is the subject of my essay today at Asia Times. I review the sources of funding for Treasury deficit and show how it is choking off credit to the productive economy. The conclusion:

The parallels between America in 2009 and Japan in 1989 are uncanny. An asset price bubble has collapsed, just before a tsunami of prospective retirements that the asset bubble was supposed to fund. Demand for savings is bottomless, and the government satisfies demands for savings by running a huge deficit and issuing debt. The crippled banking system borrows at an interest rate of zero and buys government securities. And the economy shrivels up and dies.

 

Japan, though, had one advantage: it knew how to export. There is only one way to drastically increase savings while maintaining full employment, and that is to export. America has neither the export capacity nor the customers. It could get them, but that is a different story. Francesco Sisci and I told it here.

 

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