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Old 09-20-2008, 07:27 AM
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I've been reading more about the 1980's real estate/stock bubble in Japan to get some sense of how things might play out here. If anyone is familiar with that bubble, I'd be truly interested to know how you think it compares.

One difference (unconfirmed) that crosses my mind, I wonder how many Japanese walked away from their obligations when they became upside-down. My suspicion is more Americans will abandon ship. Don't know how that will impact the situation.

Thoughts on Japan 1980's vs. US 2000's?
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Old 09-20-2008, 11:01 AM
Location: Barrington
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The peak in Japan occured in 1991. Property values went into a free fall for the next 15 years. Most homeowners in Japan's major cities lost 64 % of their home equity. Public funds were used to inject capital into the financial systems.

The differences, as I understand them, include:

The stock market in Japan was the primary driver of speculation.

Prices rose faster and steeper in Japan, than they did here.

The dominate speculators were major coprorations with deep pockets.

The culture is not conducive to walking away from obligations.

While mortgages are pooled and sold as investments in Japan, they were not subject to the financial engineering they were in the U.S. Such investments were also not eagerly pursued by international markets as they were here. The aftermath of the bubble was relatively contained in Japan.

Housing bubbles and crashes are common in most industrialized nations throughout history. In the U.S., the Government has been priming the pump of bubbles and bailing out crashes since the Great Depression.
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