The Great Deflation - Japan Goes From Dynamic to Disheartened

[pow]

http://www.nytimes.com/2010/10/17/world/asia/17japan.html?pagewanted=1&_r=1&hp

OSAKA, Japan — Like many members of Japan’s middle class, Masato Y. enjoyed a level of affluence two decades ago that was the envy of the world. Masato, a small-business owner, bought a $500,000 condominium, vacationed in Hawaii and drove a late-model Mercedes.

But his living standards slowly crumbled along with Japan’s overall economy. First, he was forced to reduce trips abroad and then eliminate them. Then he traded the Mercedes for a cheaper domestic model. Last year, he sold his condo — for a third of what he paid for it, and for less than what he still owed on the mortgage he took out 17 years ago.

“Japan used to be so flashy and upbeat, but now everyone must live in a dark and subdued way,” said Masato, 49, who asked that his full name not be used because he still cannot repay the $110,000 that he owes on the mortgage.

Few nations in recent history have seen such a striking reversal of economic fortune as Japan. The original Asian success story, Japan rode one of the great speculative stock and property bubbles of all time in the 1980s to become the first Asian country to challenge the long dominance of the West.

But the bubbles popped in the late 1980s and early 1990s, and Japan fell into a slow but relentless decline that neither enormous budget deficits nor a flood of easy money has reversed. For nearly a generation now, the nation has been trapped in low growth and a corrosive downward spiral of prices, known as deflation, in the process shriveling from an economic Godzilla to little more than an afterthought in the global economy.

Now, as the United States and other Western nations struggle to recover from a debt and property bubble of their own, a growing number of economists are pointing to Japan as a dark vision of the future. Even as the Federal Reserve chairman, Ben S. Bernanke, prepares a fresh round of unconventional measures to stimulate the economy, there are growing fears that the United States and many European economies could face a prolonged period of slow growth or even, in the worst case, deflation, something not seen on a sustained basis outside Japan since the Great Depression.

Many economists remain confident that the United States will avoid the stagnation of Japan, largely because of the greater responsiveness of the American political system and Americans’ greater tolerance for capitalism’s creative destruction. Japanese leaders at first denied the severity of their nation’s problems and then spent heavily on job-creating public works projects that only postponed painful but necessary structural changes, economists say.

“We’re not Japan,” said Robert E. Hall, a professor of economics at Stanford. “In America, the bet is still that we will somehow find ways to get people spending and investing again.”

Still, as political pressure builds to reduce federal spending and budget deficits, other economists are now warning of “Japanification” — of falling into the same 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: as prices fall further and jobs disappear, consumers tighten their purse strings even more and companies cut back on spending and delay expansion plans.

“The U.S., the U.K., Spain, Ireland, they all are going through what Japan went through a decade or so ago,” said Richard Koo, chief economist at Nomura Securities who recently wrote a book about Japan’s lessons for the world. “Millions of individuals and companies see their balance sheets going underwater, so they are using their cash to pay down debt instead of borrowing and spending.”

Just as inflation scarred a generation of Americans, deflation has left a deep imprint on the Japanese, breeding generational tensions and a culture of pessimism, fatalism and reduced expectations. While Japan remains in many ways a prosperous society, it faces an increasingly grim situation, particularly outside the relative economic vibrancy of Tokyo, and its situation provides a possible glimpse into the future for the United States and Europe, should the most dire forecasts come to pass.

Scaled-Back Ambitions

The downsizing of Japan’s ambitions can be seen on the streets of Tokyo, where concrete “microhouses” have become popular among younger Japanese who cannot afford even the famously cramped housing of their parents, or lack the job security to take out a traditional multidecade loan.

These matchbox-size homes stand on plots of land barely large enough to park a sport utility vehicle, yet have three stories of closet-size bedrooms, suitcase-size closets and a tiny kitchen that properly belongs on a submarine.

“This is how to own a house even when you are uneasy about the future,” said Kimiyo Kondo, general manager at Zaus, a Tokyo-based company that builds microhouses.

For many people under 40, it is hard to grasp just how far this is from the 1980s, when a mighty — and threatening — “Japan Inc.” seemed ready to obliterate whole American industries, from automakers to supercomputers. With the Japanese stock market quadrupling and the yen rising to unimagined heights, Japan’s companies dominated global business, gobbling up trophy properties like Hollywood movie studios (Universal Studios and Columbia Pictures), famous golf courses (Pebble Beach) and iconic real estate (Rockefeller Center).

In 1991, economists were predicting that Japan would overtake the United States as the world’s largest economy by 2010. In fact, Japan’s economy remains the same size it was then: a gross domestic product of $5.7 trillion at current exchange rates. During the same period, the United States economy doubled in size to $14.7 trillion, and this year China overtook Japan to become the world’s No. 2 economy.

