A Comparison with Japan

The spectacular fall of Japanese markets after 1989, in which land and equity prices followed one another down in a long spiral, inevitably suggests comparisons with the contemporary American predicament. But the comparison provides no cause for optimism, for Japanese households, at the height of the bubble, had a high rate of domestic savings of 15 percent of household income. Yet this cushion did not arrest the fall in equity and real estate values. Household savings, calculated without reference to equities and real estate, have been zero for some time in the United States. And household finances are deeply impaired by high debt and collapsing asset values.

Keep this chart in mind as we go forward and survey US responses to the crisis.