Japan Is The Economic Model

I remember back in the late 70's and early 80's, as the American economy struggled with high inflation a non-competitive auto industry, everybody looked to Japan as the new economic model. They had just-in-time manufacturing, cooperation between corporations, banks and government, a highly motivated workforce, it looked like they were going to eat our lunch. Well, for a long while they did eat our lunch, but then came their real estate bubble and stock market crash. The Nikkei still hasn't recovered half the "value" it had 20 years ago.

And all of a sudden, the pundits in the US decided that everything about the Japanese economic model was wrong. After all, they lacked diversity, creativity, and that Greenspan grail, creative destruction. The American economic experts railed at the Japanese for propping up failed companies that had speculated in real estate, with chest thumping exclamations that "the market" knows best, "the market" will work it out. The Japanese couldn't stand the pain of failing companies and people thrown out of work, so they settled for slow growth, a fairly valued stock market, and occasional bouts of deflation. Unlike American households, Japanese households save their money at the expense of consuming, so slow growth is a given when corporations aren't spending.

Jumping forward to 2007, Bernanke has replaced Greenburg, the US is in the beginning stages of the worst real estate bubble ever, and the Treasury is encouraging the banks to get together and prop up their bad real estate portfolios. What? Whatever happened to the wisdom of the market, capitalism and all that. "No" say the Fed and the Treasury, it's more important to limit the "damage" from a credit crunch. After all, didn't the Nobel prize for economics just go to three Americans who explained that markets don't always work correctly?

So it's getting near time for a Japanese style recession in the US, and the only thing that can delay it is very un-American tampering with the system. You can count on the Dept of Commerce to keep under-reporting inflation, and both sides of the House to come together for a mortgage bail-out to try to sustain housing prices at their unrealistic levels, nationwide. Yes, you heard it here, real estate isn't a series of local markets, it's a national market, and cheap mortgages inflated it all.

I just wish I spoke Japanese so I could watch their financial TV for the next 20 years and hear their pundits telling Americans that they have to let the market decide, stop hiding those bad loans off the banks balance sheets, and of course, a special plea to the American consumer to spend, spend, spend.