China has so thoroughly eclipsed Japan that few American intellectuals seem to bother with Japan now, and once crowded Japanese-language classes at American universities have emptied. Even Clyde V. Prestowitz, a former Reagan administration trade negotiator whose writings in the 1980s about Japan’s threat to the United States once stirred alarm in Washington, said he was now studying Chinese. “I hardly go to Japan anymore,” Mr. Prestowitz said.

The decline has been painful for the Japanese, with companies and individuals like Masato having lost the equivalent of trillions of dollars in the stock market, which is now just a quarter of its value in 1989, and in real estate, where the average price of a home is the same as it was in 1983. And the future looks even bleaker, as Japan faces the world’s largest government debt — around 200 percent of gross domestic product — a shrinking population and rising rates of poverty and suicide.

But perhaps the most noticeable impact here has been Japan’s crisis of confidence. Just two decades ago, this was a vibrant nation filled with energy and ambition, proud to the point of arrogance and eager to create a new economic order in Asia based on the yen. Today, those high-flying ambitions have been shelved, replaced by weariness and fear of the future, and an almost stifling air of resignation. Japan seems to have pulled into a shell, content to accept its slow fade from the global stage.

Its once voracious manufacturers now seem prepared to surrender industry after industry to hungry South Korean and Chinese rivals. Japanese consumers, who once flew by the planeload on flashy shopping trips to Manhattan and Paris, stay home more often now, saving their money for an uncertain future or setting new trends in frugality with discount brands like Uniqlo.

As living standards in this still wealthy nation slowly erode, a new frugality is apparent among a generation of young Japanese, who have known nothing but economic stagnation and deflation. They refuse to buy big-ticket items like cars or televisions, and fewer choose to study abroad in America.

Japan’s loss of gumption is most visible among its young men, who are widely derided as “herbivores” for lacking their elders’ willingness to toil for endless hours at the office, or even to succeed in romance, which many here blame, only half jokingly, for their country’s shrinking birthrate. “The Japanese used to be called economic animals,” said Mitsuo Ohashi, former chief executive officer of the chemicals giant Showa Denko. “But somewhere along the way, Japan lost its animal spirits.”

When asked in dozens of interviews about their nation’s decline, Japanese, from policy makers and corporate chieftains to shoppers on the street, repeatedly mention this startling loss of vitality. While Japan suffers from many problems, most prominently the rapid graying of its society, it is this decline of a once wealthy and dynamic nation into a deep social and cultural rut that is perhaps Japan’s most ominous lesson for the world today.

The classic explanation of the evils of deflation is that it makes individuals and businesses less willing to use money, because the rational way to act when prices are falling is to hold onto cash, which gains in value. But in Japan, nearly a generation of deflation has had a much deeper effect, subconsciously coloring how the Japanese view the world. It has bred a deep pessimism about the future and a fear of taking risks that make people instinctively reluctant to spend or invest, driving down demand — and prices — even further.

“A new common sense appears, in which consumers see it as irrational or even foolish to buy or borrow,” said Kazuhisa Takemura, a professor at Waseda University in Tokyo who has studied the psychology of deflation.

A Deflated City

While the effects are felt across Japan’s economy, they are more apparent in regions like Osaka, the third-largest city, than in relatively prosperous Tokyo. In this proudly commercial city, merchants have gone to extremes to coax shell-shocked shoppers into spending again. But this often takes the shape of price wars that end up only feeding Japan’s deflationary spiral.

There are vending machines that sell canned drinks for 10 yen, or 12 cents; restaurants with 50-yen beer; apartments with the first month’s rent of just 100 yen, about $1.22. Even marriage ceremonies are on sale, with discount wedding halls offering weddings for $600 — less than a tenth of what ceremonies typically cost here just a decade ago.

On Senbayashi, an Osaka shopping street, merchants recently held a 100-yen day, offering much of their merchandise for that price. Even then, they said, the results were disappointing.

“It’s like Japanese have even lost the desire to look good,” said Akiko Oka, 63, who works part time in a small apparel shop, a job she has held since her own clothing store went bankrupt in 2002.

This loss of vigor is sometimes felt in unusual places. Kitashinchi is Osaka’s premier entertainment district, a three-centuries-old playground where the night is filled with neon signs and hostesses in tight dresses, where just taking a seat at a top club can cost $500.

But in the past 15 years, the number of fashionable clubs and lounges has shrunk to 480 from 1,200, replaced by discount bars and chain restaurants. Bartenders say the clientele these days is too cost-conscious to show the studied disregard for money that was long considered the height of refinement.

“A special culture might be vanishing,” said Takao Oda, who mixes perfectly crafted cocktails behind the glittering gold countertop at his Bar Oda.

After years of complacency, Japan appears to be waking up to its problems, as seen last year when disgruntled voters ended the virtual postwar monopoly on power of the Liberal Democratic Party. However, for many Japanese, it may be too late. Japan has already created an entire generation of young people who say they have given up on believing that they can ever enjoy the job stability or rising living standards that were once considered a birthright here.

Yukari Higaki, 24, said the only economic conditions she had ever known were ones in which prices and salaries seemed to be in permanent decline. She saves as much money as she can by buying her clothes at discount stores, making her own lunches and forgoing travel abroad. She said that while her generation still lived comfortably, she and her peers were always in a defensive crouch, ready for the worst.

“We are the survival generation,” said Ms. Higaki, who works part time at a furniture store.

Hisakazu Matsuda, president of Japan Consumer Marketing Research Institute, who has written several books on Japanese consumers, has a different name for Japanese in their 20s; he calls them the consumption-haters. He estimates that by the time this generation hits their 60s, their habits of frugality will have cost the Japanese economy $420 billion in lost consumption.

“There is no other generation like this in the world,” Mr. Matsuda said. “These guys think it’s stupid to spend.”

Deflation has also affected businesspeople by forcing them to invent new ways to survive in an economy where prices and profits only go down, not up.

Yoshinori Kaiami was a real estate agent in Osaka, where, like the rest of Japan, land prices have been falling for most of the past 19 years. Mr. Kaiami said business was tough. There were few buyers in a market that was virtually guaranteed to produce losses, and few sellers, because most homeowners were saddled with loans that were worth more than their homes.

Some years ago, he came up with an idea to break the gridlock. He created a company that guides homeowners through an elaborate legal subterfuge in which they erase the original loan by declaring personal bankruptcy, but continue to live in their home by “selling” it to a relative, who takes out a smaller loan to pay its greatly reduced price.

“If we only had inflation again, this sort of business would not be necessary,” said Mr. Kaiami, referring to the rising prices that are the opposite of deflation. “I feel like I’ve been waiting for 20 years for inflation to come back.”

One of his customers was Masato, the small-business owner, who sold his four-bedroom condo to a relative for about $185,000, 15 years after buying it for a bit more than $500,000. He said he was still deliberating about whether to expunge the $110,000 he still owed his bank by declaring personal bankruptcy.

Economists said one reason deflation became self-perpetuating was that it pushed companies and people like Masato to survive by cutting costs and selling what they already owned, instead of buying new goods or investing.

“Deflation destroys the risk-taking that capitalist economies need in order to grow,” said Shumpei Takemori, an economist at Keio University in Tokyo. “Creative destruction is replaced with what is just destructive destruction.”

[SAmadei]

You read my mind, I was thinking of posting this article, as well, but I wasn't sure it would have been well received.

That said, the article mentions that it can't happen here... "We Aren't Japan" (as spoken by some arrogant talking head)... but I beg to differ.

[ZL-1]

That said, the article mentions that it can't happen here... "We Aren't Japan" (as spoken by some arrogant talking head)... but I beg to differ.

[Drew Dowdell]

I'm still curious how we aren't like Japan.

[CSpec]

Japan has been stagnant for 20 years. They dithered at the beginning of the lost decade (the 90s) because the cozy relationship between big business and government didn't lend itself to rapid restructuring, and the honor thing is real over there. Also the government has wasted ungodly sums of money on useless construction projects, thinking they could spend their way out of it. Meanwhile they still maintain their protectionist trade policies. 30 years ago many in the West were shrieking that the US should also adopt a national industrial policy and actively protect favored industries. I'm glad the US had the sense to not follow Japan down that road to ruin.

[Drew Dowdell]

What about Japan's unwillingness to deleverage that we are duplicating?

No one is willing to take the haircut... so everyone will end up getting one, and that will depress spending for a loooong time.

[A Horse With No Name]

What about Japan's unwillingness to deleverage that we are duplicating?

No one is willing to take the haircut... so everyone will end up getting one, and that will depress spending for a loooong time.

I feel like Mr Rogers...now say it after me..."Decades."

I no longer expect to see an economic turnaround in my life time. And we have been sinking since about 1980 or so....

[ZL-1]

Also the government has wasted ungodly sums of money on useless construction projects

But the thing is the Japanese deficit went into construction (infrastructure), while the US budget deficit appears out of tax cuts that stimulate consumption but not investment that adds to the economy's capital stock.

[A Horse With No Name]

But the thing is the Japanese deficit went into construction (infrastructure), while the US budget deficit appears out of tax cuts that stimulate consumption but not investment that adds to the economy's capital stock.

You would be entirely correct, sir.

Part of Japan's funk is that it has set itself up to be a long range supplier of high quality goods, while the rest of the world has kind of imploded and no longer needs them.

