Why did zero percent interest rates lead to stagflation in Japan in the last couple of decades? -

Why did high government spending and zero percent interest rates lead to stagflation in Japan? Do the politicians seem to be making the same mistakes with the UK and US now?

Actually the Japanese didn t go into stagflation but instead to a stag deflation for the past 2 decades. Although it would be hard to predict what will happen with the US economy since there are so many problems, the differences between Japan and the US are vastly different. In Japan, the consumer is quite different in that as long as the economy is even slightly weak, the Japanese consumer will not spend. Without the consumer spending, it is difficult for the economy to recover. Previously the economy recovered by increasing exports which was no longer viable. Secondly all the Japanese policies were done very late including interest rate reductions, infrastructure spending, and making the banks solvent.

Money isn t earning anything with 0% interest. Its just sitting there. Inflation is eating up money, and I mean eating it up.

Nobody would loan money if they couldn t make any money on it.