Is the US turning Japanese?
Americans may have to get used to a slow-growth economy.
By Kevin Mellyn, guest columnist
U.S. consumers are now living in a world much like the one the Japanese have been living in for the past 20 years: a world with limited access to credit, little or no appreciation in asset values, slow growth, large government deficits, and a rickety banking system.
The headline story about Japan is that the bubble economy of the 1980s was popped by central bank policy, and through bad policy choices the country has remained mired in deflation and low growth ever since.
That sounds like something we Americans may experience. The point is, though, that people are adaptable and can learn to cope with a no-growth or slow-growth economy.
The Japanese were the envy of the world (and bugaboo of American pundits) during the so-called Bubble Economy of the 1980s, when excess savings and low rates drove a huge run-up in asset prices. Then the bubble burst, with the Nikkei falling from a peak close of 38,915 to a low of 7,054. (It now sits at around 9,000 after 20 years.) In addition, prime real estate has fallen to as little as 10% of 1989 prices.
You would think that 22 years of super-low interest rates and no significant asset appreciation would result in a miserable society, but no visitor to Japan can escape the fact that it remains a very rich and harmonious country. The Japanese have gracefully adapted to a world of slow growth and diminished expectations, aided by their aversion to borrowing money and their habits of thrift.
Americans are not at all like Japanese, but whether or not we have it in us to adjust to a new normal of less leverage and low returns on investment, we are not going to escape the consequences of our own bubble. The U.S. economy was driven for more than two decades by an oversize financial sector leading up to the panic of 2008. The financial sector grew by increasing the availability of consumer credit and lowering its quality, especially in mortgage lending.
Now the U.S. financial services industry is being cut down to size by regulation and litigation, with no end in sight -- a process that was probably long overdue. Banks are learning how dangerous it is to lend money to anyone who actually needs it, especially consumers. It is going to get worse, not better, for households seeking credit. The real choice is whether to live within your means with a good heart, as the Japanese do, or hope the credit bubble can be reinflated.
I would not put my hopes on the latter.
Kevin Mellyn is the author of Broken Markets: A User's Guide to the Post-Finance Economy and an international banker and consultant at MasterCard Advisors.
What the article does not say is that the Japanese public debt (which it acknowledges exists) came about in large part through endless government attempts to stimulate the economy with deficit spending. They pumped billions into this project and that, all in vain attempts to stoke the economy back up. Meanwhile, the debt pile mounted high, and yet the economy continued to stagnate. The debt is still there. The stagnation is still there. And, China (not Japan) is now the #2 economy in the world.
Does any of this sound even vaguely familiar? Good thing we're NOT blindly heading down the same path the poor Japanese did!
Can wrap up the whole problem in a nutshell.
This whole problem has to do with the deterioration of the middle class. They no longer have the spending power they once had, and if they do have money, they are afraid to spend it.
The reason why this has occurred, is our middle class, especially the unskilled middle class, and there are a lot of them, are now competing, with the lowest paid workers in the world. All in the name of corporate profits.
The process is so slow that many people don't realize that they are becoming marginalized both economically and politically within their own country. The metaphor of a frog in boiling water was a correct example to explain the complacency of the majority of people not to realize that the heat is being turned up on them slowly as the middle class are becoming slowly disenfranchised within their own country.
Does this surprise anyone except the real owners of the US. When we knew that NAFTA would cost American jobs, the puppet politicians told us, "No it will create more jobs for Americans".
Another bold face lie, why do Americans always fall for the lies over and over again when the truth stares them in the face?
Why should we continue to prop up the TBTF banks when they are interlending globally and only care about their own profits? We need banks that are allies of their home - not enemies.
The best days of America are sadly behind it. The WWIi so-called "Greatest Generation" had it the best. Low home interest rates and relatively low priced homes that were generally paid off in 20 to 30 years. A carrot stick retirement that was honored and fullfilled upon one's retirement. A job that was created in America and stayed in America. A very low crime rate. Gas prices that were so low they were almost free. Very little if any drug problem. The list goes on.
Nowadays the future is unclear and so depressing. No longer are the above-mentioned facets of Americana viable. The rich get richer, the poor rely more and more on welfare, and the middle class gets more S C R E W E D, having to pay for what the rich no longer pay for and what the poor either can't or won't pay for. However, there are still those die-hards - mostly the rich - who fly these monstrous American flags in front of their homes and businesses while the rest of us labor in those same businesses, some working in more than one of those businesses just trying to put a roof over their heads and food on the table. Oh yes, the land of opportunity.
Many Americans are not like the Japanese but there is a large group of us that are when it comes to as little debt as possible and high savings.
There are only three types of debts that i consider OK: Mortgage, Car and Education. And while its possible to avoid all three (esp car loans), it is important to stay as low as you can in debt and seek to get out of it as quickly as possible if you do go into debt.
If you cant pay it off right away, don't buy it
If you cant save up for it, don't buy it
I am not a 1% but definitely in the top 10% right now (as per take home income) yet i still go to thrift stores, yard sales, antique store (lots of quality stuff cheap if you look past the high ticket items) and the like. Why pay more when you can still get nice for less (i do draw the line sometimes, like shoes and underware)? Its that much more in my pocket for other uses
Ah, poor banks. This article makes it seem the banks are innocent. They did this in the 30's. They got rid of the Glass Steagle act that regulated them and prevented the distruction. The deregulation happens every 50 years, and the banks boom from it. The taxpayer is suppose to live within their means. No the banks are to live within their means and should've. They are the culprits but now its turned on the tax payers to do it. I think what American's can do it live within their means, and I mean pay cash. Then no need for banks.
I live in Japan, and this article is stupid. The reason why Japan has been trudging along is that the average Japanese will not question the government, but just accept what is given to them. Not like in America where we question authority. Also, prices are sky high in Japan. A house that would cost you $90K in some midsized city would cost almost half a million in the same sized city in Japan. Land ownership is limited unless you can afford it. Dinner for 2 in a place like Outback would cost you around $120 US, where in the states it would be less than half of that.
This article is suggesting that we should be just like the Japanese and be "sheeple" and accept what is given to us by the so called "eduated elites" (I am not even going to get into the disparity in classes in Japan vs USA). If it means some hard decisions have to be made, then the government must make them. What they are actually saying is that the consequences would be that the ones in government now would be voted out if they actually did what they needed to do.
Memo to MSNBC, don't tell us to just "accept it" but rather ask the questions to the insiders of why your screwing the rest of the American people.
Copyright © 2014 Microsoft. All rights reserved.
As geopolitical tensions threaten to spin out of control, investors are wondering how best to position their portfolios for the global turmoil.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.