Worst Case Scenario For US Economy

Becoming like Japan:

In 1995, Japan's economy was seven times bigger than China's. Since then, China's economy has grown a lot — it's now bigger than Japan's. And Japan's economy has actually shrunk a bit.

As its economy was shrinking, Japan's government spent like mad. So its debt is now twice as big as its GDP. There is one country in the world in worse debt shape: Zimbabwe. The highly indebted countries you keep hearing about, like Greece and Ireland, have much smaller debt burdens than Japan.

The future does not look bright. Japan's population is tilted towards older people, so they have to think about huge pension payments in the coming decades.

Investors are still lending lots of money to Japan at reasonable rates. The country does not seem on the brink of an acute fiscal emergency. At the same time, it doesn't seem likely to break out of its long term chronic economic illness.

The primary reason for this lack of growth is bad government decisions. The good news is that means this is avoidable. The bad news is we need our politicians to make good decisions. I won't be losing sleep over this, but it is a possible future for America.