Also, on a lot of things I buy that are not automotive related but high ticket items, Europe been eating japans butt in terms of the quality and creativity.

Especially on things like tools, etc.

[Drew Dowdell]

Tax cuts can't stimulate spending when we still have all of this debt....both public and private.

[ZL-1]

Tax cuts can't stimulate spending when we still have all of this debt....both public and private.

Exactly. And they only make sense if the governent budget balances (I mean the primary ones, i.e. those before public investment spending) are highly positive.

[CARBIZ]

Well, setting aside $56B to 're-value' the yen probably doesn't help. Or the cozy relationship MITI (and its successors) have had with Japanese corporations for decades. Or the banks loaning money to Toyota and others at 0% to finance their overseas conquests, while the hapless Japanese consumers tolerated moribund returns on their investments. A negative birthrate doesn't bode well, either. (Although they could import a ton of cheap laborers from West Africa for giggles - see how that's working for Germany, France and others.)

Not gonna get a lot of sympathy from the Carbiz corner. Japan Inc's relenteless pursuit of world domination finally ran aground on the shoals of Western ingenuity. Or maybe some people are finally waking up to the fact that not everything imported is good for us?

Oh, who am I kidding? Japan Inc simply stole what they needed from the West, but Western companies are tripping over themselves to hand technology to the Chinese. Worrying about 100 million Japanese who salivated over our markets will seem like the 'good old days' once Beijing gets into high gear.

[A Horse With No Name]

Oh, who am I kidding? Japan Inc simply stole what they needed from the West, but Western companies are tripping over themselves to hand technology to the Chinese. Worrying about 100 million Japanese who salivated over our markets will seem like the 'good old days' once Beijing gets into high gear.

BINGO....you would be once again correct sir.

Give the man a Cigar!

[balthazar]

Tax cuts can't stimulate spending when we still have all of this debt....both public and private.

Here in Jersey, statistically, I work into MAY just to pay taxes, so yes, if that was greatly reduced... say on the order of halved, I personally would spend more,

but I have almost no debt (1 managable car loan @ $252/mnth) due to the way I run my household finances.

I CAN guarantee you this, any MORE I have to pay in taxes over today is going to result in even LESS spending, even tho I'm already stripped down & running lean.

If only the government could even conceive of running things remotely responsibly...

[Drew Dowdell]

Macro, not micro.

[A Horse With No Name]

Here in Jersey, statistically, I work into MAY just to pay taxes, so yes, if that was greatly reduced... say on the order of halved, I personally would spend more,

but I have almost no debt (1 managable car loan @ $252/mnth) due to the way I run my household finances.

I CAN guarantee you this, any MORE I have to pay in taxes over today is going to result in even LESS spending, even tho I'm already stripped down & running lean.

If only the government could even conceive of running things remotely responsibly...

I agree completely with you. While we are at opposite ends of the political spectrum, I think a smaller, leaner, more efficient government would actually be better at providing basic services!

[balthazar]

^ Since I agree right back, perhaps we're not at "opposite ends" as much as you think.

Government should be attempted to be run like a business, not a cheap magic show. Empower people, not the government.

And take the 'micro' and build the 'macro' from the building blocks.

[A Horse With No Name]

I agree right back...gov't should be in a lot of ways run like a business. As much as I am loathe to love Reagan, that was one of the things he did right. He set up a lot of government accounts as subcontract work so the free market could compete and provide the service.

Things like mowing the grass in national parks for example.

Gov't should also run like a business in another way...it should be "customer oriented." We should be using our tax dollars for practical things here at home. City parks come to mind, as do state forests and decent highways. Decent lunches for school children would do wonders. I'd love to take part fof what we spend on one F-22 Raptor warbird and provide fresh fruit, veggies, and fresh, locally sourced meat for school children. Yes, some of it would be wasted, but then a lot of it wouldn't.

And it's pretty hard to low a field with a tank.

Part of my real problem with the "right" is the insistence on no government at all. Your in the building trades, I'm in the building trades...I actually like Code enforcement because it keeps people honest about their work, and levels the playing field so more people can compete for work. Plus...we have one standard of work. I can come help you with a project in jersey, help Camino with a project in PA, help cubitar with a project in Arizona, and then help croc with a project in LA.

All those different places might have regional differences in how things are usually done, but overall...we have a standard of how things are done here. To me...that HELPS our free enterprise system.

And I really think the key to our economic future is small business-you own one and I work for one-to me that's the way our nation needs to fly-lots of self reliant small business people that provide services to people. Not saying we don't need general Motors and General Electric...we do...but...think small business and we'll think alike.

