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Commentary

Doing a Japan?

From an excellent article by Absolute Return Partners (courtesy John Mauldin):

Talking about policy makers, back in 1991, when the Japanese property bubble finally burst, few investors imagined that it would take at least a couple of decades to work off the excesses which had accumulated after years of rising property prices. Some commentators have made the point that the overheating in the Japanese property market was much more severe than anything we have witnessed in the U.S. in recent years, but that is factually incorrect. As pointed out in The Economist last week (see chart 4), residential property prices have actually risen more in the U.S. during the boom years 2000-06 than Japanese property prices did during their boom years in the late 1980s.

Doing a Japan?

This is striking. People have cursed Japan as doing too little or too much in their crisis time, and they haven’t recovered even now. Not in their real estate market, and not in their stock market either. Is the US going down this route?

Japan took over its biggest banks. America is doing that. Japan reduces rates to a pittance – the US has done most of that already as shown above. And the US housing bubble was much bigger, at least in terms of price rise, than Japan.

To me these are big bad warning signals. When Japan went away the US was there to take over the massive spending of money. If the US goes, no one, not even India and China put together, can make up.

  • Arun says:

    >Check this interesting viewpoint on Japanese deflation… Apparently ZIRP was for saving the banks

    http://brontecapital.blogspot.com/2008/07/deflation-and-bank-bailouts-in-japan.html

  • Anonymous says:

    >Interesting viewpoint but i think its incomplete the picture….for one the rise in japanese equity market during the phase 80-90 was meteroic….similar rise in us market is missing..secondly the time period for appropriate japanese rise was much bigger….thirdly world market was less integrated way then ……

    this is not to be viewed as pro USA comment coz i feel us is going down the drains tks to mr greenspan….however…wat helped Japanese ppl was their discipline n hardwork which us sorely lacks…it wud manifest itself during times of hardship….however…..world being as integrated as it is now..the turbulence will be shorter and shared….just as everyone world over shared the lower cost of capital….