In 1999 while working for UBS (Private Banking) in Zurich, I do recall writing a report that confidently asserted that the United States would not go the Japanese way. However, on August 9th, in my new role as a consultant for my former employer, this is the comment I wrote on the Federal Reserve Open Market Committee decision:
The Federal Reserve Open Market Committee – with three dissenting votes who wanted to retain the existing phrase of communicating exceptionally low rates for an extended period – decided to communicate to the market that it would keep its current low rate policy at least through mid-2013, through a majority vote of 7-3. Somewhat unsurprisingly, the stock markets responded positively with US indices rising some 4%. The stock markets were technically very oversold and were due for some bounce. What investors would do – over time – is to chew on the implicit message from the Federal Reserve that this is taking America several steps closer to the experience of Japan in the 1990s.
I am glad to note (ht: Calculated Risk blog) that some one who had once argued that the US was not Japan now is not so sure, any more, as is the case with me. Perhaps, I am surer now. It is getting closer (lot closer) to Japan of the 1990s without its cultural safety valves!