Credit crunch: JapanÆs lessons for the US

JapanÆs experience in the 1990s shows that a credit crunch can destroy wealth and dampen growth in the real economy for years. The US won't be immune.

There has been a great deal of speculation in the Western press about what lessons the US can learn from JapanÆs credit crisis in the 1990s. Generally, the comparison ends on a note of self-congratulation, with the author pointing out the speed at which US firms have moved to reveal losses, re-capitalising via sovereign wealth funds in some cases, and how quickly the Federal Reserve has cut interest rates.

By contrast, it took many years before the Japanese, under the...

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