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Is US entering Japan's nightmare?

Astroboy

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Japan's bust started with a real-estate boom, lax lending and the propping up of financial firms -- and its recovery took a decade. The Fed's rate cuts keep the US on the same path....

...... And like the U.S. real-estate boom, the Japanese boom was fueled by cheap money. The Bank of Japan, that country's Federal Reserve, had lowered the discount rate -- the rate it charges other banks -- to a post-World War II low of 2.5% from 5% in 1984-87. In those same years, the money supply grew by better than 10% a year.

Stock Quotes, Business News and Data from Stock Markets | MSN Money

This article is quite right. Although the American economists do not agree yet, the US situation is exactly the same as 1989-90 era of Japan. After all, USA lived on only bubble economy for the past years, and the economy is entering into lost decade or endless depression until house price recovery.

When Japan warned USA, they didn't hear us, saying US economy is strong and US-led Global Capitalism is Global Standard. But in fact, is was Global Casino Economy.

Japan needs to develop BRICS markets as an alternative of US market.
 

tokapi

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Huh .. characteristics of economic crisis may look similiar but USA is a heavy weight technological front-runner 900-lb gorilla has political clout and military muscle globally.In other words,America has more " cards in the deck " for any kind of financial manuveuring to put its economy back on track.

Economics 101,recession comes and goes.I wouldn't sell America short.
 

Astroboy

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We are living in the most reckless financial environment in recent history. Arcane credit derivative bets are now well into the tens of trillions. According to Charles R. Morris, the astronomical leverage at investment banks and their hedge fund and private equity clients virtually guarantees massive disruption in global markets. The crash, when it comes, will have no firebreaks. A quarter century of free-market zealotry that extolled asset stripping, abusive lending, and hedge fund secrecy will come crashing down with it. The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash: Morris, Charles R.: 9781586485634: Amazon.com: Books

Americans spent money "more than you can chew". There are more than enough US dollar currency in the global market. And Thus, the value continues to drop. I suggest Americans to follow Japanese life style:

1. Develop public transportation system like Shinkansen instead of automobile only.
2. Seek cheaper grain-based dietary life instead of big portion of beef.
3. Sleep in a smaller bed or Tatami instead of King size bed, and then you don't need big sized house.
4. Abandon American Express credit card, but instead cash only. Then you can become more cost-conscious.
:p
 

tokapi

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The world subsidizes American consumer population and living standard in the USA for the past several decades.

Consumers account for 3/4 of US economy.China now holds over 1 trillion " I owe you " in USA funds for manufactured goods exported to US.
 

Astroboy

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The world subsidizes American consumer population and living standard in the USA for the past several decades.

Yes, you are right because US market provides us with more yields than other markets. But if US market is not profitable, the money will not head for USA. Because US current account remains chronicle deficit, US financial market will fall into credit crunch as the money flow to the USA will stop.

And such situation is now happening..... It is likely that USA cannot continue to print Dollar Note anymore as people don't trust US economy anymore. So American's choice is now being limited.
 

AroundTheWorld

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Americans spent money "more than you can chew". There are more than enough US dollar currency in the global market. And Thus, the value continues to drop. I suggest Americans to follow Japanese life style:
1. Develop public transportation system like Shinkansen instead of automobile only.
2. Seek cheaper grain-based dietary life instead of big portion of beef.
3. Sleep in a smaller bed or Tatami instead of King size bed, and then you don't need big sized house.
4. Abandon American Express credit card, but instead cash only. Then you can become more cost-conscious.
:p
Most Americans are too individualistic to sacrifice for the greater good. Its how they're raised culturally. They would see it as not worth the tiny little sacrifices like Big Macs and Hummers to fix their economy.
1) I ride the public bus everywhere and don't plan on owning a car unless I absolutely need it for a job.
2) I eat rice, potatoes, and pasta mostly :]
3) I have a futon in my room which folds up for easy storage. I think Americans are selfish and their houses should be smaller, but Japanese houses should be bigger if there is a family living there. But I understand Japan has a lot less space.
4) I spend cash easier, actually. I think a lot of Americans do, just depends on the person. But, tons of Americans are not cost concious at all and rack up huge bills with credit cards.
 

caster51

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as a natural law, There is no thing that continues through all eternity. 🙂
There is a deep adjustment of it if there is rapid growth.
 

