of immigration are essentially a constant (i.e. that aspect is always present and so it’s effect is already factored into our current condition).
Our savings rate is so miniscule that it’s effectively zero in terms of impact on the current econimic condition.
We also have the un constitutional fillibuster rule in the Senate which will slow everything down. People are simply not productive when they are uneducated, bankrupt because of an illness, are forced out of their homes, and underemployed.
Our manfacturing base has been decimated. Our so called best and brightest are busy dreaming up new financial instruments and more efficent methods of selling the instruments to anyone who’s greedy enough to buy them. Nothing that a real economy is based on…
And, last but not least, the Citizens United supreme court decision will ensure that the politcal/ economic status quo will not change anytime soon.
So, we will break Japan’s record of economic malaise; unless something startling happens on Tuesday. How’s that for a solid argument?
@VancouverJones: “We also have the un constitutional fillibuster rule in the Senate which will slow everything down.”
I realize that accusing something of being unconstitutional seems to be en vogue right now, but, unless you have a case citation, please avoid such hyperbole. Straw-man opinions from constitutional scholars trying to spin a political agenda do not make something unconstitutional.
just read the referenced discussion from satchel’s post, and it scared out of me any optimism i may have had about the economy. given that it has been two years since that discussion, how have things unfolded so far with respect to the inflation/deflation theories put forth in that discussion?
the steps taken by policymakers in the U.S. will prevent a Japan style deflationary trap.
Underemployment, however, will be here for a long time.
Real estate credit bubble busts are always deflationary, and are virtually always accompanied by underemployment which exacerbates the deflationary spiral which exacerbates the underemployment and on and on.
U.S. central bankers were able and seem to continue to be able to prevent outright deflation, but they CANNOT create aggregate demand which will cure our underemployment issues. A real estate/credit bubble bust like this has always led to severe underemployemnt. In a fiat currency world, the deflationary forces can be slowed and even stopped, but once unleashed, they create a long period of downward pressure in aggregate demand and that leads to unemployment.
Unless the Fed is going to print 5 trillion dollars, and then give it to the poorest 33% of the U.S. population directly in the form of expiring FRNs, aggregate demand and thus unemployment cannot be solved by the Fed in this situation. Of course, this ‘helicopter’ plan would cause a few issues in the form of inflation/dollar depreciation…
There is no free lunch.
CSK,
yes, Satchel changed his name to LMRiM.
No one knows what happened to him. Another poster threatened to turn him into the SEC for providing investment advice, and he never posted after that. It was about 4/5 of the way down on this thread:
https://socketsite.com/archives/2009/08/a_maybeck_for_rent_on_castenada_and_related_neighborhoo.html
He was sort of hinting that he was going to move to Florida, so perhaps he left and this blog no longer interested him.
After he disappeared, I begged the editor, twice, to send him my e-mail address, and ask him to contact me so that I could see if I could coax him into returning, but I never heard from him. Don’t know if the editor didn’t send him anything or if the editor sent it but LMRiM didn’t respond.
Whether you agreed with his positions or not, I think we all learned a great deal from him. It was very sad for all of us when he left.
BTW editor, my offer to coax him back is still open.
That Satchel post is the gift that keeps on giving: do you folks get the same top result when you google “Dr. Greedscam” that I do? 🙂
I’m guessing that he moved to Florida to establish residency with plans to kill himself before 12/31/10 for maximum estate tax avoidance!
He was a fun, incredibly smart guy and I wish he would return.
I have him buying a house in Monterey Heights in ’09 and not wanting to hear about what a bad idea it was so he went silent.
“I realize that accusing something of being unconstitutional seems to be en vogue right now, but, unless you have a case citation, please avoid such hyperbole. Straw-man opinions from constitutional scholars trying to spin a political agenda do not make something unconstitutional.”
You’re right, that’s a strong word; and it’s not central to the point I was trying to make. Should have replaced it with “extremely inefficient”. My point is that we’ve greatly diminshed the chances that we will weather the economic storm by:
1)Making it sound like a silly, quaint idea that ordinary legislation should pass by simple majority in the Senate.
2) Failing to invest in the health and education of our citizens. Yeah brilliant idea, let’s have people go bankrupt over medical bills. Here’s another winner: saddle your young college graduates with 10’s of thousands $ of debt even before they’ve landed their first job. Oh yeah, this will make us the country to beat in the economy of the future!
3)Allowing those who are supposed to facilitate the raising and funneling of capital to our brightest citizens to drain vast sums of capital from the system. Vast profits should accrue only to those use their own money (raised or otherwise), take on risk, work hard, and (gasp) actually solve a real problem. You know… the American way.
Anyway you get the idea. We have the best people; we have a fantastic democratic foundation. It’s simple: set up strong rules, insist on fair play, invest in the intelligence and ingenuity of the people and we will come out ahead.
dub dub wrote:
Yes. And it’s the number five hit on Microsoft Bing 🙂
One more thing about the article, it doesn’t tell us what Adam Posen thinks are the key areas that could put us on the deflationary spiral even if every other aspect of our economy is different from that of Japan. The U.S. doesn’t have a “national consumption tax” to raise.
And this:
The U.S., of course, isn’t starting out with the “already stingy individuals” factor of the equation. From bloomberg.com, datelined today, second ‘graph:
Emphasis added, because the author of that story was trying to focus on the fact that consumer spending rose less than analysts forecasts predicted. When consumer spending starts decreasing at a faster rate than incomes are falling, perhaps we’ll start seeing a genuine downward spiral.
deflation is here and all those mbs that the fed bought are worth pennies/dollars. unemployment will remain high and growth low. most will suffer and it will take a generation to settle into the ‘new american standard’ of living. that much is easy enough to see and predict.
what is harder to discern is the ongoing strength of the ‘supercities’ and the geographical pull they continue to have. i predict that $/sq.ft. will remain high and we will see more of a new york/hong kong/london scenario where apartments are chopped into smaller pieces and occupied by more tenants.
there is a mighty pool of pension money that needs to find a home and i can see some of it going into reits holding residential assets.
sortof like the peter cooper/stuyvesant deal but without the high price tag.(i.e. past puke)