Comparing China today to Japan 25 years ago

Yves Smith discusses this subject here.

The analogy of Japan in 1984 to China today is worth careful consideration. Japan responded to reduced exports caused by revaluation negotiated in the Plaza Accord with inflationary policy which created a real estate bubble. When the bubble blew up, Japanese authorities responded with even more inflationary policy…deficit spending, rock bottom interest rates, and quantitative easing. None of which was sufficient to avoid two “lost decades”.

Today, China must respond to reduced exports to the US due to consumers having run out of savings and credit. China is pursuing inflationary policies, which is clearly driving asset price bubbles. The rest of the story…look to Japan.

Advertisements

1 Comment »

  1. […] See more here: Comparing China today to Japan 25 years ago […]

RSS feed for comments on this post · TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: