Japanese Economic Comparison

[alaskaguy]

Comparisons are being made between the current subprime mess and our government's plan to freeze subprime interest rates and what happened in Japan during the 1990's.

Japan pursued a “convoy systemâ€￾ for its banking regulation, forcing its larger and healthier banks to absorb the bad loans of weaker brethren. The approach worked fine for a long time, until the "convoy" –overloaded with years of mispriced debts — ground Japan’s economy to a terrible halt. And its taken the Japanese economy a LONG time to recover.

 

[Cyclonepride]

I tend to agree with the economists who are saying that any attempted bail out will only make the problem worse when it finally does hit.

 

[alaskaguy]

I tend to agree with the economists who are saying that any attempted bail out will only make the problem worse when it finally does hit.

Many economists fear that the interest rate freeze is a temporary solution that creates longer term problems. Its kind of like an alcoholic, where another drink works for a bit, but causes longer term problems.