Even so, the specter haunting U.S. officials is that America would have to go through the deflationary lost decades of Japan. To which, David Goldman retorts, "
You should be so lucky." (My emphasis)
"
During Japan's 'lost decade' of the 1990s, everyone was working, everyone kept their homes, everyone maintained their lifestyle (minus some shopping trips to Paris), and life carried on more or less the same. America enters the second decade of the millennium with un- and underemployment around 20%," the former head of credit research at Bank of America and current senior editor of First Things magazines writes on his
Inner Workings blog at Asia Times.
Japan was able to export to earn the income to fund the retirement wave it faced from its aging population, Goldman continues, despite a plunge in consumption and a two-thirds collapse in stock prices from their peak. Americans have forgotten how to export; they have little choice but to cut spending and save and invest in 2.5% Treasuries, or junk bonds, or leave their money in the bank at a fraction of a percent.
President Obama has set a goal of
doubling American exports, the path that Japan took to cushion its decline. It did so by cutting prices domestically, which is the definition of deflation. That also is the tack taken by Germany; curbing prices and wages has helped power an export boom. It also helps if you produce what's in demand, such as capital goods for China.
Ultimately, central-bank governors cannot cure such problems by manipulating interest rates, exchange rates and money supplies. Creation of real wealth, as opposed to paper wealth, is lots harder.
