America is a zombie economy following the footsteps of Japan, says Morgan Stanley Asia chairman Stephen Roach.
Writing in the Financial Times, Roach says the "global economy is being hobbled by a new generation of zombies – the economic walking dead."
Consider this: since the beginning of 2008, inflation-adjusted growth in consumption in the US has averaged just 0.5 per cent. That's never been as weak as this before in the postwar era.
He says the actions of the Federal Reserve mirror those undertaken by the Japanese. The Fed embarked on two rounds of quantitative easing to get consumers spending again. It didn't happen and there's a good reason for that: people are losing jobs and homes.
Roach writes: "The aim is to get zombie consumers to ignore their festering problems and start spending again – irrespective of the wrenching balance sheet damage they suffered in the "great recession". The subtext is Washington condones a revival of reckless behavior Unsurprisingly, US consumers are smarter than US policymakers. With fiscal and monetary policies on unsustainable paths, households know that these life support efforts are temporary, at best. "
Throwing more money into the system isn't going to make people start buying. Even with 0% interest rates, they are burdened with unemployment or job insecurity, high debt and falling house prices.
America, says Roach, has failed to learn from the lessons of Japan. The only answer to America's economic woes is to create full employment which will increase demand, increase output, and cut budget deficits. Too much money is spent on banks and housing, not enough on technology and infrastructure which can drive the job market.
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