Bubble burst: No need to learn from Japanese lessons??

[Astroboy]

In his view, the American economy is already in recession and faces a lengthy downturn of a year or more, before growth recovers.
Still, even Roubini sees scant chance of the United States following Japan's path.

"I'm very pessimistic, but I don't think it will be anything like Japan," he said.

Compared with the boom-bust cycle in Japan, the U.S. housing market looks positively sedate. In the major metropolitan regions of the United States, house prices rose 82 percent from the end of the last recession in November 2001 to their peak in June 2006, according to the Standard & Poor's/Case-Shiller home price index.

http://www.iht.com/articles/2008/02/08/business/yen.php

G7 conference ended yesterday, but financial authorities of world's rich club could not show specific solution for the ongoing credit crunch in the global economy. Many economists insist that Today's financial turmoil in USA and Europe is not the same as Japanese bubble burst.

But to me, it's exactly the same. But at the same, I hope it's not.

What do you think? "Lost decade" will happen in USA and others?

 

[otoko]

It is not the same. There are similarities. It took Japan years to take action when their bubble burst. At the core, how the Japanese dealt(and continue to deal) with everyday business situations is fundamentally wrong, or at least not optimal. The bigger the problem the worse they are at fixing it. Slow to pinpoint their problems. A lack of transparancy, inappropriately close relations between banks, corporations and beauracrats persists today. Slow to act. That the beauracracy so totally ****** up in the aftermath of the bubble bursting(also responsible for creating it) and are not held responsible is beyond me, heads should have rolled. 17 years of near zero(and zero) interest rates is a joke. The only place to put your money is offshore.
Sub-prime was stupid. Why Harvard and Wharton MBAs thought it was a good idea to give people with poor credit the ablity to buy houses just doesn't make sense. Maybe they had a couple years of nice bonuses, and of course it isn't their money they were using. Inspite of that, the US has moved fairly quickly to fix the situation. It is bad but it isn't the worst financial crisis in the history of the United States.

 

[Pachipro]

Many economists insist that Today's financial turmoil in USA and Europe is not the same as Japanese bubble burst.

No it is not the same, read on. Japan survived while the US may very well not. However, it will be a long, hard road in the coming months and years!

Sub-prime was stupid. Why Harvard and Wharton MBAs thought it was a good idea to give people with poor credit the ablity to buy houses just doesn't make sense.

If you understand what is going on between the corporations (Wall Street), the Fed (which is not a part of the government), and the government, you would understand just what is going on.

In order to stave off the last recession in 2001 when the "dot coms" went "dot gone" the only way to keep the US out of recession was to make credit available to everyone to keep them spending money they didn't have. And where else to get that money than out of their overpriced homes which artificially kept on rising and people thought it would last forever because they were made to think that.

Therefore, they speculated on condos and flipped homes at the fastest pace in US history and the banks, at the urging of the Fed, were all to eager to lend anyone and everybody money, even for homes the banks KNEW they couldn't afford. They offered "come hither" Adjustable Rate Mortages (ARM's) that were below 3% and the average Joe could now buy a home and the average speculator could buy also buy homes and flip them at a 10% profit. This held off the recession that was already in progress.

However, what many people failed to realize was that the ARM's would re-adjust in a couple of years where their mortage payments would baloon a few hundred dollars and they would then not be able to meet their payments. This did not faze the Fed or the banks as the economy was falsly booming. Millions took out Home Equity Lines of Credit (HELOC's) thinking that their homes would rise in value forever and spent that money on home improvements, bought SUV's, big screen TV's, etc and it looked like, on paper anyway, that the US economy was robust. Far, far from the truth as it was booming on borrowed money and many people now had two mortages so to speak.

Today that bird has come home to roost and the economy IS suffering AND will continue to suffer for many years to come. I feel it will be much in the same vein as Japan's, but the major difference here is that Japan is a nation of savers where the average American is one paycheck away from bankruptacy. THAT IS WHY JAPAN'S ECONOMY DID NOT FAIL AND PRICES REMAINED STABLE FOR 20 YEARS! Not so in the US in the coming years. With the recent rise in inflation last quarter, the Bank of Japan announced yesterday that they would probably cut interest rates further shortly!

