Is Europe the next Japan?

It's interesting travelling across Europe and seeing how one by one each of the economies is stagnating.

In the thirst for monetary union the stability pact has created a counter productive framework for growth and slowly but surely each country is grinding to a halt (in growth terms).

Germany is surely the most severe problem and reforms are taking time to push through let along have any effect.

And yet we sit here in the UK apparantly headed down the same road as the EU.

Recent measures to change our targetted inflation rate to match that of the EU is surely economic madness. How we can exclude the main cost of living from our calculations for inflation is totally beyond me. I have watched Ireland and the impact it has had there but still the jury is out on the Irish experiment.

Despite the warning signs EU policy seems stuck in a maliase worse than that which Japan had before it plunged into its modern dark age. At least Japan reacted quicker when they realised the issues they face. EU policy makers appear to beileve that this will not happen to them and that creeping policy is the best advance.

Meanwhile UK appears to break all rules on entry while at the same time attempting to fudge others.

If you ask me its all a bit of a mess and one that UK and EU will have to pay for, for many years.

Interesting post, S.

I will give you a vote.

Interesting observation Scrip. I'm not sure whether my memory is playing tricks, but wasn't it the case that the second and most serious dip in Japan was largely blamed on a sudden increase in long dated bond yields about 3 - 4 years into their bear market in about 1993?

It is of course unthinkable that there should be a sudden increase in bond yields in the West at a similar time from the market peak.

Hi Scripophilist

I believe the UK is breaking the boom bust cycle, and the Labour party and Bank of England have done great in stabilizing everything.....however Germany is dragging European economies down with them

The only comfort I can take in this fiasco is something that was said in the tv program "Yes Prime Minister" which went

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How they think they can have a one size fits all EU economic policy is beyond me. We can't even cope with the north / south divide - and we're in the same country.

My answer...get out of Europe and become part of the USA

Well the jump in yeilds has throttled the housing remortgaging market in the US for sure.

The trouble with Economics is that it is an art not a science I think general trends are relatively easy to spot but the beast that is an economy just sort of lumbers around and often wakes up with a start. Events like 9/11 can de-stabilise any forecast. I like to know though that we are heading roughly in the right direction.

I expect that if interest rates fall or rise they will have nasty implications. Neither of which are conducive to holding assets. I much prefer the situation that we saw in the early 80's. Things just couldn't get much worse and interest rates were high. Plenty of room for assets to rise in value.

"I believe the UK is breaking the boom bust cycle, and the Labour party and Bank of England have done great in stabilizing everything....."

I'm not so sure, having been through at least three business cycles I don't believe policy can totally determine or outthink everything. I remain to be convinced.

I believe the current cycle was abnormally shallow probably due to two things, mortgaging our future for the sake of having somewhere to live and also the massive public sector spending. Both of which are uneconomic and will require big payback from future generations.

I'd prefer to have less debt in the economy so as to create a better basis on which to build stability. I belive all the current administration has done is passed that problem to a future one!!

The Govt is getting away with a poor economy at the moment. They've spent the savings with nothing to show.
Nobody has noticed because they're all out spending someone else's money.

The Govt as in the UK ? Well I dont think the UK is the next Japan. Europe being the next Japan will depend on the aftermath of the German economy finally imploding. The Germans are worse than the US right now. Europe may sucumb due to being unable to avoid a wider problem.

Kevin.