Is the US turning Japanese?

Americans may have to get used to a slow-growth economy.

By MSN Money Partner Jul 6, 2012 2:25PM

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.

581Comments
Jul 13, 2012 7:23PM
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I love your myopic viewpoint on the illicit profits parked overseas, just waiting to be allowed into the country at zero taxes.  How does any of that money help average citizens?  Oh, right.  The wealthy folks will trickle it down in service jobs to the people who cut their grass and change the linen.  Remove the tax breaks for cheaters.  Who are cheaters?  Pretty simple.  If a person corrupts the system to hide profits - I'd say that's cheating.  If a person works, "off the books" I'd say that's cheating, too.  But, even more so, the employer who works employees, "off the books" - now that is really cheating.  How about the company that wants to exist in the good old U.S. of A. so it can take advantage of our markets but exports all its jobs to some third world country, solely to take advantage of a cheap labor market.  These are about the biggest cheaters I can sort out.  Where is their patriotism?  Who or what do they honor?  Apparently the almighty dollar takes prescidence over their neighbors.  I say if this is truly a government of the people, by the people, and for the people then those corporations need to be expunged.  Let them move to their foreign job market and enjoy life their, not cheat and retreat into their tax dodges.

 

Here's another thought for you:  We wouldn't be in this mess if Congress took all votes by role call.  If your representative knew his vote was registered and reported back home, you can bet the good-old-boy politics would die a quiet death. 

Jul 9, 2012 10:44AM
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We could only hope the U.S. could be more Japanese- Japan will continue with their respect for one another, common language, and their amazing capacity to survive any challenge without panic or rioting. The U.S. has no choice but to continue on its path of self-destruction,due to one factor(I believe)- we have lost the concept of self-responsibility, "golden rule", whatever label you want to attach to it. This, and the right to reproduce without any restriction will continue to push us down the path of divisiveness and struggle for resources.   Like any other 3rd world mess.
All civilizations decline eventually. 
We will decline fat, stupid, and at each others throats, unless we can become one unit, as Japan is.
See y'all at the Hometown Buffet!... until the power goes out:)

Jul 9, 2012 7:56AM
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Lets not forget the government was the big driver behind giving anyone and everyone credit.
Jul 9, 2012 12:37AM
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"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".  The only part of this that is correct are the last few words.  The financial services industry--Wall Street and the banks--are using an army of lobbyists to cut the teeth out of any meaningful reform.  I believe small businesses, under about $10 million in revenues, should get some relief from excessive regulation.  But, they do get big tax advantages.  I know, because I help some Sub-S's do their 1120's; and, I was a small biz owner and financial consultant for many years.  The truth is the big companies and Wall Streeters are screwing over small biz and the middle class a lot more than the govt ever did.  Time to wake up.
Jul 9, 2012 12:26AM
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Want to know, briefly, why the USA is in trouble? Check this site: http://zfacts.com/p/318.html.  Then tell me why I should vote Republican.
Jul 8, 2012 5:59PM
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"We need more people that work for a living to vote ..."

 

Lol, MG, if you get that majority to vote, Republicans will be in the minority.  Be careful what you wish for.

Jul 8, 2012 4:40PM
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After Oh-Blame-A gets the boot and takes his Man-size{I think she is bigfoot} wife we will all be better off.
Jul 8, 2012 1:50PM
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The "Reagan Revolution" worked out so well because it was the beginning of a economic pattern. Taxes were cut {they were very high} at that time. I am sure the Dems would love to go to the rates of the Reagan years.

The economic pattern of Small buisness entrepreneurs can be translated to mean"folks who are will to work longer hours for less pay and benefits". That has culminated to what we see today. Not solely mind you, but really here. Also was set in motion the big part of individual debt spending. That drove the economy til most folks credit was tapped out. Japanese ideas of "just in time inventorying" were adopted. Again, after 30+ years of this, well you get the picture. Look across the pond at Japan for the outcome. We the people created it.

Jul 8, 2012 1:46PM
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It was not my intention to enter or take sides in partisan political debates. I would urge anyone interested in the broader message of my new book Broken Markets to go to my Amazon page for that title (an earlier book on finance, Financial Market Meltdown is also on Amazon) and use the look inside feature to read a foreword Duff McDonald was kind enough to write for it, The book is about the consequences of recent history in which the US economy was propelled by the vast expansion of leverage at every level while being hollowed out at its core by global competition. The term Post Finance Economy is not widely used but it describes where we are, which like the 1930s is a very bad place with no easy answers. The observations in this short piece are a small fraction of the argument which is really about where we all go from here.

