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10-30-12 Macro Analytics – LESSONS FROM JAPAN – Charles Hugh Smith

Japan has experienced massive debt buildup, a growing interest payment burden, long term economic stagnation and now an emerging trade deficit. The question posed in this discussion between Gordon T Long and Charles High Smith is: “how has Japan avoided an economc death spiral?”.

Japan has been a model and case study in stagnation and stimulus spending. Having pioneered ZIRP and Quantitative easing what can we learn from Japan? What are the lessons for the US with a similar characteristic of looming economc stagnation? What lessons MUST be learned? What should we conclude about the fact that Japan recently attempted QE 9, which failed so quickly that it actually tightened the monetary delivery mechanism versus the intended loosening of the Japanese credit markets?

It is important to appreciate that the US and Japan are different in some very critical elements. Having $3Trillion of assets and a self funded domestic debt makes a significant difference financially for Japan, compared to the US with a large percentage of its debt being foreign owned. The US ‘trump card’ has been the privelege of having the US dollar as the global reserve currency and the requirement for foreign countries to hold US dollars for global trade. However, that strategic advantage could be changing, as is the powerful demographic savings advantage recently held by Japan.

With 36 supporting slides this is a thought provoking review of the lessons we must learn from Japan before it is too late.

Are you the author?
Charles Hugh Smith
At readers' request, I've prepared a biography. I am not confident this is the right length or has the desired information; the whole project veers uncomfortably close to PR. On the other hand, who wants to read a boring bio? I am reminded of the "Peanuts" comic character Lucy, who once issued this terse biographical summary: "A man was born, he lived, he died." All undoubtedly true, but somewhat lacking in narrative.
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