Chris

[balthazar]

Damn straight RE small business. Is the private sector still responsible for 70% of GDP, or has the recent employment/government bloat tipped the scale a bit backward ?

While I am for basic standards WRT codes, they never stop and more & more disregard common sense. I'm sorry, but at some point it does squeeze the beginner/little guy and knocks them out of competition. Think corporate farms vs. the local guy- often it takes money to make money.

If I want to reroof a porch- I have to have a license, a business name, scads of insurance, I cannot hire anyone without providing workmen's comp & doing tax witholdings, I have to get a permit, an inspection, dispose of any debris in a sanctioned manner, I have to provide a written estimate in advance, I can only take X amount down and have to wait for a sign-off to get the final.... is it always worth a guy with a hammer & a can of nails tackling all that.... or what does unemployment pay again ??? It's become too much.

If you are a competent, honest, quality contractor, doing familiar work to your typical meticulous standards, work that you stand behind, what is the actual purpose of taking out a permit?

A contractor who knows what he's doing & stands behind his work will do it right (or fix it right). And if a homeowner is NOT required to get a permit to do the work himself, you can see how easy it is to look at permit fees as little more than a money grab. Sure, not all contractors are as described above (most AREN'T), I understand that, but for those that are, that's money lost, either from the contractor or the homeowner. There needs to be a system around it. Why is it congressmen are never accountable, but I always have to be?? Who is playing with/risking more money ??

I do NOT advocate starving the military to provide good school lunches; the world is far too shaky to let down our guard.

Stop paying billions upon billions WE DON'T HAVE to overseas countries when we're broke, and use that first.

Or just dismantle the DOE ($65 Billion)- we got along for 200+ years without it, while developing some of the greatest accomplishers the world has ever seen. Another issue.

BTW - I have never heard of ANYONE advocating "no government". You are the very first person I've ever heard state that combination of words.

[Drew Dowdell]

Why do we have more carrier groups than the rest of the world combined?

If you were a country with a large sovereign debt problem and you knew that the U.S. was required by treaty to come galloping to your rescue.... what would you do with your carrier fleet?

[Robert Hall]

Why do we have more carrier groups than the rest of the world combined?

Because our military structure, fleets, etc were all designed for the Cold War...not necessarily applicable to the 21st century where decentralized Islamic terrorism is the war du jour...

[CARBIZ]

You guys cannot afford to be the world's cop anymore. Your total debt and current account deficits are unsustainable. As a taxed-to-death-Canadian (we pay until sometime in July before we hit 'tax freedom day'), it seems strange that every election Americans strike DOWN tax hikes (like, who in their right mind is every going to vote FOR a tax hike?), but somebody has to tell you that the cupboards are bare!

I have an ugly feeling the fat lady has not sung yet. I know the real estate market around here is hanging by threads; held together only by the myth of globialization and the addition of 350k immigrants per year, most of whom end up in Toronto.

[A Horse With No Name]

Damn straight RE small business. Is the private sector still responsible for 70% of GDP, or has the recent employment/government bloat tipped the scale a bit backward ?

If you are a competent, honest, quality contractor, doing familiar work to your typical meticulous standards, work that you stand behind, what is the actual purpose of taking out a permit?

A contractor who knows what he's doing & stands behind his work will do it right (or fix it right). And if a homeowner is NOT required to get a permit to do the work himself, you can see how easy it is to look at permit fees as little more than a money grab. Sure, not all contractors are as described above (most AREN'T), I understand that, but for those that are, that's money lost, either from the contractor or the homeowner. There needs to be a system around it. Why is it congressmen are never accountable, but I always have to be?? Who is playing with/risking more money ??

I do NOT advocate starving the military to provide good school lunches; the world is far too shaky to let down our guard.

Stop paying billions upon billions WE DON'T HAVE to overseas countries when we're broke, and use that first.

Or just dismantle the DOE ($65 Billion)- we got along for 200+ years without it, while developing some of the greatest accomplishers the world has ever seen. Another issue.

BTW - I have never heard of ANYONE advocating "no government". You are the very first person I've ever heard state that combination of words.

I've just seen really crappy stuff on things that involve life safety...such as fire alarm sysems.

Inspection system should be simple and easy to go through....

I don't advocate starving them, just "Put them on a leash...."

[A Horse With No Name]

You guys cannot afford to be the world's cop anymore. Your total debt and current account deficits are unsustainable. As a taxed-to-death-Canadian (we pay until sometime in July before we hit 'tax freedom day'), it seems strange that every election Americans strike DOWN tax hikes (like, who in their right mind is every going to vote FOR a tax hike?), but somebody has to tell you that the cupboards are bare!

I have an ugly feeling the fat lady has not sung yet. I know the real estate market around here is hanging by threads; held together only by the myth of globialization and the addition of 350k immigrants per year, most of whom end up in Toronto.

