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"Neither the United States nor Europe, outside Germany, is likely to experience serious deflation in the next year or two. But that's the wrong question - and we should bear in mind that Japan's economic malaise took a long time to turn into all-out deflation."

"The American situation is strikingly similar in some ways to that of Japan a decade ago. Like Japan circa 1993 or 1994, the United States is now facing the aftermath of a huge stock market bubble. Also like Japan, America faces a problem not of sharp downturn but of persistent underperformance - an economy that grows, but too slowly to prevent rising unemployment and falling capacity utilization.

What's different is that America has Japan as a cautionary example. Is forewarned forearmed?"

http://www.iht.com/articles/97523.html

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Property taxes on our home went up 23% last year. Even after contesting an increase of the valuation of our summer place and getting some relief, the taxes on that will go up nearly 50% this year. Our backup health plan has averaged rising 12.5% for the last 7 years and did just about that for this year PLUS the copay on drugs increased more than 10% as well. I don't know how much more of this sort of "deflation" we can stand. At least we gave up smoking long ago.

brucedoe
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Hi brucedoe - sorry to hear about the multiple whammies you're having to deal with. I guess these are the kinds of things where international economics doesn't make much of a difference- housing, taxes, health care. Hopefully the saving grace will be in items where it does make a difference - cars, apparel, electronics.
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What's different is that America has Japan as a cautionary example. Is forewarned forearmed?"

Only if a solution exists. Does one exist?
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jim : Only if a solution exists. Does one exist?

The most enduring solution would be job growth - but that ain't likely anytime soon. The other is the 'wealth effect' - rising values of property and investments. Which was what drove the boom in the first place. Housing certainly is doing its share with the help of all time low interest rates. Now we have to see whether investor psychology can do its part in rebuilding confidence to venture forth into the market again. The tax cuts need to start paying off.
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The most enduring solution would be job growth - but that ain't likely anytime soon. The other is the 'wealth effect' - rising values of property and investments. Which was what drove the boom in the first place. Housing certainly is doing its share with the help of all time low interest rates. Now we have to see whether investor psychology can do its part in rebuilding confidence to venture forth into the market again. The tax cuts need to start paying off.

Don't forget savings.

Far, far too many people are tapping equity to fund lifestyle. This is a game that has a definite end; when the equity is gone and the borrower is maxed out, then he'll stop spending and start paying back if that is possible for him to do.

In the meanwhile, the housing boom is being driven by a combination of gov't homeowner programs and low rates.

Well, rates can't go much lower, and everyone who is breathing and not a credit basket case has been able to obtain a mortgage. So, while single family housing for the time continues to show adequate strength, foreclosures are also at an all-time high and the commercial sector in many regions of the country (including mine, unfortunately) is in bad shape.

This housing cycle is past due to end. What happens then?
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