Turning Japanese

The Economist compares the current recession to Japan in the 1990s. It's a grim read, not least because of how many Americans borrowed recklessly for so long:

The rebuilding of American households’ balance-sheets is likely to force a reliance on government demand that is bigger and longer-lasting than many now imagine ... With their assets worth less and credit tight, people will be forced to save much more than they used to. The household saving rate has risen to 3.6% of disposable income after being negative in 2007. For much of the post-war period it was around 8%, and in the short-term it could easily exceed that. But, whereas dis-saving by Japanese households countered the corporate balance-sheet adjustment, American firms are unlikely to invest more while consumers are in a funk. Propping up demand may therefore require more persistent, and sustained, budget deficits than in Japan.

Hence the greater early emphasis on fixing the government's long-term indebtedness. The US has little chance of sustaining its short-term borrowing needs without it.