Jitenchakun

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The Fed

These sacrifices you mention are neither the source nor the solution to our economic troubles. Just as in Japan, the problem is an unsustainable economic system. If you want to understand the are of the problem, take the time to watch these videos:
youtube.com/view_play_list?p=C9A41FCF41056879
 

Pachipro

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Astroboy said:
This article is quite right. Although the American economists do not agree yet, the US situation is exactly the same as 1989-90 era of Japan. After all, USA lived on only bubble economy for the past years, and the economy is entering into lost decade or endless depression until house price recovery.

The situation is exactly the same as I was in Japan when it occurred and I left because of the high housing prices. The only difference is that Japan was able to survive because it is a creditor nation and the Japanese people are savers. America, on the other hand is a debtor nation who has exported their inflation these many years by "forcing" other countries to buy up their T-Bills, and the nation, as a whole has a negative saving rate and is severely in debt to the tyune of $9 trillion dollars! ($9,000,000,000,000) That amount can never be repaid.

The "designed" housing bubble has collapsed and the next shoe to drop will be the credit card and debt bubble which I do not believe the nation can survive.

If one looks back, the Japanese stock market was hovering around 44,000 and homes were out of reach of the average Japanese. Today, almost 20 years later, housing prices still have not even come close to their 1989 peak and the market has also never fully recovered and is still less than half of what it was 20 years ago. I fear the same will hold true for the US only it will be much, much worse as 85% of our manufacturing has been off-shored and the US depends on foreign nations for their very survival. Watch the dollar as it will continue to nose dive and the stock market will fall below 10,000 and even lower.

tokapi said:
Huh .. characteristics of economic crisis may look similiar but USA is a heavy weight technological front-runner 900-lb gorilla has political clout and military muscle globally.In other words,America has more " cards in the deck " for any kind of financial manuveuring to put its economy back on track.
Economics 101,recession comes and goes.I wouldn't sell America short.
True, but there will be no "financial manuvering" as it is a designed crash and fall from grace. The economy will not be put on track for many years to come.
 

uchimizu

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I would think that the west (US & Europe) will go through a real recession this time. It will certainly be painful, as unsustainable consumption based on credit and house price bubble will have to stop.

I have the impression that American companies are in better shape than Japanese ones were during the bubble. However, American households and the government are probably in worst shape. I am not sure what the result will be.

Then, the question is how the politicians in the west will react. Basically, you can either feel the pain now, or try to "protect" your economy (by keeping bad companies alive, protectionism...). In that case, you escape a short term shock and replace it with a decade long agony. Not all the noise we heard during the American presidential campaign is economically sound.

On a different note, with China and India rising, and Europe organizing itself better, America will be less and less the "city on the hill" and more and more a major economic player amongst others, competing for talent, natural ressources...
 

Dogen Z

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We are surely living in a time of crisis. As Pachipro described, the U.S. economy is in serious trouble with the credit crunch only partially resolved. There will be widespread ramifications and, perhaps, a partial time of reckoning for America's/Bush's profligate ways.

BUT IMO, the U.S. will not go down the toilet bowl because it plays such a key, central role in the global economy. If the U.S. goes down then everyone goes down with it. So it's in everyone's interest to try to make this fall from the top as painless as possible. A heavyweight such as Paulson was especially picked for this exact reason. Other countries will believe him. The G8 summit will play a role in coordinating major economies' efforts. I can only wish them good luck. There will be pain to share by a lot of countries.

However, as the Chinese saying goes, "Crisis means trouble and opportunities."
 

tokapi

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For USA,it's self-fulfilling prophecy :)

This country will tough it out 😌
 

tokapi

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Total value loss tops $1 trillion !