There are 15 million homeowners today in the US who now owe more on their homes than they are worth. It is estimated that 2-3 million people will lose their homes in foreclosure this year alone! With many more next year and the government will not help many. Foreclosures are at an all time high and the average price of ahome in California, Florida, and Nevada has fallen well below 15%! What the government has done is help the banks and Wall Street by now guaranteeing their loans with taxpayer dollars. It is the US taxpayer who will pay for this mess and how will they do that if they are broke?

Inspite of that, the US has moved fairly quickly to fix the situation. It is bad but it isn't the worst financial crisis in the history of the United States.

And how are they doing that? With an economic stimulus package of giving every taxpayer a $600 check and $300 for the kids and $300 for the elderly and poor who don't pay taxes? And where is that money coming from? China and the Middle East that's where! We are so damned broke that China and the Middle East HAS to lend money to the US government for this false package that will do nothing except show a third quarter increase in spending that's all! And will have to pay this money back to them? The US traxpayer and their children and grandchildren, that's who!

Mark my words here and save this post otoko, as this is just the tip of the iceburg. This will end up being the worst financial crisis in US history dwarfing the depression of the 1930's. The US is a debtor nation and, in effect is broke! We make nothing anymore and neither do we export anything anymore as 75% of corporations have now moved offshore with the rest to follow.

A lack of transparancy, inappropriately close relations between banks, corporations and beauracrats persists today. Slow to act. That the beauracracy so totally ****** up in the aftermath of the bubble bursting(also responsible for creating it) and are not held responsible is beyond me, heads should have rolled. 17 years of near zero(and zero) interest rates is a joke.

And just what do you think is happening in the US? It is the same relationship! Treasure Secretary Paulson is a former Goldman-Sachs executive as is the Governor of the Bank of Japan. Check it out! As also are many of the government officials in Europe! Many have worked for major corporations before.

I believe Japan did very well these past 20 years although housing proces have never recovered as will happen in the US! The US may just follow Japan's lead in that they will again lower interest rates in a few weeks and then again in a few months. Watch.

However, as I said before, Japan is a nation of savers and that is what kept them afloat while the US is in debt up to her eyeballs as well as the average citizen. I don't think it will work well for the US, but we'll have to wait and see what rabbit the Fed and Wall Street pulls out their hat this time. I have a sneaky feeling it will be the suggestion of an American Union between the US, Canada, and Mexico. Just watch. The pieces are all falling into place and the US dollar will slowly sink, slowly as it is directed, to it's lowest levels in history and finally collapse bringing the US to her knees.

The only place to put your money is offshore.

The only palce to put your money is in gold and silver as that is the only real money as it will NEVER lose value. In fact in times like this it is only gaining in value as it always does as it is a safe haven. Both gold and silver are at record highs and, based on what I've researched I expect silver to double by years end and gold to gain 10-20%.

Also, you can put your US dollars in any currency besides dollars as it will only continue to weaken. Swiss francs are good and safe, China's currency will do well this year as well as India's, the Euro may go down to 1.40/$US but it will probably rebound to 1.50-1.55 by years end a 10% gain on investment! Brazilian currency is also a good bet!

India's and China's stock markets will also probably gain about 10% this year whil the US continues to fall.

 

[otoko]

If you understand what is going on between the corporations (Wall Street), the Fed (which is not a part of the government), and the government, you would understand just what is going on.

You can understand what is going on between them and still say it wasn"t a good idea.

In order to stave off the last recession in 2001 when the "dot coms" went "dot gone" the only way to keep the US out of recession was to make credit available to everyone to keep them spending money they didn't have. And where else to get that money than out of their overpriced homes which artificially kept on rising and people thought it would last forever because they were made to think that.

Therefore, they speculated on condos and flipped homes at the fastest pace in US history and the banks, at the urging of the Fed, were all to eager to lend anyone and everybody money, even for homes the banks KNEW they couldn't afford. They offered "come hither" Adjustable Rate Mortages (ARM's) that were below 3% and the average Joe could now buy a home and the average speculator could buy also buy homes and flip them at a 10% profit. This held off the recession that was already in progress.

However, what many people failed to realize was that the ARM's would re-adjust in a couple of years where their mortage payments would baloon a few hundred dollars and they would then not be able to meet their payments. This did not faze the Fed or the banks as the economy was falsly booming. Millions took out Home Equity Lines of Credit (HELOC's) thinking that their homes would rise in value forever and spent that money on home improvements, bought SUV's, big screen TV's, etc and it looked like, on paper anyway, that the US economy was robust. Far, far from the truth as it was booming on borrowed money and many people now had two mortages so to speak.

