The Nipponization of the US

If we use the same logic over and over again, we will arrive at the same end result. The solutions that were used by Japan, and proposed by ia. Greenspan and Krugman failed. And yet, the same school is still in power, and implementing the same policy in the US. In Europe, this school is very powerful. In 2008 they pushed for higher public spending. Now we are going towards "the road of least resistance": inflation, or money printing.

They tried it in Japan. It didn't work. It will not work in the US nor in Europe. The result will be despair, chaos, and disruption of companies and economies.

The world has to rebalance, has to put sustainability on the forefront. That was the subject of "Econoshock" in 2008, written before the crisis. It is still valid today.

The Nipponization of the US is visible in the behavior of stock markets, monetary policy and bond yields. It will also become clear in the evolution of public debt.

There are however big differences between the US and Japan. Japan had strong savings, and a net financing surplus. The US is a net creditor of the world. Japan has a strong manufacturing base, which is the source of its wealth and exports. The US has become a manufacturing desert.

The Greenspan/Bernanke-School bears an important responsibility in the current crisis. Greenspan's policy was at the heart of "the easy money-easy credit"-policy of Post-2000. Furthermore, Alan Greenspan opposed to more regulation in the financial sector when it mattered. Bernanke's speech "Making sure "it" does not happen" (2002), was the ticket to his Fed's presidency.

In spite of all the warnings, Bernanke has not promised a zero interest rate policy for the foreseeable future. It is a dead end street. Once you start this policy, it is extremely difficult to change or end it.

Economists should learn that the economy is not like a big machine. You cannot pull a lever a switch a button and control the US or world economy. The Communist economy thought that Economic Planning could be effective, it wasn't and ended in disaster. The western model is not a capitalist model anymore. A long time ago, it was corrected by budgetary and monetary means. We live in a hybrid form, were central banks and governments are trying to control the economic cycle, and try to artificially generate growth.

Debt fueled cycle management and growth stimulus is now faltering. Unless we have the courage to rebalance this unsustainable system, it will end in tears

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