5:37 am November 15, 2010, by Henry Unger
More people are starting to worry if we’re going to follow the Japanese economic path of long-term malaise.
There are some troubling similarities, AJC reporter Michael Kanell writes.
As the Japanese economy staggered in the early 1990s, the Bank of Japan had to prevent collapse of the banking system. So officials poured money into the financial sector, Kanell writes.
In the U.S. crisis, the Federal Reserve and government bailed out the big banks.
The Bank of Japan dropped short-term interest rates to zero. Ditto the Fed here.
If you track Japanese home prices from 1977 to 1995, they match up nicely with U.S. prices from 1992 to the present, Kanell reports.
There are differences.
We don’t have deflation like Japan. But we are getting closer to it, and that is what really worries economists. Because deflation is a dangerous malady, a lot harder to deal with than its opposite, Kanell writes.
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