Following in Japan's footsteps?

Great article in the Wall Street Journal today comparing our crisis to the crisis Japan had in the 90's, referred to as Japan's lost decade. They had a paired crash of both their real estate and stock market, and a decade of recession as a result. During that time, Japan's government made stimulus payment and bailout after bailout. Lots of public works. They didn't make a dent, and ended up putting Japan $1.35 trillion further into debt.

In fact, despite multiple examples in history and around the world showing otherwise, we are still convinced that the government can borrow, tax and print more money, and pay enough to stop any sort of economic crisis. Sorry, but no. Its never worked. Ever.

"Not to spoil the party, but this is not a new idea. Keynesian "pump-priming" in a recession has often been tried, and as an economic stimulus it is overrated. The money that the government spends has to come from somewhere, which means from the private economy in higher taxes or borrowing. The public works are usually less productive than the foregone private investment." - Barack Obama-san, WSJ

Honestly, we are seeing a "cleaning out" of our markets bad and inflated investments. Unfortunately, we're also seeing some deflation happening, which, if it catches momentum, could spell real trouble for us long term, economically.

As individuals, its pretty great. The ratio of debt to income in America has lowered for the first time in 52 years!! (We've been borrowing more and more and more for 52 years....and now we're surprised to get the check. We have been so spoiled) The amount of dollars saved per person actually raised and is close to being a positive number. (That's right, we've borrowed so much that even when every person's savings in America is added all together, we're still in the red!)And with deflation, it means things are more affordable, and cash savings are easier to hold onto.

All in all, yes, its painful, but this is a step in the right direction. Its like when you go on a diet after eating McDonald's for years. The first couple days you are starving and feel really crappy. And here's your Uncle Sam trying to hand you another Big Mac so you don't feel so hungry. Gee thanks.