William Grieder, writing in The Nation back in 2003, mind you:

At the risk of sounding like Chicken Little, I am going to describe the economic situation in plain English. The United States is flirting with a low-grade depression, one that may last for years unless the government takes decisive action to overcome it. This would most likely be depression with a small d, not the financial collapse and “grapes of wrath” devastation Americans experienced during the Great Depression of the 1930s. But the potential consequences, especially for the less affluent and the young, would be severe enough–a long interlude of sputtering stagnation, years of tepid growth and stubbornly high unemployment, punctuated occasionally with a renewed recession. Depression means an economy that is stuck in a ditch and cannot get out, unable to regain its normal energies for expansion. Japan, second-largest economy in the world, has been in this condition for roughly twelve years, following the collapse of its own financial bubble. If the same fate has befallen the United States, the globalized economy is imperiled, too, since America’s market for imports and its huge trade deficits keep the global trading system afloat.

Most authorities, I should add, do not regard any of this as likely. The great difficulty for policy-makers is that this doesn’t much feel like a crisis–not yet anyway, for most Americans. So where’s the urgency to undertake radical remedies? Some of Wall Street’s best forecasters, for instance, are predicting 4 percent US growth in the second half of 2003. But Japan experienced false recoveries, too. Nobody knows what will unfold if nothing is done, but the consequences of waiting to find out could be horrendous for the broad ranks of Americans. When the US economy corrects for its excesses, it is always the innocents who are led to the slaughter first. Even if the odds are only one in four that the worst will happen (as the Dallas Federal Reserve Bank president recently estimated), it seems reckless to gamble. Taking strong measures now would be messy and disruptive to regular order (maybe wasteful if they aren’t needed), but in the present circumstances that would seem more prudent than a false optimism that lamely repeats that the “good times” are right around the corner.

A depression can be read as a “market signal” of a dysfunctional economy that requires fundamental restructuring. Japan learned this the hard way. In this case, such a signal may be flashing the need for deep changes both in the American economic system and the world’s. Surely it is not too soon for Americans to ask themselves what might be out of whack and how to correct things–starting with their own much-celebrated economy.

I asked a financial economist at a major US hedge fund where the United States appears to be at this point. “We are in the second or third year of what Japan has gone through,” he surmised. How much longer might this go on? “Another ten years,” he said, “if you think about Japan, another ten years.”

[...] Basically, what’s under way is a brutal unwinding of the delusional optimism that reigned during the 1990s–excesses like the hyperinflation in financial assets and the swollen ambitions that led investors and companies to wildly overvalue their prospects for future returns. The stock-market bubble was the most obvious expression of excess, but not the most serious dimension. In an era of Internet fantasies and collective self-delusion, business sectors (and their financiers) overinvested on a grand scale and generally used borrowed money to do so. That is, they built too many factories, shopping centers and office buildings–creating more productive capacity than the marketplace could possibly absorb. Consumers indulged in their own version of wishful thinking, borrowing heavily to keep on buying, hoping the “good times” would last long enough to bail them out.

This legacy of accumulated excesses lies across the American economy like a heavy wet blanket–overcapacity in production, overpriced financial investments, mountainous debt burdens for corporations and households, and thus a deepening reluctance to invest or to consume. Personal debt is now at an extraordinary 130 percent of disposable income, up by nearly one-third since the mid-1990s. Manufacturing is operating at only 72.5 percent of its productive capacity, greater idleness than during the 1990-91 recession and approaching the severity of the 1982 recession. For producers of semiconductors and related electronic components, capacity utilization has fallen to 65 percent. In telecom equipment, it is at 50 percent. That’s why there is so little new investment. What company is foolish enough to build new plants when so many existing ones are shuttered? And who would lend them the capital? If consumers run out of capacity to borrow more or can no longer refinance home mortgages, the collapse of aggregate demand will become far worse.