Friday, January 30, 2009

Ignored: lessons of housing, debt, history

Japanese housing prices

U.S. Housing prices

Japanese Debt

U.S. Debt as a percentage of the annual output of the economy

In the 1990s, the Japanese entered a time such as the U.S. is now. Stupid monetary policy created a stock market bubble and housing boom. Then it all went bust. The Japanese had less debt and were a net exporter of goods--two advantages that the U.S. doesn't have. Yet, all the deficit spending and economic tools at Japanese government disposal could not prevent a 14 year slide in home prices. In fact, all it did was delay the recovery.

That's why the "recovery" efforts by the U.S., Canada, and most other countries in the world will all prove in vain. Governments would be better to let the inevitable occur so that market forces would allow a real recovery, and that it would come faster.

All this comes c/o James Quinn, a Financial Securities Officer who documents the case in an editorial full of illustrative charts. It's worth a look.

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