I agree that the jury is still out on major economic transitions (from communism to capitalism). However, I was referring to economic crisises within advanced market economies.

The RTC approach worked well in the US. Japanese banks were still burdened with non-performing loans many years after the crash over there.

Certainly Argentina turned around quite quickly when it massively defaulted / devalued… After the slow torture approach had been tried for years. Same for Korea (without the sovereign default).

The history of the Great Depression is that the countries that went off gold soonest did best. The gradual approach didn’t work anywhere (to the best of my knowledge).

1.2 billion consumers. If exports dry up and the factories start turning idle, then the government will drop money from the sky to create demand.

The history of structural economic reform could argue the opposite (China versus Russia).

There is also a bias here.

If the “fast resolution” doesn’t work, then you have a “slow resolution.” In the case of Japan, asset prices fell really quickly in 1990, but that was just the beginning of the problems.

I don’t think that “fast” versus “slow” is the determining factor. There are places where “fast economic reform” has worked (Poland and Vietnam). There are places were “slow economic reform” has worked (China). There are places were “fast economic reform” hasn’t worked (Indonesia and Mexico).

When doing comparative analysis, it’s always dangerous to have two samples, since you could end up looking at the wrong variable.

I was thinking of a simplistic answer to the US overseas debt - bring in some people with savings! That might help the existing population a little if they paid more taxes on their income than the state spent on them. They might also pay the existing population to be allowed to come - for example, I have seen it proposed that the US auction its citizenship!

The history of financial crisis’s shows that a fast resolution works better than a slow one. Compare the quick financial restructuring in the US after the real estate bubble in 1980s with Japan’s decade+ of stagnation.

To be direct, putting off the day of reckoning or stretching out the pain doesn’t work. Reprising assets to real market values and moving on does.

I have never seen any evidence (even a unsubstantiated claim) that immigrants have conspicuously higher saving rates versus native. That applies with or without permanent residence status. In any case, even in they did, the numbers are too small to make a difference.

Your idea about saving construction jobs via immigration sounds like another scheme to reflate the bubble. In any case, losing construction jobs won’t hurt the American people that much. It looks like most them were done by illegal aliens anyway.

As for America have a huge area. Two points, First, if America really has such a large area, then immigration won’t raise asset prices. Second, as economists such as Brad De Long and others have noted, the US ran out of land within a reasonable commute starting around 1970.

So the US should persue mass immigration to maintain the asset bubble? Ponzi would be proud of you. Of course, Bush obviously regarded Ponzi as an inspiration as do serveral “mainstream” economists (G. Peri) who regard immigration inflated asset prices (mostly houses) as a “virtue”. Alas, bubbles end badly as Bush has sadly discovered.

RebelEconomist,

So the US has to consume less because “the world is hitting the capacity limits for various natural resources and pollution”. Let’s assume you are correct. Now doesn’t immigration into the US make the problem vastly worse? Immigrants don’t come to consume less after all.

Note: If brazil cultivates 3.5 million square km( 40% of area), brazil can produce 50-60 million barrels/day of oil equivalent at 50 tonne/hectare yield of sugarcane.

I agree, it is going to be tough for the US to consume less, but I think that they must try - it will be difficult to accommodate the rise of China (not to mention India, etc) without the developed countries consuming less, because it appears that the world is hitting the capacity limits for various natural resources and pollution. I would suggest increasing gasoline tax and introducing some kind of wealth tax, but immigration is another option. As the dollar and American house prices decline, the US looks an increasingly attractive place to live.

I dont see US reducing consumption without seeing massive recession which would further complicate the role of dollar as reserve currency.

Only way I see problem can be minimized is large immigration or population growth which could help stabilize asset prices and create collatrel for banks to continue lending(i think politically not feasible)