Japan’s Big-Works Stimulus Is Lesson for U.S. - Results Not So Good

Quote from ByLoSellHi:In other words, had the Japanese officials allowed the free market pain machine to crush asset values quickly, and let what would soon be 'zombie banks' and 'financial institutions' fail, rather than try to delay that process, and prop up failed banks, institutions and policy - essentially trying to get the bubble to deflate very slowly, over time - they'd be far better off.
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hmm I think we disagree. The Japanese did exactly what you proposed in 1990/1991/1992. Nothing. In fact, they failed to admit until much later that they were in trouble at all. It didn't do them much good.

They wanted to just let the "market clean up itself". It didn't. Banks didn't pull loan lines on non-performing creditors. They didn't want to push 40 year long corporate customers into liquidation because they would lose their face. Banks stopped foreclosing on real estate assets "until the markets recover", hiding toxic assets and trying to avert their own bankruptcy. Insurances and banks tried to sit out the problem; just making it worse.

The "free market pain machine" works great when markets are rational and efficient; it ceases doing its magic when participants are irrational (e.g. not declaring bankruptcy, not liquidating non-performing loans, unwilling to buy "good" debt etc.) as the market is broken and becomes inefficient.

Where does this "Let them all fail and let the free market work its way, it will clean up the mess. Look at Japan!" urban legend come from? Jim Rogers?
 
US banks would fail if we let them, Lehman did. We don't have the Japanese culture here that existed in 1990. Do you really think Citi and AIG would be able to just sit there and wait?
 
Quote from makloda:


Where does this "Let them all fail and let the free market work its way, it will clean up the mess. Look at Japan!" urban legend come from? Jim Rogers?
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Krugman claims without fiscal packages Japan would gone into depression, friedman claims japan is proof monetary policy is more important than fiscal policy, austrians like Rogers claims japan is evidence that you ought let the system collapse or things stagnate for longer, the communists claim japan is proof capitalism is a failure. Everybody see what they want to see
 
Quote from ByLoSellHi:

By the way, if you believe stock_trd3r has attempted to have sexual intercourse with some manner of fruit filled pie at some point in his life, please rate this thread 5 stars.

Thanks.
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Seriously, how do you rate threads? I imagine only moderators or something can.
 
Daal, good point. I guess we all look at evidence through our own filters and accept what fits with our subjective perception of reality and dismiss what doesn't. Human nature.
 
Quote from Daal:

Krugman claims without fiscal packages Japan would gone into depression, friedman claims japan is proof monetary policy is more important than fiscal policy, austrians like Rogers claims japan is evidence that you ought let the system collapse or things stagnate for longer, the communists claim japan is proof capitalism is a failure. Everybody see what they want to see
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Right, but in the end, it's the bums in the streets that reveal reality.
 
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