[quote=sdduuuude]davelj – right. But it was a lost DECADE. That’s a long time. Even at 1/3 the size it doesn’t seem to suggest near-term recovery. Maybe he wasn’t saying near-term. He did say “one day.”[/quote]
Agree. Look, I’m already on the record as saying that I think the peak-to-trough GDP decline will be in the 6%-8% range which will be followed by a decade of around 1%-ish annual real GDP growth. That’s not so hot. But under the circumstances, it’s not so bad, either. We partied pretty hard for the previous 15 years, after all. And in the process cumulatively front-loaded a few years’ worth of GDP via leverage. Now we’ve gotta give it back (re: pay it down)… over time.
You mentioned the lack of defaults in Japan during the ’90s. Well, the reason is that the government wouldn’t “let” anyone default. The companies pretended they were making enough money to pay their debts and the banks and bondholders pretended to get paid. As bad as things are here in terms of “delaying the days of reckoning,” we’re actually moving through this crisis much faster than Japan did. Companies are failing, banks are failing, etc. But the government’s trying to spread it out over, I think, another 2 years or so, instead of letting the whole system go down all at once. It’s debatable as to whether this is the “optimal” way of going about things. But Japan never addressed these issues and just pretended that there wasn’t “really” a problem. And here we are almost 20 years later…
