Learning From Past History

Sunday’s Washington Examiner posted an editorial about how Japan handled its last recession and what the results of those decisions were.  In 1991 Japan’s stock marking and real estate markets collapsed.   The decisions made by the Japanese government at that time made the recovery from that collapse much more complicated and resulted in a ten-year recovery period instead of a quick recovery.  Unfortunately, we are making almost identical mistakes in the way we are dealing with our current financial crisis. 

The mistakes listed in the article are:

  • A stimulus package that added to the national debt but did not stimulate the economy.
  • Bad loans–our subprime mortgage brokers had great intentions–allow lower income people to own homes–but if those people can’t afford their mortgages, the loans lose their value.
  • Bailouts of companies that would continually need government money to stay afloat, costing taxpayers money and thus taking money out of healthy companies.
  • Increased government control of the economy, which limits the ability of the economy to respond quickly and adapt to market forces.
  • Raising taxes (if Cap and Trade is passed, it will be impose an annual energy tax of approximately $ 2000 per person).
  • Monetary policy–in slashing interest rates drastically after 911, the Federal Reserve prevented a recession at that point, but they caused a devaluation of the dollar that contributed to a drastic rise in gasoline prices and caused other problems.
  • Lack of transparency–there are still serious questions about how TARP and stimulus money was spent.

To quote George Santayana, “Those who cannot learn from history are doomed to repeat it.”  We need to learn from Japan’s mistakes.