Whether people failed to realize that their rates would increase is up for debate and that really is their responsibility. I think many knew the rates would increase but felt with the rising value of their home they could refinance. Unfortunately housing prices did not continue to rise and they had difficulty refinancing.




Today that bird has come home to roost and the economy IS suffering AND will continue to suffer for many years to come. I feel it will be much in the same vein as Japan's, but the major difference here is that Japan is a nation of savers where the average American is one paycheck away from bankruptacy. THAT IS WHY JAPAN'S ECONOMY DID NOT FAIL AND PRICES REMAINED STABLE FOR 20 YEARS! Not so in the US in the coming years. With the recent rise in inflation last quarter, the Bank of Japan announced yesterday that they would probably cut interest rates further shortly!

They save and don't consume(The Japanese). Whether consumption has that great of an effect in helping an economy is highly debatable. I don't think you can make the connection between high saving rates and prices remaining stable. You have to take into account those zero interest rates and the fact that wages didn't increase but rather decreased and are lower, relatively speaking.

There are 15 million homeowners today in the US who now owe more on their homes than they are worth. It is estimated that 2-3 million people will lose their homes in foreclosure this year alone! With many more next year and the government will not help many. Foreclosures are at an all time high and the average price of ahome in California, Florida, and Nevada has fallen well below 15%! What the government has done is help the banks and Wall Street by now guaranteeing their loans with taxpayer dollars. It is the US taxpayer who will pay for this mess and how will they do that if they are broke?


And how are they doing that? With an economic stimulus package of giving every taxpayer a $600 check and $300 for the kids and $300 for the elderly and poor who don't pay taxes? And where is that money coming from? China and the Middle East that's where! We are so damned broke that China and the Middle East HAS to lend money to the US government for this false package that will do nothing except show a third quarter increase in spending that's all! And will have to pay this money back to them? The US traxpayer and their children and grandchildren, that's who!

Mark my words here and save this post otoko, as this is just the tip of the iceburg. This will end up being the worst financial crisis in US history dwarfing the depression of the 1930's. The US is a debtor nation and, in effect is broke! We make nothing anymore and neither do we export anything anymore as 75% of corporations have now moved offshore with the rest to follow.

Now that is a prediction. Greater than the Great Deppression! Wasn't debt measured as a percentage of GDP much larger then than it is today?

And just what do you think is happening in the US? It is the same relationship! Treasure Secretary Paulson is a former Goldman-Sachs executive as is the Governor of the Bank of Japan. Check it out! As also are many of the government officials in Europe! Many have worked for major corporations before.

I believe Japan did very well these past 20 years although housing proces have never recovered as will happen in the US! The US may just follow Japan's lead in that they will again lower interest rates in a few weeks and then again in a few months. Watch.

Sure, fine. Remember the federal funds rate was at a low of 1%from June 2003 to June 2004(it was over 6% as late as 2000), then by 2006 it was 5.25%.

However, as I said before, Japan is a nation of savers and that is what kept them afloat while the US is in debt up to her eyeballs as well as the average citizen. I don't think it will work well for the US, but we'll have to wait and see what rabbit the Fed and Wall Street pulls out their hat this time. I have a sneaky feeling it will be the suggestion of an American Union between the US, Canada, and Mexico. Just watch. The pieces are all falling into place and the US dollar will slowly sink, slowly as it is directed, to it's lowest levels in history and finally collapse bringing the US to her knees.


The only palce to put your money is in gold and silver as that is the only real money as it will NEVER lose value. In fact in times like this it is only gaining in value as it always does as it is a safe haven. Both gold and silver are at record highs and, based on what I've researched I expect silver to double by years end and gold to gain 10-20%.[/I]

To clarify I meant banks.

Also, you can put your US dollars in any currency besides dollars as it will only continue to weaken. Swiss francs are good and safe, China's currency will do well this year as well as India's, the Euro may go down to 1.40/$US but it will probably rebound to 1.50-1.55 by years end a 10% gain on investment! Brazilian currency is also a good bet!

India's and China's stock markets will also probably gain about 10% this year whil the US continues to fall.[/QUOTE]

This is fine but that is investing in the short term.