I strongly agree with 'Biz.

[loki]

just by the title. the deflation is over, welcome to the norm, increasing prices without increasing wages. stagflation...something the fed was supposed to hold at bay, but has encouraged all along...but it's going to get worse.

[A Horse With No Name]

just by the title. the deflation is over, welcome to the norm, increasing prices without increasing wages. stagflation...something the fed was supposed to hold at bay, but has encouraged all along...but it's going to get worse.

...and you would be correct also. We've had serious forms of it since 1980 or so, but it is rearing its ugly head more and more now.

[Drew Dowdell]

just by the title. the deflation is over, welcome to the norm, increasing prices without increasing wages. stagflation...something the fed was supposed to hold at bay, but has encouraged all along...but it's going to get worse.

I wouldn't say so much that the Fed encouraged it, more like it enabled it. The easier credit of the last 30 years (not just interest rate, but ease of acquiring new credit) became a substitute for higher wages.

[balthazar]

Credit is NOT income!

Anyone perpetrating that illusion needs to shovel out cow barns daily @ 4AM for a year, and for good measure, this should include the entire staff of the Fed on general principals.

[ZL-1]

Credit is NOT income!

Anyone perpetrating that illusion needs to shovel out cow barns daily @ 4AM for a year, and for good measure, this should include the entire staff of the Fed on general principals.

[Drew Dowdell]

I didn't mean to say that it was. Sorry for not completing my undeveloped thought....

We "got out" of stagflation in the early 80's right? No... we put it on our Mastercharge and used easy credit to get us out of it. Stagflation never went away.... just the easily recognizable symptoms.

Treating stagflation with easy credit is like treating cancer with Tylenol.

[A Horse With No Name]

Credit is NOT income!

Anyone perpetrating that illusion needs to shovel out cow barns daily @ 4AM for a year, and for good measure, this should include the entire staff of the Fed on general principals.

Could you very politely go on Fox, MSNBC, CBS, Air America, and anywhere else your voice can be heard, and tell about three hundred million Americans the same thing?

You are SO right on and we agree SO much on this it isn't even funny!

[A Horse With No Name]

Treating stagflation with easy credit is like treating cancer with Tylenol.

And this is why I bitch about the last thirty years so much, and I am really equally angry with both political parties for getting us here. Let's just try to face our problems like adults before they take us under...

And this is why I dislike John Kaisich for governor of Ohio so much also...he strikes me as another guy that will walk through the back door rather than the front, and be unwilling to face the problems that bugger us right now.

[A Horse With No Name]

Because our military structure, fleets, etc were all designed for the Cold War...not necessarily applicable to the 21st century where decentralized Islamic terrorism is the war du jour...

And we keep things this way because we have an entitled elite in our country who get wealthy off of the military industrial complex, and it ain't about to change anytime soon.

Remember the words of Dwight Eisenhower, one of the best men to ever sit in the oval office. Beware of...."the military industrial comples..."

Sixty years later he is so right it isn't even funny, at all.

[loki]

I wouldn't say so much that the Fed encouraged it, more like it enabled it. The easier credit of the last 30 years (not just interest rate, but ease of acquiring new credit) became a substitute for higher wages.

so, isn't controlling interest rates a form of social/economic engineering/intervention, aka socialism?

if you take away the "enabler" as you call it, would the congress control interest rates or would you move it back to a free-market force?

[loki]

And we keep things this way because we have an entitled elite in our country who get wealthy off of the military industrial complex, and it ain't about to change anytime soon.

Remember the words of Dwight Eisenhower, one of the best men to ever sit in the oval office. Beware of...."the military industrial comples..."

Sixty years later he is so right it isn't even funny, at all.

but he should have told his parents generation of it too, WW1 just gave us precedent to get into WW2, other than the pacific theater. our "back room deals", excluding the punished (germany), really just set the stage for them to elect the radicals to power...hitler and such.

[A Horse With No Name]

It isn't socialism, but it is a form of social engineering per se.

Problem is, once you start, how do you stop? Had interest rates not dropped on home loans, everything would have tanked. As it is, I just refinanced at 5 and 1/4 from 6 and 1/ 4, and may do it again if rates keep dropping.

But it is a devils deal, as the only thing holding up home equity is cheap loans. And it makes no sense to pay the whole thing off early, as massive inflation is bound to follow all of the money we are having to print to pay for our two failed wars in the middle east, all of the junk we buy from China, and all of the oil we buy from the middle east.

[Drew Dowdell]

so, isn't controlling interest rates a form of social/economic engineering/intervention, aka socialism?

if you take away the "enabler" as you call it, would the congress control interest rates or would you move it back to a free-market force?

A single entity controlling interest rates is bad. Congress would be even worse. Free-market would be the absolute worst.

