Tuesday, September 07, 2010

A stagnate future for the US economy


This is the source of Japanese style stagnation. US Economic growth is likely to remain low perhaps less than 2% a year over a decade. Unemployment will stay high for the forseeable future. People will gradually adjust to the new reality.

If housing price can not adjust downward, the only way to full employment is to raise the price of other goods and service - inflation. Holding down the mortgage rate alone will take a very long time to clear the market.

This is a political struggle between homeowners and bond holders.

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