Bill, your demographic argument is intriguing, but I'm not convinced. Are you suggesting that the Japanese downturn and our Depression were in fact based on some kind of demographic cycles, rather than simply being the inevitable consequence of massive misallocation of capital during significant financial bubbles? Can you direct me to any web sites with more information about this relationship?
While it's true that Japan prolonged the pain by delaying failure, I don't think that things are so different here. Our Fed has been desperately trying to delay the collapse by inflating the money supply at unprecedented rates. Different tactics, same goal, same flaw. Every tries in vain to prolong inevitable collapse. Furthermore, our sorry financial analysts never paused their cheerleading routines even after the bubble began deflating last year. They've been saying the same thing month after month: "This is THE BOTTOM. The recovery is NEXT QUARTER."
Of course, you're right that 9-11 complicates things. It's impossible to say how that will affect things though.
I think Greenspan, still flying high on his bubble-induced ego trip, will lower interest rates to within puking range of Zero, and will continue to print money with reckless zeal. And I don't think it's going to help.
Every significant bubble, from tulips to canals to railroads to the South Sea to twenties financial schemes to Japanese real estate to the Internet, ends in ugliness. A big bubble never just deflates to the historical mean and then fades away. It just doesn't work that way. Greenspan or not.
Dave |