The views in the book are not reflective of my employer or my political leanings but of a long and deep reading of economic history and 40 plus years of experience in and around finance.



Jul 8, 2012 12:17PM
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Enough with the negative leading headlines already. The bigotted U.S. media is becoming increasingly negative for the sole purpose of winning an election so the top 1% can win in the upcoming election. It aint gonna work --- so quit trying to drive the market and people's pensions and peoples 401K's down and do some honest constructive reportinhg for a change.  
Jul 8, 2012 11:52AM
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When the middle class is strong, the overall economy is strong. In a plutocracy, the middle class is diminished, and only the wealthy are strong, and that's exactly what we have happening in the US.
Jul 8, 2012 11:50AM
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Heard one of the greatest Republican presidents of all time, Ronald Reagan, say in a nationally televised speech, The US is going to be a service economy. How's this Walmart economy working out for y'all, that the politicians created.
Jul 8, 2012 10:39AM
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Hmmm...

 

I guess you could distill all this down to one school of thought...

 

Should the government be in charge of the economy?  Should it set up 5 year plans?  Should it be in control, with economic decisions made by  an elite?   The democrats seem to think so.   If they were in charge we would have one car company, GM, and choice would not be needed.

 

This of course will fail, as all socialist economies eventually do.  Free markets will have ups and downs.  But they represent the only path to prosperity.  Thus, this November we reall have a choice, between a free market and a centrally planned one.  The choice is really quite stark. 

 

Socialism or Free Market Capitalism.   Thos that do not want to workand think they are entitled of course will vote for Obamanomics.   The question is what will the people that support these people do? 

 

We need more people that work for a living to vote, than we need those that vote for a living to vote.

 

Japan's choice was the socialist path.  Near zero innovation, zero growth, a demographic that will halve their population over the next 40 years, and more government planning will not improve Japan, or the USA either.

 

Jul 8, 2012 6:19AM
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For all you zero counters, get a life. It doesn't matter how many zeros there are, the poster was trying to make a point. I have made the adjustment in my life to accept this as the way of the American future. A great country destroyed by the greed of a few. I like your spirit, poppy speaks, but the reality is that we have created a lazy, undisciplined, entitled society, who won't know what to do in times of real crisis. I'm glad that I am in my senior years, and don't have to be here for what the future holds for this country. The hard work that was once known to the proud American men and women is a far gone notion, and it's a shame

Jul 8, 2012 1:40AM
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I went to Japan in 1968, skiied, bought my father a top end professional camera when the exchange rate was 360 to the US dollar--now it's about 79 to 1, even though their stock market dropped from about 36500 to 8000.  Let's hope we wake up here before the equivalent drop takes place in the Dow.

The Japanese people were very nice, industrious; and, I enjoyed myself immensely.  One could ski all day (each ride on a lift cost about 10 cents apiece--no all day tickets).  It is also a beautiful country.

The USA is very different from Japan in many ways, and will likely always be so, but their cars are still more reliable than almost all of ours.  Viva la difference.
Jul 7, 2012 6:37PM
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The US has been moving in the wrong direction for 50 years.....wake-up and vote out any politians who has been in Wash DC for longer than 4 years.
Jul 7, 2012 6:35PM
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Well maybe the discussion about Nippon has run it's course, that's nice....

 

Some had some interesting comments....

Jul 7, 2012 6:29PM
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BTW......Retire L.....Would it matter to you/we  got $100,000,000,000,000.00 (trillion)dollars or pennies or would $100,000,000,000.00 (billion) dollars or pennies be enough...?

 

I would be happy with either. 

Jul 7, 2012 6:22PM
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I'm curious how 40,000 (thousand) drones are going to get clearance and airspace.....?

 

Please explain that to us.

Jul 7, 2012 6:19PM
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Retire Later.......No Problem, a lot of people on here, have no idea what a hundred trillion is, as far as it being written out numerically.....They do not teach that in schools anymore hardly. In 8th. grade.

 

But they may be able to explain a nano second to us....Who knows??

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