I’m posting a video on this topic
again because I think there’s a lot the U.S. can learn from Japan’s “lost
decade” and this will give us some insight into what kind of monetary/fiscal
policy the U.S. should pursue and why the Fed is still keeping interest rates at record lows for such a long time. In this video economist Richard Koo says
that what the world is experiencing right now, a "balance sheet
recession," is different from traditional recessions. Below is a more in-depth blog post on
the “balance sheet recession”:
Do you think the deleveraging is over
yet? Does this explain why the Fed has kept
interest rates low for such a long time and/or why the U.S. is doing so much better
than Europe? If the deleveraging is not over, what
will be the effect of cutting spending (government or otherwise)? Apparently Ben Bernanke met Richard Koo
and thanked him for his work; do you think the Fed has learned from Japan’s
experience?
No, I do not think that deleveraging is over but I also cannot say that it can be solved easily. I think that a lot of analysis of the current system needs to be done before there should be talk of recovery.
ReplyDeleteThese days, the word "recovery" sounds nice and comforting towards a brighter future but is it really? Richard Koo has a point when he says that history is not exactly repeating itself but it is sort of showing a pattern that has existed in retrospect.