Real Lesson of Japan's Lost Decades
Neither Koo nor Krugman have learned a thing about the Real Lesson of Japan's Lost Decades.
The real lesson is no matter how much money you throw around, economies cannot recover until noncollectable debts are written off. That is why you have “zero interest rates and still nothing’s happening.”
The moment fiscal stimulus stops economies are virtually guaranteed to relapse until the core problem is resolved. The problem is Asset Bubbles, Malinvestments, and debts that cannot possibly be collected.
Bailing out the banks did nothing to fix these problems. Consumers are still saddled in debt, in underwater mortgages, with no job. Moreover, there is no driver for jobs given rampant overcapacity in nearly every sector.
Banks do not want to lend in this kind of environment so they don't. Businesses do not want to expand in this kind of environment so they don't. Meanwhile the Obama administration is making matters worse by increasing taxes on small businesses and proposing everyone pay for health insurance, with businesses forced to offer a plan or pony up part of the cost.
This too is giving small businesses an incentive not to hire. Housing prices are too high yet the Administration and Congress are hell bent on propping up prices. The solution is to let prices fall until they are affordable.
The irony is after all the bitching we have heard and all the "Affordable Housing Plans" out of Congress, we have a golden opportunity for affordable housing and no one wants it.
This proves beyond a shadow of a doubt that "affordable housing" was nothing but a scam for the Fannie Mae, Freddie Mac Congressional slush fund all along.