logicalthought

The Return of Japan's Zombie Finance

>>...Japan’s... “zombie finance”, where Japanese banks continued to provide support for highly inefficient, debt-ridden companies...<<

Well, obviously the U.S. isn't destined to repeat THAT experience... After all, our banks no longer "provide support" for ANY companies!

Japan: It's the Supply Side, Stupid!

>>...the only solution appears to be... austerity with high interest rates...The problem is of course that thing have to get a lot worse before they actually get better...<<

I think you have the right answer for the wrong reasons. Higher rates won't increase domestic investment. However, what they WILL do (to co-opt a phrase from Buffett) is allow the tide to stay out long enough to drown those who have been swimming naked (after which the economy could rebuild from a healthier base). Of course, we could've accomplished the same thing (and saved around a trillion dollars of taxpayer money) by refusing to bail out Citi, AIG, GM, etc., and instead cramming their debt-holders down to common. Someone, I suspect that if the political will wasn't around to do that earlier this year, it won't suddenly appear now. Of course, if we start to see a substantial pick-up in inflation, it might be a different story, and the ensuing higher rates might be the silver lining.