The scenario
was eerily familiar. A long real estate bubble that had expanded
extra rapidly for the previous five years suddenly burst, and asset
prices came crashing back down to earth. Banks and financial
institutions were left holding piles of worthless paper, and the
economy soon headed south. The national government responded to the
crisis by encouraging more lending and spending previously
unfathomable amounts of money on public works projects in an effort
to stimulate consumer spending and restart growth.
But as Anthony Randazzo, Mike Flynn, and Adam B. Summers write in our July issue, that stimulus did not save the Japanese economy in the 1990s; far from it. The ensuing period came to be known as the Lost Decade, characterized by multiple recessions, an annual average growth rate of less than 1 percent, and a two-decade decline in stock prices and corporate profits. So why is President Barack Obama emulating it?
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