I really doubt the US can do worse in reacting to the sub-prime crisis compared with the Japanese reaction to their bubble bursting. Japan is the prime example of what not to do.

 

[Astroboy]

It is not the same. There are similarities. It took Japan years to take action when their bubble burst. At the core, how the Japanese dealt(and continue to deal) with everyday business situations is fundamentally wrong, or at least not optimal. The bigger the problem the worse they are at fixing it. Slow to pinpoint their problems. A lack of transparancy, inappropriately close relations between banks, corporations and beauracrats persists today. Slow to act. That the beauracracy so totally ****** up in the aftermath of the bubble bursting(also responsible for creating it) and are not held responsible is beyond me, heads should have rolled. 17 years of near zero(and zero) interest rates is a joke. The only place to put your money is offshore.

For the above, You must be right.

But from my point of view, the biggest reason behind the Japan's lost-decade
was that Japan already entered less-demand economy due to the rapid demographic change - ageing population.

Japanese economic boom had grown simultaneously as baby boomers grew.
People tend to buy house the most when they become late 30s - early 50s. Japanese domestic house price peaked at 1989 when baby boomers entered late 40s. Since then, Japan's house price and land price dropped significantly.

Such a house price drop affected all of Japanese economy, and then lost decade, while J-government tried to lift up the economy with tons of public work projects.

Ageing population is now common everywhere in the world. And I heard that US-babyboomers also marked its peak. I think that USA is now entering less-demand economy. If it's true, US economy will continue to be less demand, and any government programs to stimulate its economy will fail to work out. Unless the government can make another bubble, US economy may be sluggish.

Maybe Americans may tell "Don't worry. US population is increasing and we will have more immigrants". But from my perspective, immigrants will not be an answer to stimulate economy because they are economically weak, but instead they will increase social costs and become more pressure of government budget.

Needless to say,
Transparency of banking sector, prompt actions of government, and effective measures for economic recovery are important, but real demand is more important for economic recovery. Japan is still looking for the measures to stimulate economy (real demand), but not wroking well. It is because Japan is ageing and people need less and less.

If USA enter the same path as Japan, US economic recovery must be tough. And thus world's economic recovery must not be easy as well.

Make sense?

 

[otoko]

For the above, You must be right.
But from my point of view, the biggest reason behind the Japan's lost-decade
was that Japan already entered less-demand economy due to the rapid demographic change - ageing population.
Japanese economic boom had grown simultaneously as baby boomers grew.
People tend to buy house the most when they become late 30s - early 50s. Japanese domestic house price peaked at 1989 when baby boomers entered late 40s. Since then, Japan's house price and land price dropped significantly.
Such a house price drop affected all of Japanese economy, and then lost decade, while J-government tried to lift up the economy with tons of public work projects.
Ageing population is now common everywhere in the world. And I heard that US-babyboomers also marked its peak. I think that USA is now entering less-demand economy. If it's true, US economy will continue to be less demand, and any government programs to stimulate its economy will fail to work out. Unless the government can make another bubble, US economy may be sluggish.
Maybe Americans may tell "Don't worry. US population is increasing and we will have more immigrants". But from my perspective, immigrants will not be an answer to stimulate economy because they are economically weak, but instead they will increase social costs and become more pressure of government budget.
Needless to say,
Transparency of banking sector, prompt actions of government, and effective measures for economic recovery are important, but real demand is more important for economic recovery. Japan is still looking for the measures to stimulate economy (real demand), but not wroking well. It is because Japan is ageing and people need less and less.
If USA enter the same path as Japan, US economic recovery must be tough. And thus world's economic recovery must not be easy as well.
Make sense?

Also China must be taken into account. China was rising before and during Japan's bubble.

Actually the US doesn't have Japan's population problem. They have a much higher birthrate(enough for population replacement). This is true even when you take immigrants out of the equation.

I don't know why you think immigrants are economically weak. Maybe illegal immigrants are. Immigrants have been a huge part of America's success for generations. People go to the US for education in large numbers, undergraduate, graduate and doctoral. Many stay. They are a valuable part of society.

If there are social costs that are a problem, social security is one of them. Educated immigrants are not a problem.

 

[Astroboy]

Immigrants have been a huge part of America's success for generations. People go to the US for education in large numbers, undergraduate, graduate and doctoral. Many stay. They are a valuable part of society.

Partly agree. It is why I am investing in USA.
GO USA!