The federal government's and Federal Reserve's response to date is also strikingly similar to Japan's, in both magnitude and substance.
If anything, American leaders are being even more aggressive than Japan's leaders were. The Obama administration's projected deficits for the next 10 years, $9.1 trillion, would be more than 5 percent of GDP for the entire decade, while Japan's was 4 percent for the decade following the 1990 collapse. On the monetary side, the cost of borrowing is now cheaper here than it was in Japan in the 1990s, although both now sit at close to 0 percent, with little room to go any lower.
If one is to go by the Japanese experience, Americans should expect little from the current stimulus policies.
Even a prominent proponent and architect of the Japanese approach, Richard Koo _ chief economist of Nomura Research Institute, Tokyo, and a former New York Fed economist _ argues that the best the United States can hope for is avoidance of a worsened recession.
With the likely limp and drawn-out recovery will come inevitable deficits, a larger government sector, an expanded debt, and interest burdens that will plague American taxpayers far into the future.
___
ABOUT THE WRITER
Fergus Hodgson is a visiting research fellow at the American Institute for Economic Research, 250 Division Street, Great Barrington, Mass. 01230. This commentary originally appeared in The Free Lance-Star of Fredericksburg, Va.
This essay is available to McClatchy-Tribune News Service subscribers. McClatchy-Tribune did not subsidize the writing of this column; the opinions are those of the writer and do not necessarily represent the views of McClatchy-Tribune or its editors.
___
(c) 2009, The Free Lance-Star (Fredericksburg, Va.)
Distributed by McClatchy-Tribune Information Services
For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
A service of YellowBrix, Inc.
