Is US in for lost decade(s)?

[Perrine]

I know that sounded weird but check this out...
there's unsettling similarities between the Japanese early 90s and the current crisis we have

U.S. Hears Echo of Japan’s Woes
http://www.nytimes.com/2010/10/30/world/asia/30japan.html?pagewanted=2&_r=1

[Motherland]

How is deflation bad?

[Maverick]

Lower prices sounds good to me.

[Shuffler]

Initially when you are forced to sell at a lower price, your cost have not reduced. This means less cash and a slowdown in manufacture.

Slow down in manufacturing then causes shortage and .... price rise. Anyone getting seasick

[Penguin]

With less money, it is more difficult to remain liquid.  In addition, a $400,000 mortgage may seem doable, but with deflation, that figure may seem more like $500,000, as it increases the power of the interest rate.

-Penguin

[Perrine]

Initially when you are forced to sell at a lower price, your cost have not reduced. This means less cash and a slowdown in manufacture.

Slow down in manufacturing then causes shortage and .... price rise. Anyone getting seasick

There's even a word invented by economists called Japanification... These are the same guys that came up with Stagflation.


Japanification

Deflationary trap of collapsed demand that occurs when consumers refuse to consume, corporations hold back on investments and banks sit on cash. It becomes a vicious, self-reinforcing cycle.

[Nefarious]

The difference is that Japan had(s) relatively low unemployment during their lost decades. The US on the other hand... 

[Mickey1992]

Japan's national debt is over 200% of GDP.  In my opinion the only thing keeping Japan's economy from going into fullblown depression is that they still have a positive balance of trade with the rest of the world.  (Although they did not for a couple of quarters last year).

The US has a trade deficit that will continue to grow as the world economy slowly recovers.  The current US trade deficit is nearing 6% of GDP.  In August, the US sold $153.9 billion in goods and services internationally, but bought $200.2 billion.  That's a $46.3 billion deficit, and it will continue to increase.  Wealth is leaving the US that will never return, unless it returns in the form of foreign investment, ie. US companies continue to be bought by foreign companies.

This is only the beginning.

[oakranger]

Interesting, this is something that Glen Beck talked about awhile back.  At first i was puzzle, like a lot of thing in life, but understood what he was pointing out too.

[Yossarian]

How is deflation bad?

I'm not sure deflation itself is necessarily bad, but some of the consequences can be.

edit: http://inflationdata.com/inflation/inflation_articles/Deflation.asp

[mechanic]

None of this matters in the long term picture. Within a few hundred years the earth will either be a single global nation or it will be destroyed by our conflicts.

[RufusLeaking]

How is deflation bad?

Deflation is bad because the future value of money is greater than current value.  This is an incentive to delay spending, which is bad for an economy that is based on consumption, as in the US.

How would this work with a mortgage?  A house value deflates.  A payment is constant.  ... This is hurting my head.  ...  So, every mortgage would end up being more than the future, deflated value of the house.

Back to the OP:  Japan had demographic (aging) issues that the US does not have to the same degree.  And the US has a good record with technology.  Who saw the internet coming 30 years ago?

None of this matters in the long term picture. Within a few hundred years the earth will either be a single global nation or it will be destroyed by our conflicts.

At least you are looking past the end of the Mayan calendar.

[Perrine]

The difference is that Japan had(s) relatively low unemployment during their lost decades. The US on the other hand... 

I think that's because their employers would rather share the loss and pain by reducing work hours to part time instead of reducing staff.
That "socializing" losses and gains... that's a bad word around here.

[mechanic]

At least you are looking past the end of the Mayan calendar.

Well, either way, the economics of individual nations will not be important in the near future.

[Perrine]

Back to the OP:  Japan had demographic (aging) issues that the US does not have to the same degree.  

true...

And the US has a good record with technology.

I see it like this.  US has a good record with innovation and more tolerant to creative destruction that come with it than EU and japan.
Maintaining the lead on the other hand is iffy.  
We came up with internet... but no longer lead in speed and penetration
GM came out with an EV1 electric car in the 90s and it scared japan...  instead of GM nurturing EV they decided to scrap it and cede to likes of Nissan, Toyota etc.

The only way out of this rut is to innovate

if that doesn't work in the long run then US should go total war against [_fill-in-blank_].  No walk-in-the-park policing but total war!
It worked in WW2... and (based on the track record) everytime US wins a war it becomes stronger.

Who saw the internet coming 30 years ago?

al gore?