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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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