[A Horse With No Name]

but he should have told his parents generation of it too, WW1 just gave us precedent to get into WW2, other than the pacific theater. our "back room deals", excluding the punished (germany), really just set the stage for them to elect the radicals to power...hitler and such.

Which is why I agree with Carbiz and want us to end our interventionist foreign policy...but how? One of the reasons I am so mad at W Bush is that he promised no nation building when he was elected, and I voted for him based on that promise. He then spends eight years trying to do...nation building. Ughhh!

[A Horse With No Name]

A single entity controlling interest rates is bad. Congress would be even worse. Free-market would be the absolute worst.

Depends. If you had a rational free market, a stable currency, and an educated population, you could pull it off.

However, we don't have a market that acts in a rational manor, our currency is unstable, and our population makes horrible decisions when it comes to finance. So right now, given our current situation, a free market solution that was totally free market would be an utter disaster.

[Drew Dowdell]

Depends. If you had a rational free market,

*spits tea all over the keyboard*

*chokes*

a stable currency, and an educated population, you could pull it off.

However, we don't have a market that acts in a rational manor, our currency is unstable, and our population makes horrible decisions when it comes to finance. So right now, given our current situation, a free market solution that was totally free market would be an utter disaster.

yes.

[loki]

Depends. If you had a rational free market, a stable currency, and an educated population, you could pull it off.

However, we don't have a market that acts in a rational manor, our currency is unstable, and our population makes horrible decisions when it comes to finance. So right now, given our current situation, a free market solution that was totally free market would be an utter disaster.

who would it be a disaster for? the people that don't know why/how interest rates are figured(bankers/loaners), or the people that take those loans from people that don't know how to figure those things? ...something that this mortgage fiacso basically started from, sub prime... people that couldn't make the payments.

disaster is one word for it, but "back to reality" is better... tons of debt no one can pay for on the shoulders of those that made those loans.

i'm sure people that get burnt on banking things look more closely at "who" they are working with, but many people don't spend anytime doing that. shouldn't that be more important than lots of other things, yet cause of FDIC many people know it's supposed to be safer there than anywhere else...

[loki]

...but how?

try your damnedest to elect people with integrity, and don't stop there...

[A Horse With No Name]

try your damnedest to elect people with integrity, and don't stop there...

This is a real start, and why I was talking about the need to get people voting in the politics section.

But until we realize one CONSERVATIVE ideal... namely, that we need to take responsibility for ourselves and our nation...all else is moot!

[ZL-1]

But until we realize one CONSERVATIVE ideal... namely, that we need to take responsibility for ourselves and our nation...all else is moot!

But that is not a Conservative-vs-Liberal issue; it's above that division. Conservative governments in the US have been responsible for tax cuts that have put the US in a positions of having to sustain a budget deficit on top of a trade deficit. With the degree of social security and public healthcare coverage you guys have compared to us here in Western Europe, it is amazing how the US government keeps showing such budget deficits.

Edited October 24, 2010 by ZL-1

[A Horse With No Name]

But that is not a Conservative-vs-Liberal issue; it's above that division. Conservative governments in the US have been responsible for tax cuts that have put the US in a positions of having to sustain a budget deficit on top of a trade deficit. With the degree of social security and public healthcare coverage you guys have compared to us here in Western Europe, it is amazing how the US government keeps showing such budget deficits.

It's deliberately engineered stupidity IMHO. It's called starving the cow....if you create budget deficits large enough and for long enough, you can justify cutting social programs, which is what the conservatives here really want to do.

[ZL-1]

It's deliberately engineered stupidity IMHO. It's called starving the cow....if you create budget deficits large enough and for long enough, you can justify cutting social programs, which is what the conservatives here really want to do.

Engineered stupidity. Interesting expression, and a true one.

[balthazar]

I'll say it again- Gov should be run like a business. Right now there is zero accountability. Cripes, the Sec of the Treasury is a tax cheat !! Aliens circling the globe in outer orbits must be laughing themselves into coronaries and writing Earth off as 'not worthy'... in the negative sense.

IF turning Gov around could be done, it would take generations to accomplish. Start by removing 1 superfluous & intangible grade/high school course and sub in mandatory 'Money Management' and start teaching kids a life skill they NEED- how to responsibly execute a budget on a personal level. MAYBE by the time some of them enter politics, it will be ingrained enough to become a second nature course of action. Like it or not, the world spins on money (or the illusion of such).

Washington is broke, terminally broke. Elitists, millionaires, the blind, the moronic, the radical, those with no concept of the private sector that this country rests & relies on- they have. to. go. Unfit for duty.

...if you create budget deficits large enough and for long enough, you can justify cutting social programs, which is what the conservatives here really want to do.

