Krugman: Mind the Gap

Old Blog Import

Back when I first got professionally obsessed with Japan’s problems, around four years ago, I made myself a mental checklist of reasons that Japan’s decade of stagnation could not happen to the United States. It went like this:

1. The Fed has plenty of room to cut interest rates, which should be enough to deal with any eventuality.

2. The U.S. long-term budget position is very strong, so there’s plenty of room for fiscal stimulus in the unlikely event interest rate cuts aren’t enough.

3. We don’t have to worry about an Asian-style loss of confidence in our business sector, because we have excellent corporate governance.

4. We may have a stock bubble, but we don&#8217;t have a real estate bubble.<br /> <br /> I&#8217;ve now had to strike the first three items off my list, and I&#8217;m getting worried about the fourth.&#8221; </blockquote> 

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