Crisis wipes $1 trillion from financial stocks

Monday July 7, 4:57 pm ET
By Joe Bel Bruno, AP Business Writer

Concerns about credit, housing wipe $1.3 trillion from S&P 500's financial companies in 2008

NEW YORK -- U.S. financial companies have lost more than $1 trillion in value this year, and yet another decline on Monday shows concerns aren't going away soon.

Source: Yahoo Finance - Stock Market Live, Quotes, Business & Finance News
 

uchimizu

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In time of crises, people, companies or countries with deep pockets will have great opportunities to buy goods, companies, and real-estate at a discount.

This may mean you will end-up having an emirati or chinese boss.

However, as the Chinese saying goes, "Crisis means trouble and opportunities."
 

uchimizu

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I am not sure any major country is ready for a full-blown war now. As:
- there are a few major countries with nuclear bomb that could retaliate to an American attack on themselves or their allies (certainly at least Russia, China and France have the capability)
- even if the US would probably win many conventional wars with its high-tech weapons, there would be a quite efficient counter-strategy to let them enter one country, and then use guerilla techniques against them;
- I am not sure the American population would be ready for the sacrifices of war (extremely expensive petrol, numerous human losses (not 1000s but 100.000s)).
it might be a just Prelude
however, USA has ultimate means. that is to make a WAR
 

TuskCracker

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am not sure any major country is ready for a full-blown war now. As:


How did this turn into a discussion of Nuclear War. We were talking just the economy.


Their is a famous American saying;

- -> We have met the enemy and he is us.
 

noyhauser

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I made a post but the internet ate it, so this is a short version.

In short, no there are few parallels. As the head of the US Federal bank in Dallas noted (who was in Japan in the early 90s) the US and Japanese economies are far far different. He noted the U.S. economy is far more flexible than the Japanese economy was, which he called command oriented. Growth was largely directed by large industries, where consumer growth in the United States is the main driver of the economy. A critical difference is that the United States also maintains robust population growth, which gives it a foundation for future economic prosperity.

The United States Government has moved quickly to deal with the crisis, unlike Japan. IT took twelve years for the Japanese government to effectively address the banking sector. On average one major bank failed a year between 1990 and 2002. While one major bank has failed in the United States, and one or two more are tottering, that seems to be the extent of it.

Finally, the scale is far far different. Since the start of the subprime crisis, property values have dropped 10~15%. Yet Japanese property dropped almost 2/3rds of its original value from 1990. That was a real property bubble, which the United States is not really experiencing.
 

caster51

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There is no attractive industry in the United States any longer.
IT and the housing industry are the service-producing industries.
They are not industries that make value.
The United States lost by burst of the economic bubble of the service-producing industry.
It compensates in the capital from another country to bury the loss or value (wealth) is only voluntarily created.
Attractive industry that can introduce the capital from another country is not found in the United States any longer.
The United States should switch to the economic policy of the own creation of value, that is, "making things" emphasis.

can USA make things,machine and manufacture ?.....
I think USA depends on this matter


I think it was natural to adjust for long time
1949(nikkei started) and top of nikkei 225 was 1990.
Japan spent 39years to top. and adjustmen was 15 years.
54 years is very long term of business cycle

it seems normal adjustment or correction waves againt impulse wave

Nikolai D. Kondratiev
Nikolai Kondratiev - Wikipedia
54 year cycle...
http://cepa.newschool.edu/~het/schools/business.htm
If economic growth is rapid, the adjustment is also rapid.
the ajustment is also time included
japan spended 15 years ajustment.
The revival of the Japanese economy started in 1949(nikkei index) started again) at the bottom.
that is,japan spended one cycle as bottom to bottom for 54 yeasr
Everyone was convinced of the end of one cycle in 2003. (54years)
it means japan started the begining of new 54years cycle.
I dont khow when the top comes...


1929 The world great depression
and bottom was 193?.....
1987 black monday....

1886( the japanese diet was found) japanese economy was bottomed after civil war.
maybe at age of Taisho democracy was the TOP
then 1941~1945 was at the bottom
 
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Pachipro

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uchimizu said:
In time of crises, people, companies or countries with deep pockets will have great opportunities to buy goods, companies, and real-estate at a discount.

This may mean you will end-up having an emirati or chinese boss.
And you are quite correct as it is happening. The iconic Chrysler Building, as well as the General Motors Building, both located in New York City were recently sold by German investors to investors from Abu Dabi. The dismanteling and selling off of America continues. The funny thing is there is no outcry from the population as was so prevalent in the 1980's when the Japanese were buying up New York and the Pebble Beach golf course with the sledge hammering of Japanese autos and such.

noyhauser said:
In short, no there are few parallels. As the head of the US Federal bank in Dallas noted (who was in Japan in the early 90s) the US and Japanese economies are far far different. He noted the U.S. economy is far more flexible than the Japanese economy was, which he called command oriented. Growth was largely directed by large industries, where consumer growth in the United States is the main driver of the economy. A critical difference is that the United States also maintains robust population growth, which gives it a foundation for future economic prosperity.

The United States Government has moved quickly to deal with the crisis, unlike Japan. IT took twelve years for the Japanese government to effectively address the banking sector. On average one major bank failed a year between 1990 and 2002. While one major bank has failed in the United States, and one or two more are tottering, that seems to be the extent of it.
The situation in the US, I believe will be far worse regardless of what the Fedhead says. And the "bank" you mentioned (Bear Sterns?) is not even a bank. It is an Investment House/bank and is not subject to the rules of chartered banks.

The problem is that the government will not step in this time. Look around! GM is teetering on bankruptcy and is now worth less than McDonalds! Citigroup is broke and may go under. Lehman Brothers investment firm may fold as well as Merrill Lynch. I believe you will see many bank failures within the coming year.

The US only has 16% of it's manufacturing base left as everything else has been offshored toi China and elsewhere. Where will all these people work? In Wal-Mart? And what will they produce? The US has moved nowhere close to solving the problem other than to save and bail out their cronies on Wall Street.

75% of the US economy depends on consumer consumption and with gas prices in outer space, inflation going crazy, home prices declining, the average American is now not spending any money other than food, mortgage and gas.

The U.S. economy shed 62,000 jobs in June while the unemployment rate unexpectedly remained at a four-year high of 5.5%, the Labor Department reported Thursday. Payrolls have now fallen in all six months this year for a total job loss of 438,000, the strongest evidence that the economy fell into a recession. Job losses in June were worse than the 40,000 expected by economists surveyed by MarketWatch.


Non-manufacturing sectors of the U.S. economy contracted in June, the Institute for Supply Management reported Thursday. The ISM non-manufacturing index fell to 48.2% from 51.7% in May. The decrease was below forecasts. Economists were looking the index to inch lower to 51.0%. Inflation pressures intensified. The price index rose to 84.5% from 77.0% in the previous month. The employment index fell to 43.8% from 48.7% in the previous month.

Delinquency rates for home equity lines of credit and bankcards rose in the first quarter to 1.1% up 0.14%, the highest rate since 1997. Bank credit card delinquencies rose .13% to 4.51% versus the four-year average of 4.40%. These are accounts 30-days or more overdue.

Home equity delinquencies fell to 2.34% from 2.39%, as auto delinquencies fell to 3.09% from 3.13% and property improvement delinquencies fell to 1.78% from 1.81%. Marine delinquencies rose to 1.7% from 1.57%. Recreational vehicles increased to 1.11% from 1.08% while mobile homes rose to 3.22% from 2.92%. Direct auto delinquencies increased to 1.92% from 1.9% and personal climbed to 2.55% from 2.48%.

Home equity lines of credit at least 30-days past due rose 14 bps to 1.1% of accounts for the quarter. Delinquent credit card accounts increased 13 bps to 4.51%, the highest rate in two years.

American Airlines will cut close to 7,000 employees by the end of the year, or about 8% of its worldwide workforce, as it reduces flights and grounds aircraft due to high fuel costs.
United has laid off 1,100 and Continental 3,000. AirTrans will cut wages 10% to 15%.

