If the United States really were headed for recession, where would it show up first?

In RV sales. Nobody needs a land barge. It’s a top-end consumer purchase that can easily be put off. Especially when gasoline is selling for more than $3 a gallon.

So what has happened to RV sales?

“Winnebago Industries, Thor Industries and other US makers of recreational vehicles will probably say that shipments fell in 2007 for the first time in six years...” says a report in today’s International Herald Tribune .

The IHT goes on to tell us of a University of Michigan study that predicted an increase in sales of 3.5% in 2008. Now, less than six months later, the analysts have sharpened their pencils and looked out the window; they now say sales will fall by 4.8%.

Pity the poor RV owners. They are doomed to wander America’s lost highways, carrying three tons of steel on their backs. Everywhere they turn, there are rising expenses – gas, insurance, campground fees.

And pity the poor stockholders. Fleetwood Enterprises fell 27% this year. Coachmen is down 47%, while Monaco Coach and Winnebago are both down 37%.

So, is the United States headed for recession?

Yes, it appears to us that it is, or at least to some kind of slump, maybe the major Japan-like slump we forecasted seven years ago .

Yesterday, stocks staged a rebound. The Dow bounced 215 points. But don’t get too excited, dear reader; the tide still appears to be draining out. Sure, there are always some back-eddies and countercurrents. But the major flow of liquidity is down and out.

So far, U.S. stocks are down about 10% from their peaks. That’s about $1.5 trillion in losses. Then, there’s the housing market – where prices are off 5%-10%, another big loss of implied wealth, equal to as much as $2 trillion. It’s adding up.

What it is adding up to we don’t exactly know. But the immoveable object of deflation – lost cash and liquidity – looks ever more immoveable, day by day.

Yesterday’s headline in the Financial Times told us that the “Fed move fails to avert rout in markets.” Credit fears are growing, even “in spite of aggressive efforts by the Federal Reserve to head off an end-of-the-year squeeze.”

It appears that we are reaching a “pushing on a string” problem. The expression is famous in economics. It describes what happens when a deflationary spiral gets out of control. The financial authorities can offer more money on better terms – but the banks and the borrowers turn up their noses. They’re already having trouble paying off the debt they’ve got; they don’t want any more. Besides, they’re not too sure that others will be able to pay their debts either, which makes them suspicious of both sides of the credit/debt equation. On the one side, the debtors may not be able to pay. On the other side, the creditors may not be able to collect. Whichever side you’re on, you’re looking for shelter.

When this happens, the financial authorities want to put cash and credit in the system. But they are pushing on a string; the system won’t take it.

Henry Paulson, U.S. Treasury Secretary, is pushing the idea of a huge SuperFund to bail out SIVs (C’mon, we explained what they were last week. Have you already forgotten? They’re “structured investment vehicles.”) But HSBC – Europe’s largest bank – decided not to play along. Instead, it is taking the hit now – as much as $45 billion – by bailing out its own mortgage-backed investment vehicles. The move will come as a relief to HSBC’s investment customers. But it is a blow to the Paulson plan and to the effort to get more cash and liquidity into the system. Paulson can push on the string all he wants; HSBC isn’t going to tow the line.

This ‘pushing on the string’ phenomenon is neither new nor entirely theoretical. Japan pushed on a string for 17 years. In fact, it is still pushing hard. It pushes with the left hand of fiscal policy and the right hand of monetary policy; it has the largest public deficit and the lowest interest rates of any major country. And yet, Japanese stocks lost 18% since their peak in ’06 and another 13% since this January. And they’re still worth less than half what they were worth 17 years ago. What’s more, the latest report from Japan says that consumer prices are still falling.

Well, who knows...maybe Paulson and Bernanke will be able to do what the Japanese couldn’t. Anything could happen. Maybe they’ll find a way to put some starch in the string. We’re keeping our eye on it, dear reader.

*** “Here’s a view,” says MoneyWeek editor Merryn Somerset Webb, “buy Japan. Yes, the place is a disaster in many ways. But it looks like it’s time to buy. Not only do they have more Michelin restaurant stars in Tokyo than they do in Paris – 191 compared to 98 – but they have something else. For the first time in years, the dividend yield on Japanese stocks (as measured by the Topix index, which is broader than the Nikkei) moved higher than the yield on government bonds. This is a very big deal.”

Now, you can get more yield from a Japanese stock than from a Japanese bond. That makes stocks a buy, says Merryn.

“Every other time this has happened it marked a rally in Japanese shares that sent prices up 30% to 40%.”

The situation in Japan, as near as we can tell, is a mess. But it is a mess in an opposite way to the mess in the United States. Americans are in trouble because they spent too much. The Japanese are in trouble because they spend too little. American markets are now falling because they strayed too far from the fundamentals. Japanese markets have already fallen because they paid too much attention to fundamentals.

“The bulls, myself included,” writes Merryn, “keep waiting for inflation to return to Japan. But it never does. Instead, there is still mild deflation, a situation hardly helped by the fact that the Bank of Japan, with is terrified of asset bubbles, has raised interest rates twice recently. More irritatingly, Japanese consumers, despite expectations to the contrary, insist on keeping their wallets shut; with wages static and prices not rising, they see no reason to spend.”

But Japanese companies are profitable and cheap. The average P/E is 15, about the same as the United States. But Japanese companies are growing faster than those in the U.S., and interest rates are lower. Among the leading nations, its shares are the cheapest in terms of book value. And while small caps trade at a 43% premium to large caps in the United States, they are actually discounted in Japan. “Add it all up,” Merryn concludes, “and – according to Goldman Sachs – Japan is now the cheapest it’s been in 33 years.

“And if you step back and take a good look at Japan, it is clear that almost every possible negative is already priced into the market, something that suggests it must be at, or near, a bottom – and one neatly signaled to us by the cross of the equity and bond yields. History tells us that this is not a signal to ignore.”

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.