How U.S. can avoid Japan's lost decade

Flags of the U.S. and Japan


BILL RADKE: Federal Reserve Chairman Ben Bernanke is a student of Japan's infamous lost decade of economic stagnation. As he prepares to deliver a big speech tomorrow, we ask whether the U.S. can prevent a repeat... The economic data out this morning isn't great -- new unemployment claims rose again last week, there's no sign of what they call core inflation, and once again imports from China grew a lot faster than our exports did. All of which leads us right to economist Diane Swonk of Mesirow Financial joining us live from Chicago. Good morning, Diane.

DIANE SWONK: Good morning.

RADKE: The Fed chair speaks tomorrow. What lessons has Ben Bernanke learned from Japan's lost decade that he'll apply here?

SWONK: Well I think the big lesson that Ben has learned, and he certainly has iterated over the years, is that there are no small moves that should be made. Japan did a lot of experimentation with tinkering with stimulus, but didn't really commit themselves to big stimulus efforts. And he feels that's where they made a mistake. So from Ben, you'll hear no small moves.

RADKE: Go big, or go Japan. What's your take, Diane? What signs do you see that the U.S. can avoid Japan's fate?

SWONK: The one unique factor that distinguishes this situation from that of Japan, or the Great Depression for that matter, is all the cash we have on the sidelines, particularly mounting on corporate balance sheets. Now somewhat understandably, they're hoarding more cash today because they were left without any cash or credit just two years ago and couldn't pay payrolls. But any increase in confidence, or firming of confidence that we see, could result in a much more stronger hiring and investment environment that what we've seen. And could tip the scales to be much more favorable than what we saw in either Japan or the Great Depression. Having all that money on the sidelines ready to go, all's we need to do now is get them to move on it.

RADKE: I hope so. Economist Diane Swonk of Mesirow Financial, thank you.

SWONK: Thank you.


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