The US Economy and Japan's Lost Decade - An Eerie Similarity

Nobel prize winner and economist, Paul Krugman, in his book "Depression Economics" describes how the current US economy bears a disturbing resemblance to Japan's lost decade from 1991 to 2000.

In the 1980's, during Japan's period of economic miracle, Japan experienced incredible levels of growth in GDP. This was fueled by low interest rates, and crony capitalism - similar to sub prime mortgage, only in this case, corporations with bad credit could also easily borrow from the banks. The abundant supply of cheap credit tripled Japanese asset prices and the stock market soared, leading to a giant asset bubble. Realizing that such astronomical asset prices were unsustainable, the Japanese central bank, suddenly began raising interest rates in 1990. The market responded quickly resulting in a steep market crash. The stock market went down 60% and asset prices took a nose dive. Japan went from a 2.4% budget surplus in 1991 to a 10% deficit in 1998.

In response to the impending recession, Japan's central bank lowered interest rate and increased the supply of money. Big banks were bailed out several times. Through quantitative easing (printing money and buying government and bank bonds to supply banks with cash to encourage lending and in turn hope that "deposit multiplication" leads to creation of more money) the government hoped for a market recovery. Despite several stimulus injections the economy did not respond favorably. Instead of borrowing money from the government, Japanese corporations decided to save more and pay down their massive debts. Corporations tightened their belts and unemployment went up and so did inflation resulting in a decade long period of flat GDP known as the lost decade of Japan.

The US economy seems to be following a pattern of asset bubble burst and liquidity trap similar to Japan. The question is whether the Fed's expansionary monetary policies (low interest rates, increase in money supply) and government's fiscal policy (taxation and expenditure) will have any positive sustainable effect on the GDP and unemployment rate or will the US economy slip into a period of stagflation. Stagflation is generally preceded by a supply shock event such as a steep rise in oil price (the gulf of Mexico spill could be a catalyst). If the US experiences a stagflation, it will be very difficult to counter it with measures suggested by Keynesian theory (since inflation and unemployment are supposedly mutually exclusive). Irrespective of the market response, the Fed and government should initiate policies to fix the economy. Inaction (mainly due to political disagreement)or policies such as "quantitative neutrality" will only make matters worse.

Columbia Pre-MBA career management

Take aways from Columbia's pre-MBA career management session on 22nd July, 2010.

Gina Resnick (Asst Dean & MD of career management center (CMS))-
1. The job market is a slightly better this year
2. There's a new normal in the job market. MBAs have to be on top of their game to get an internship.

Michael Malone (Director, Career Education & Advising, CMC)
3. Lots of resources available at columbia, make use of them NOW. Not much time for research when you join. School's moving from H,HPs,Ps to A,B,C grading system.

Bruce Llyod, Director, Employer relations, CMC
4. Researching the industry (who what when how, industry outlook), company (history, size, headquarters, biggest competitors, major players, stock price, market capitalization, major divisions, past problems/successes, future outlook, alumni) and function
5. Banking & consulting companies show up very early on campus. Sep 27th is the first corporate event (probably an info session). Be prepared to network effectively and talk intelligently from day one. PEs/VCs, etc show up in Spring.

Laurie Boockvar, Associate Director, Career Education & Advising, CMC
6. Find your i. interests (energizing vs draining jobs), ii. skills (strengths/weaknesses), iii. values (key drivers that you wont compromise on), iv. Style (preferences, e.g working with facts or big pic, individual vs team), v. Financial/work-life balance

7. Draw a map of your career in 10 years. There are many paths that lead to your final goal. Find a bridge job to align your background with the skills you need for your dream job.

Jay Corcoran, Asst Director, CM Lib & Dig media
8. Start looking at columbia's website for resources, career chronicles, coaching tips (video), industry resources, etc
9. Reach out to the alumni - look through the database

Frameworks for Investigating Careers (moderated by Pamela Wellington)
The panelists were 4 coaches who help candidates with their careers
Charlie Alum '72 (Started SWAPS) - Preparation is the key
Chris (healthcare consulting) - Networking with 1 or 2 people per session.
Anna (mgmg consulting) - show interest
Andrew (Banking) '01 - Info interviews are real interviews. Be ready. Exibit a lot of interest in industry and company.

Nayla Bahri (Ass Dean office of student affairs)
10. Take exemption exams but not too many. Dont miss out on cluster experience. Case study with learning team during orientation

1st Sem best practices (moderated by Loren Margolis, Associate Director)
Corey class of '11 - interning at Unilever, brand management
Sid class of '11 - interning at a hedgefund, background in hedgefund.
Lots of leadership positions available at various clubs.
High grades important to banks.