You know you have to start worrying when the people who need to spin a positive web start sounding like we are facing Armageddon. Larry Summers, director of the US president’s National Economic Council, said today that “the American problem this time has more in common, at least qualitatively, with the Japanese post-bubble problem, where the issue was not reassuring foreigners but maintaining sufficient domestic demand to push the economy forward.”

          In case you haven’t done your homework The Japanese annualized contraction of 12.7 per cent, or 3.3 per cent in quarterly terms, dwarfs those of the United States and Europe and is much worse than anything that happened to Japan during its so-called "lost decade" of recession in the 1990s. In other words, bend over and kiss your bank account good by.

          If you need a reference, most economists say that more than 10% is a deep depression. Get the picture?  If you need a comparison, the Nikkei Index was souring in 1989 at 38.000 and by 2003 it fell about 80% to below 8,000. So don’t take my word for it, even Summers predicts that the stimulus is not going to work. Japan had 10 stimuli and none of them worked either.

          Do you want more of a comparison with Japan? For the past decade Japan has had government-directed investment to key strategic industries. I like to call the Obama plan, which is essentially the same, “partnership politics”. Did you know that Japan tried TARP to the tune of 20-trillion yen to guarantee zombie companies? Healthy companies were forced to compete with subsidized failures. Just today I heard a person say how FORD had not accepted a dime of bailout money. How surprised will that person be when FORD goes under, and my guess is that since it stood up against Obama, it will be allowed to disappear. Only time will tell, but the writing on the wall, and this time it is in Japanese and it tell me that all this will come to pass in the blinking of an eye.

          During the 90’s Japan pumped more than 10 stimulus packages into their failing economy, which totaled over 100 trillion yen. Guess what? None of them worked. Surprised? Well the real surprise is yet to come. You don’t like big corporations, no worries, no jobs, no mas. So you think that pouring money into failed banks is a new idea? Think again. Between 2001 and 2003 Japan flooded the banks with an increase of more than 293 percent. So next time the genius Krugman writes that Obama needs to pump more money into the economy, write him a note and tell him it’s already been tried, and it doesn’t work.  But Krugman is a tough sell. The best he could do when he was wrong about Japan was to say that it would have been worse. His praise could not have been more exciting as he watched Japan discharging money by the trillions into its failing economy.

          “Over the past decade Japan has used enormous public works projects as a way to crate jobs and pump money into the economy. The statistics are awesome. In 1996 Japan’s public works spending, as a share of GDP, was more than four times that of the United States. Japan poured as much concrete as we did, though it has a little less than half our population and 4 percent of our land area. One Japanese worker in 10 was employed in the construction industry, far more than in other advanced countries.”

          Krugman has been more often wrong then correct, but still he has a following. It’s very curious, and is like the blind leading the blind. What the wonderful program of Krugman’s orgasmic delight did was to increase Japan’s national debt which exceeded 200 percent of the GDP and diverted wasted resources from the private sector, and totally distorted the free-market. Perhaps you notice that the Obama plan is moving in the same direction. So expect the same result!