Japan Credit
Crunch: Warnings To The West?
The Western world is
not the first to go through a serious credit crunch. Japan's credit crunch that
lasted almost fifteen years starting in the 1990s could possibly be seen as a
big warning to the Western world. The current credit
crunch affecting many large countries such as the United States, Europe, and Canada
has caught the attention of the entire world. From banking systems on the verge
of collapse to millions of families losing their homes and a possible food shortage
coming in the near future, the results of this credit crunch will be massive before
it is all over with. Many people are now turning their attention to lessons learned
from Japan. Credit crunch history was made over a fourteen year period during
which Japan battled a huge crunch that was hard to overcome. The
Japanese government did take action to try and relieve the credit crunch, but
once the bubble had burst it just continued popping for years to come, no matter
what was done. The first efforts were stimulus checks to the people and a lot
of public works. The goal was to perk up the spending habits in order to stimulate
the economy, but it did not work in the long term and Japan's credit crunch continued.
Right now, the United States and Europe are pumping billions
of dollars into their banking systems, trying to save the systems from completely
collapsing. Despite some protest from the people who do not want to shoulder a
possible trillion dollar American deficit, the efforts are being given in attempt
to save the country's largest banks. The Japanese government
did the exact same thing during the Japan credit crunch, and while it may have
helped get to the final program that put an end to the crunch, bailing out the
banks was not enough to stop the Japan credit crunch. It took a lot of time after
they started giving the banks money before the crunch finally started to wear
off. It is likely that the Western world will have to
wait many years as well for the credit crunch to lead into more prosperous times,
but hopefully some lessons can be learned from the Japan credit crunch so another
fourteen years won't pass under these conditions. So what
finally worked to end the Japan credit crunch? The Takenaka Plan was the final
governmental action that actually worked. This plan essentially took debts off
the bank books to free up money for them to get back to business. Just as the
United States and Europe are currently experiencing, the major cause of the Japan
credit crunch was massive loads of bad debt due to loose lending practices over
a course of many years. Practices that lend money to people
who are not likely to pay the money back cannot be sustained long term. Japan
learned the lesson and now the rest of the world is learning it as well. If there
is one thing that the United States and Europe can take away from the Japan credit
crunch, it is not to expect government intervention to bring a swift end to the
problem. Even with billions of dollars thrown into the banking system, there will
likely be repercussions hitting the economy for years to come.
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