See the full piece and some interesting illustrations at: http://www.interest.co.nz/opinion/wednesdays-top-10-nz-mint-hubbard-probe-fizzer-call-allied-statutory-manager-qe-too-lite-america-tur
Is America turning Japanese? - This is the question on everyone's lips today. In the wake of the US Federal Reserve's comments about slowing growth and deflationary pressures, many are wondering if the American economy is headed for a decade or two of slow to no growth coupled with deflation.
Obviously America wants to avoid that, but can it? Today's decision to embark on QE II lite seems like the prelude to something more substantial.
Scott Maher at Pimco, the world's largest bond investor, has done a nice analysis on whether America might turn Japanese. There are some similarities. America and Japan shared real estate bubbles and high debt. They have low growth outlooks. But there are differences. America has a low savings rate and a high current account deficit, while Japan had the reverse. America's population is also ageing, but it is still growing through migration. Japan's is not. Maher's charts are well worth a look.
The Japanese stock and house price falls since 1990 are startling. No wonder the Japanese housewives invested in Uridashi bonds in New Zealand. They got 100% of their money back and got interest too!. The comparison was a 20 year slide in other asset prices of 55%. Yikes.
