I do not disagree with you that the Japanese government has handled their depression with extremely poor fiscal and monetary policy.
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Contraction of Credit? - NOT
Deflation - Maybe, I wonder how many people in Japan see the cost of goods going down? I doubt too many.
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Maybe "contraction" is not the word I was looking for. Perhaps "destruction" of credit. When that many loans go bad, it is essentially equivalent to having billions of dollars sucked out of the asset markets. Furthermore it leaves the banking in shambles and unable to finance further economic expansion. As far as deflation is concerned, this is well documented. Japanese real estate, for example, prices have declined for 15 straight years.
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Eh?
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Bad news on savings
Regarding the trade deficit, I trust Warren Buffett's evaluation of the trade deficit issue more than I trust yours or mine.
Why I'm not buying the U.S. dollar
Also I am not a "democrat". I am probably the most fiscally conservative person I know.