New foreclosures almost quadrupled in Los Angeles and doubled in Miami in the second quarter, with as much as $5 billion worth of losses going bad in L.A. alone. The number of homes up for auction in LA rose to 14,505 compared to 3,797 yoy. Miami-Dade was 2,677 versus 1,282.
Nationwide the figure doubled since 12/06 to about 2.5% this March. New York’s foreclosures climbed 49% for $424 million. LA had about 15 times as many to be sold. Seattle was even up 48%.

Lou Dobbs reported yesterday that 1.5 million homeowners lost their homes in 2007 and 2.5 million will lose their homes this year and, by next year up to 6 million homeowners may lose their homes by next year. Home prices will fall as much as 30% or more in areas like LA, Miami, etc before this is all over.

Fed foreign holdings of Treasuries and Agency debt jumped another $23.3 billion to a record $2.346 trillion. Custody holdings for foreign central banks rose $289 billion ytd, or 27.1% annualized and 18.3% yoy.

Do you need more info to realize that this will be worse than what Japan experienced? It is already being said that this is the worst recession/depression/fall in home values/bankruptcies, etc since 1929.

Just keep your eye on the dollar as, when the dollar falls (as it will continue to do) is what will drive oil higher, the markets lower, commodities like gold/silver, food and foreign currencies higher depleting the savings of, and destroying the middle class of the US.

What you will witness will be the largest transfer of wealth from the working middle class to the pockets of the elitist corporations through high energy prices, out of control inflation (estimated at 12.5%) a falling stock market, further lowering 401k's, massive layoffs and continued off shoring of jobs, and the continued depriciation of homes.

Remember, Japan is and was a creditor nation and the people saved more than 10% of their income and where many did not live above their means. Therefore, they were able to withstand the crisis that has lasted 20 years.

America, on the other hand has no savings, is $9.5 Trillion in debt, lived above their means and will have no high paying jobs before too long. 7 out of 10 Americans are ONE paycheck away from bankruptcy.

Sorry, but I do think the US will come out of this without major scars.

The above statistics were compiled from newsletters and internet sources.
 

eng_jap_cn

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Old economic Powers

I saw a lot of discussion about Japan and US economic situations.

Like OLD EUROPE, these OLD economic powers are fading.
The only credible european nation that can stand up by itself is Germany.
None of the other European countries can stand alone as a top five economic power in the world!!!

The current top three are US, Japan and China (no European country). Very soon, India, Brazil, Russia will creep up the world economy rankings and Europe will soon even lose its representative in the top 5, or even be represented by Russia.

I come from Asia and am happy that Asia will soon boast of two or even three countries in the top five economies of the world. Future generations, please study English, Chinese, Spanish (or Portuguese), Hindi and Japanese. Forget German and French and do not waste time with Italian, those economies will no longer feature in the top five. Adios
 

tokapi

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The economy will not be put on track for many years to come.



The 1982-84 financial crises of Latin America caused substantial losses and write-offs for major multi-national banks ( mainly US finanacial institutions ) and the closure of several smaller banks primarily involved in international loan syndications.The impact was so severe that many of these major banks stopped lending to developing countries until the early1990’s - a period of almost 10 years.


I think this can be a parallel to present time America's sub-prime mess.

As my folks recall back then,Bank of America ( ticker: BAC ) stock fell to historic low of $10.00/share.And,a Saudi Prince purchased 35% stock ownership of Citicorp ( ticker: C ,now trades at multi-year LOW of $16 ) on the cheap.


***********************************************************


By MADLEN READ, AP Business Writer
Wed Jul 9, 6:18 PM ET

NEW YORK - Wall Street tumbled Wednesday as investors grappled with renewed worries about the soundness of the financial sector. The major indexes fell more than 2 percent, including the Dow Jones industrial average, which lost more than 230 points.

While many financial services companies logged steep declines during the session, government-sponsored lenders Freddie Mac and Fannie Mae were among those hardest hit. Investors are worried that the mortgage finance companies will have to sell more shares than anticipated to compensate for losses from the housing slump.

Source: http://news.yahoo.com/s/ap/20080709/ap_on_bi_st_ma_re/wall_street;_ylt=AiF1dpyi6E6kJ2j1CzLsj_Zu24cA
 
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