Cramer has had enough of the pundits who predict years and years of economic decline for the U.S. a la 1990s Japan. He likened it to other bearish sentiments – The stimulus won’t work! Nationalize the banks! – that have gripped the market for months. Of course, all of those notions have proved false, he said, and this “we are Japan” theory is wrong, too.
Sure, the U.S., like Japan, suffered a real estate-driven financial collapse, which hurt industry stalwarts such as JPMorgan Chase, Bank of America , Wells Fargo , Goldman Sachs and Morgan Stanley . And no doubt the potential for a similar 82% market drop, like that seen in the Nikkei 225 between 1989 and late 2008, seems scary. But we’re not resigned to that fate, Cramer said. There are significant differences between Japan’s situation then and ours now, differences that could be seen by anyone who looked close enough.
Cramer pointed specifically to the gross domestic product number released today. The headlines focused on the 6.1% first-quarter pullback, caused largely by problems with inventories and government spending. But the story behind those key GDP components makes the number seem a lot less severe.
Government spending should increase as 2009 progresses and President Obama’s stimulus spending kicks in. And inventory shortages are a good thing. They mean that businesses have made necessary cuts and might soon look to restock, revving up the economy and pulling us out of this recession.
Not to mention, the Japanese are much older on average than Americans – 44.2 years versus 36.7 years, respectively – and they have more senior citizens. That means far fewer people are spending money and producing goods, a detriment to any economy. We are also less dependent on exports, which is why our industrial production shrank only 2.2% in 2008, while Japan’s shrank 3.2%.
Lastly, the U.S. has better handled its financial crisis. Treasury Secretary Geithner and Federal Reserve Chairman Ben Bernanke are working overtime to get us back on track. Japan, however unfortunately, was much less proactive.
So forget all this talk of a “lost decade.” We are not Japan. The bears are now recognizing this, and their arguments no longer hold sway over the markets. That’s why the Dow jumped 169 points on Wednesday.
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