"Yes. If you don’t reduce tax penalties, tarriffs and lower rates, cutting spending will not sufficiently drive the economy in the direction we want...which is up, not sideways. The Japanese made that mistake, didn’t they?"
- What on earth are you talking about?...
"Japan slowly wakes up to doomsday debt risk"
"...The government borrows more than it raises in taxes, and its debt pile amounts to two years' worth of Japan's economic output, the highest debt-to-GDP ratio in the world.
It costs Japan half of the country's tax income just to service its debt. Each year, Japan's debt level increases by more than the combined gross domestic product of Greece and Portugal."
http://in.reuters.com/article/2012/02/20/us-japan-debt-idINTRE81G0IZ20120220
- What on earth are you talking about?...
I’m talking about how they got there...
- What on earth are you talking about?...
Japan’s economic problems, like ours, originated in huge asset “bubbles.” From 1985 to 1989, Japan’s stock market tripled. Land prices in major cities tripled by 1991. The crash was brutal. By year-end 1992, stocks had dropped 57 percent from 1989. Land prices fell in 1992 and proceeded steadily downward; they are now at early 1980s’ levels. Wealth shrank. Banks — having lent on the collateral of inflated land values — weakened. Some became insolvent. The economy sputtered. It grew about 1.5 percent annually in the 1990s, down from 4.4 percent in the 1980s.
Despite massive stimulus, rapid growth hasn’t resumed two decades later. Although the Japanese reacted slowly, they adopted the advice of economics textbooks. They raised spending, cut taxes and let budget deficits balloon. Gross government debt soared from 63 percent of the economy (gross domestic product) in 1991 to 101 percent of GDP by 1997. It’s now around 200 percent. The Bank of Japan (their Federal Reserve) cut interest rates, going to zero in 1999 — a policy that, with some slight interruptions, endures.