Originally Posted by guyy

Again, that is not what happened.

Big players did go bankrupt. And unlike here, people went to jail. In the US they end up as bigwigs on the McCain campaign with $11 million severance packages. Of course, there is nothing we can do about that, nothing we should do about that, and we must not even have bad thoughts about doing anything about it.

The "gummint bailouts made things worse" arguments is a product of stereotypes about the Japanese economy, bad reporting, and a distorted Western self-image. Unfortunately, there isn't too much in English that's worth reading about the Japan's lost ten years. What's out there is mostly of the NYT "their problem is that they need to be more like us" vein or neoliberal analyses that say that the slump was caused by insufficient neoliberalism.

The eighties were the tail end of the postwar boom in Japan and, happy horseshit aside, a period of continued decline in the US. When Japan agreed to allow the yen to rise against the dollar in 1985, it created losses for Japanese holders of US bonds. These players put their money in the TSE and in commercial property. Banks had already been playing the property market because they were getting a better rate of return their than in primary production. Interest rates were low, so money was available for people to get into the markets. The gov. was trying to sell off the recently privatised national railway's property, and therefore wanted bidding wars. As stocks rose, corporations naturally started issuing more stock. Banks started playing the stock market more. Many borrowed against their land holdings to play the stock market. Stocks trebled in value from 1985 to 1989, and real estate doubled. It was said that the value of all land in Tokyo's 23 wards was worth more than all the land in the US.

When the bubble burst, property values couldn't cover stock market losses and vice versa. Banks, corporations, and gov. bonds were downgraded, and foreign borrowing became more expensive. In order to around this, banks had to raise their self-capitalisation rates, which was usually done by cutting off lending. Just where does over-regulation figure in? The Jusen (=S&L) debacle was caused by lack of oversight encouraged by free-marketeers.

It didn't help the situation that neoliberal globalisation was becoming the rage during the late eighties and nineties. The opening of agricultural markets drove a lot of farmers out of business and put even more property in play. Offshore production, (which the property bubble encouraged by making expansion in Japan more costly) helped made employment more precarious, and workers were more and more reluctant to spend. Cutbacks in government and corporate welfare schemes -- cheered on by neoliberals, of course, personal responsibility yadda yadda yadda -- made people even tighter with their money.