Angry Bear: "Japan has certainly provided macroeconomists with an excellent demonstration of just how difficult it is to get out of a deflationary cycle once you're in one.
This also reminds those of us who worry about the sustainability of BWII just how different the situations of Japan and China are. Unlike China, Japan is unambiguously in the position where the inflationary effects of propping up the dollar are not just tolerable, but to be positively welcomed. But at the same time, it is China that has been forced to continue buying dollar reserves, while the yen's peg against the dollar has been sustained with relatively little intervention from the Japanese authorities in recent months. This type of data makes one think that they'd almost welcome the chance to start intervening again..."
This is a long-winded way of saying that common wisdom analysis of the international macro situation is not well-informed, and the U.S. may be in a firmer situation that it is readily apparent.
Yesterday, I happened to listen to some far Left nutcase talk about the progress of "dollarization" -- the tendency of many small countries in the world to peg their countries to the dollar, as a way of escaping the inflation, which results from their government's inability to credibly impose discipline on the printing press. She reminded me that a large number of countries in the world do this.