Monday, February 17, 2020
Muddling
Japan is headed into another recession. The country has never recovered from the crash of the early 90s. Banks never took write-downs for bad loans and the government never faced the truth about over-leveraged positions. It is instructive to remember the PR that Japan had in the late 1970s and 1980s. At that time, Japan Inc. was formidable and unstoppable. There were books written about Japanese methods of management and how the West could learn from them. There were consultants flitting about and promising to show American manufacturers how to catch up with Japanese quality. We were taught to dread the "Made in Japan" logo because it would someday take over the American economy. It never happened and there is a good chance it never will. Today, China is the boogeyman but it too has a giant debt overhang that it isn't acknowledging. The government concentrates on stimulus to keep the country moving forward. China is much larger than Japan and less likely to fail, but it must be wary of what could happen if it doesn't maintain a balanced economy. That doesn't mean the US should be sanguine about the future but it is a reminder that what goes up will come down.
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