Going Down the Dismal Path of Japan

Paul Krugman cites a report that lays out exactly how the US is following the same ineffective banking policies that led to the "lost decade" in Japan. Tragically, the US is heading for a similar decade of depression because first Bush, now Obama, are unwilling to deal effectively with the collapse of the banking system:

The guarantees that the US government has already extended to the banks in the last year, and the insufficient (though large) capital injections without government control or adequate conditionality also already given under TARP, closely mimic those given by the Japanese government in the mid-1990s to keep their major banks open without having to recognize specific failures and losses. The result then, and the emerging result now, is that the banks’ top management simply burns through that cash, socializing the losses for the taxpayer, grabbing any rare gains for management payouts or shareholder dividends, and ending up still undercapitalized. Pretending that distressed assets are worth more than they actually are today for regulatory purposes persuades no one besides the regulators, and just gives the banks more taxpayer money to spend down, and more time to impose a credit crunch.

These kind of half-measures to keep banks open rather than disciplined are precisely what the Japanese Ministry of Finance engaged in from their bubble’s burst in 1992 through to 1998 …

I'm a victim of this downturn. My retirement savings were in the stock market and I foolishly believed that economists were smarter than in the 1930s and that government officials (despite the ineptitude of the top levels of the Bush admin) would not make the mistakes of the past. But sadly, I was wrong. I will be eating dog food and living in a one room apartment for the last two decades of my life because of the criminals on Wall Street and the incompetents in government and the fools who pass for economists. Life is cruel. My mistake was to believe that things couldn't be that bad. I was wrong. I have no golden parachute. I have meaningful pension (government or private). My old age pension is $6,000 a year. That's it. I saved about 40% of my income diligently for 30 years to feather my nest for retirement. I had "plenty" when I retired. Now 50% of that is gone and I keep watching it ebb away as a new Great Depression gathers. I foolishly didn't believe it was possible. I'm learning my lesson most painfully. Sadly I will take this lesson to my grave.