Sorry: not all social programs are valid or beneficial- too many enable, to the point of being crippling. This, I've seen first-hand. Many have to be re-examined, scaled back, restructured or eliminated entirely. If you disagree, you are blinding yourself. NOTHING in the public sector should be above an independent justification process.

But 'conservatives want monster, incalculable deficients just to cut social programs' ?? Propaganda, IMO. No one sane would advocate that, so if you as a politician do, you're out regardless of party; unfit for duty.

You are able-bodied? There's work for you- not free housing, car, insurance, furniture & beer money in perpetuity. A certain political figure wants people to be able to 'paint & write poetry without worrying about work'! High treason !

President wants to find jobs ?? Open accounting classes; MediCare & MedicAid (not to mention the healthcare industry in the near future!!) desperately needs fraud investigators- $54 BILLION lost last year- put the damned word out !! How many in the financial sector are at least halfway suited to that work right now and would LEAP at any job ?? Any word from Capital Hill on that?? Not a whisper. No clue on how to execute responsible government, from either side. Unfit for duty.

Does this mean I advocate "no government" ?? Absolutely not. But it's a 900,000 lb rabid gorilla right now, and it's (figuratively) killing us while it claims its 'helping' us.

It's not 'Big Oil', or 'Big Unions' or 'Big Banks', you & I aren't forced to pay into those without a voice... it's Big Government that's the problem. They are not royalty, they are not celebrities, they are not sports or movie stars, they're even 'lower'; they're EMPLOYEES. Get accountable, get responsible... or GET OUT.

Hope that wasn't too political- I mentioned no names or parties in specificity. But boy; do I feel better!

-- -- -- -- --

I didn't mean to say that it was. Sorry for not completing my undeveloped thought....

My fault for implying that you were saying so; my comment was not directed at you personally but at the ideal.

[SAmadei]

Hope that wasn't too political- I mentioned no names or parties in specificity. But boy; do I feel better!

I wish I could + this up more... You got my vote. Its nice to see that some others are on the same brainwave...and can see what the real problems are, instead of having a misguided 5 second blurb that tries to treat the symptoms instead of the real problem.

+10000000000000000000000000000000000000000000000000000000000000000000000000042

I ventured onto local TV (I normally watch only Sci channel, Com Central, Adult Swim, NatGeo) while watching football today, and seeing the current batches of mud slinging and throat cutting, its the same-old, same-old... but with a different batch of useless people who are not going to get anything done but fleece us more, both intentionally and unintentionally. It's just so bleak.

[Z-06]

I'll say it again- Gov should be run like a business. Right now there is zero accountability.

Start by removing 1 superfluous & intangible grade/high school course and sub in mandatory 'Money Management' and start teaching kids a life skill they NEED- how to responsibly execute a budget on a personal level. MAYBE by the time some of them enter politics, it will be ingrained enough to become a second nature course of action. Like it or not, the world spins on money (or the illusion of such).

Washington is broke, terminally broke. Elitists, millionaires, the blind, the moronic, the radical, those with no concept of the private sector that this country rests & relies on- they have. to. go. Unfit for duty.

You are able-bodied? There's work for you- not free housing, car, insurance, furniture & beer money in perpetuity. A certain political figure wants people to be able to 'paint & write poetry without worrying about work'! High treason !

President wants to find jobs ?? Open accounting classes; MediCare & MedicAid (not to mention the healthcare industry in the near future!!) desperately needs fraud investigators- $54 BILLION lost last year- put the damned word out !! How many in the financial sector are at least halfway suited to that work right now and would LEAP at any job ?? Any word from Capital Hill on that?? Not a whisper. No clue on how to execute responsible government, from either side. Unfit for duty.

Does this mean I advocate "no government" ?? Absolutely not. But it's a 900,000 lb rabid gorilla right now, and it's (figuratively) killing us while it claims its 'helping' us.

It's not 'Big Oil', or 'Big Unions' or 'Big Banks', you & I aren't forced to pay into those without a voice... it's Big Government that's the problem. They are not royalty, they are not celebrities, they are not sports or movie stars, they're even 'lower'; they're EMPLOYEES. Get accountable, get responsible... or GET OUT.

Well said sir.

I think the ideas here at C&G because of diversity in political, social and economic opinions have been like a melting pot. We at C&G need to create our own movement, not a party nor political entity, but a social entity to make our country better.

Initially it all started bitterly here, but more and more conversations have been very constructive.

[A Horse With No Name]

I think if we could get ourselves together in person, we could do a lot of good. I was trying to bring everyone together via a LeMons car, but then the SCCA friends I had that were really interested kind of lost interest all of a sudden...

If you get back up to Michigan, let's get together Z and see if we can't make something positive come forth out of C and G.