Cambridge University Conference Presentation:
March 18-20th 2004
by Karim Basta, Valance Co., Inc.
Click on the following: PRESENTATION
A synopsis of the presentation follows:1) The U.S. has "learned" from the Japanese experience-Both fiscal and monetary policy were eased more aggressively after the U.S. equity market crash than in Japan after its crash.2) U.S. macro indicators (spending and investment) have accordingly turned up earlier than Japan's at a similar stage of the cycle.3) But core CPI in the U.S. is following the exact same path as Japan-largely due to the fact that productivity and trend GDP growth in the U.S. are so much higher. The U.S. output gap is now larger than Japan's at a similar stage.4) Where the U.S. stands now-4 to 5 years after its equity bubble burst-is very similar to Japan at a similar stage of its cycle: Some improvement in growth indicators AND policymakers and the market thinking about an unwind of the aggressive policy response (e.g., the view that the budget deficit is too high and that interest rates are abnormally low).5) Much of the criticism of Japan centers on their actions at this stage of their cycle-It looks like the U.S. may be headed down the same road.