Can we learn from Japan? History does indeed repeat

Quoted from Wikipedia:

In the decades following World War II, Japan implemented stringent tariffs and policies to encourage the people to save their income. With more money in banks, loans and credit became easier to obtain, and with Japan running large trade surpluses, the yen appreciated against foreign currencies. This allowed local companies to invest in capital resources much more easily than their competitors overseas, which reduced the price of Japanese-made goods and widened the trade surplus further. And, with the yen appreciating, financial assets became very lucrative.

With so much money readily available for investment, speculation was inevitable, particularly in the Tokyo Stock Exchange and the real estate market. The Nikkei stock index hit its all-time high on December 29, 1989 when it reached an intra-day high of 38,957.44 before closing at 38,915.87. The rates for housing, stocks, and bonds rose so much that at one point the government issued 100-year bonds. Additionally, banks granted increasingly risky loans.

At the height of the bubble, real estate values were extremely over-valued. Prices were highest in Tokyo's Ginza district in 1989, with choice properties fetching over US$1.5 million per square meter ($139,000 per square foot). Prices were only slightly less in other areas of Tokyo. By 2004, prime "A" property in Tokyo's financial districts had slumped and Tokyo's residential homes were a fraction of their peak, but still managed to be listed as the most expensive real estate in the world. Trillions were wiped out with the combined collapse of the Tokyo stock and real estate markets.

With Japan's economy driven by its high rates of reinvestment, this crash hit particularly hard. Investments were increasingly directed out of the country, and Japanese manufacturing firms lost some degree of their technological edge. As Japanese products became less competitive overseas, the low consumption rate began to bear on the economy, causing a deflationary spiral.

The easily obtainable credit that had helped create and engorge the real estate bubble continued to be a problem for several years to come, and as late as 1997, banks were still making loans that had a low guarantee of being repaid. Loan Officers and Investment staff had a hard time finding anything to invest in that would return a profit. Meanwhile, the extremely low interest rate offered for deposits, such as 0.1%, meant that ordinary Japanese savers were just as inclined to put their money under their beds as they were to put it in savings accounts. Correcting the credit problem became even more difficult as the government began to subsidize failing banks and businesses, creating many so-called "zombie businesses". Eventually a carry trade developed in which money was borrowed from Japan, invested for returns elsewhere and then the Japanese were paid back, with a nice profit for the trader.

The time after the bubble's collapse (崩壊, hōkai^?), which occurred gradually rather than catastrophically, is known as the "lost decade or end of the century" (失われた10年, ushinawareta jūnen^?) in Japan. The Nikkei 225 stock index eventually bottomed out at 7603.76 in April 2003 before resuming an upward climb.

This sounds remarkably similar to what has happened in the U.S.'s recent past, and history could very well repeat itself. We're doing the same exact thing as the Japanese are now... bailing out banks and not letting anyone fail... and creating "zombie businesses". People will eventually lose confidence in the dollar, and will start to shift their wealth out of dollars and into tangible assets.

However, this time there is no "carry trade" available to us. My prediction is that many of the bondholders of the U.S. will start to lose confidence and sell U.S. treasuries. They need to do so in order to raise money for their own purposes. China, India, and other asian nations are the major bondholders of U.S. treasuries. This selling will lead to a decline in the dollar because the government needs to print money to repay the bonds and lead to major increase in all the prices tangible assets.

History does indeed repeat my friends. Soon the United States will be a "zombie" nation, and it will be Asia (most notably China and India) that will rise out of this economic disaster the best prepared and ready to rule to future.