As goods pile up unsold, demand weakens and expectations of lean months ahead cause businesses to cut production, the downward spiral is prompting nervous comparisons with Japan’s so-called lost decade of the 1990s. Then, as now, a collapse in real estate prices left banks in tatters. Even as Japan’s central bank dropped interest rates to zero in a bid to spur growth, it had little effect because companies and households were too fearful to borrow. These days, the Fed’s target for interest rates is near zero, yet even healthy American companies are hunkered down. Even wealthy households are cutting back.

Image John B. Satterberg, of Community Financial Corporation, a Portland-area lender, offers 30-year fixed rates of less than 4 percent. Credit... Leah Nash for The New York Times

The $787 billion stimulus spending bill signed by President Obama last month is expected to generate fresh demand for goods and services. If the financial system plan is successful at removing the detritus of the real estate bust from bank balance sheets, this, too, could substantially alleviate the crisis. But the ultimate question is whether these measures can crystallize confidence in the future, so businesses and ordinary people resume transacting, generating fresh opportunities throughout the economy.

“You could fix all the problems in the financial system and we’d still spiral down because of the problem of expectations,” said Joe Cortright, an economist at a Portland-based consulting group, Impresa Inc.

Portland, a metropolitan area of 2.2 million people, affords an ideal window onto the spiral of fear and diminished expectations assailing the economy. The area has long attracted investment and talented minds with its curbs on urban sprawl, thriving culinary scene and life in proximity to the Pacific Coast and the snow-capped peaks of the Cascades. In good times, Portland tends to grow vigorously, elevated by companies like the computer chip maker Intel  which employs 15,000 people in the area  and the athletic clothing giant Nike.

But in recent months, Portland has devolved into a symbol of much that is wrong. Housing prices have fallen more than 14 percent since May 2007, according to the S.& P./Case-Shiller index. Foreclosures more than tripled last year, according to RealtyTrac. The unemployment rate for the metro area surged from 4.8 percent at the end of 2007 to 9.8 percent in January 2009, according to the Labor Department.

With a major deepwater port on the Columbia River, Portland has benefited from the growth of global trade, gaining jobs for stevedores, truckers and warehouse workers. But as the global recession tightens, Portland’s docks are a snapshot of diminishing fortunes.