Why didn't the U.S. learn from Japan's boom and bust in order to avoid our own?

From 1986 to 1991, Japan's local companies over-invested in equity and assets such as real estate. I believe the money to over-invest might best have been taken away as taxes, prior to being invested in trendy assets. As draconian as that may seem, we observe in hindsight that the over-investment led to an asset bubble followed by a decade of deep recession once the bubble burst.

http://wapedia.mobi/en/Japanese_asset_price_bubble

http://www.aei.org/outlook/27568

Why didn't the U.S learn from Japan's bad example avoid the same mistake from occurring between 2001 and 2008?

Update:

@bmsummers - you helped to make my point. Although our bubble began in about 2001-2002, we had already been observing Japan for at least a few if not several years. By '94 we certainly could have done things to avoid both the tech bubble (which I hadn't mentioned) and later the Housing bubble. I only mention the tech bubble now too because you mentioned '94. Seems we had the time to dodge a couple of bullets - if possible. (I do think it was possible!)

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  • 1 decade ago
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    To avoid it in 2001 and 2008 is too late. The wheels were set in motion before those times came to pass. Back this up to 1994 with the passage of a home-equity bill passed by the U.S. govt. that mandated banks to loosen there restrictions on investments, loans, and mortgages to allow people with lower credit scores(beneath 620) to have easy access to money. One thing they touted was the ARM which at that time was around 1-2% which was lower than an APR at about 4%.

    Now in 2002 we ran into a pickle. Terrorism required military engagement and tightened security to deal with it removing our first surplus in 60 years. Now here is where things start to get interesting.

    In 2006 those ARM's kicked in with there nasty effects. Those were given to mostly people with lower credit scores and those people didn't have much money so they were mostly getting by on minimum payments. That 1-2% interest rate gave out and kicked up to 8% to which those people couldn't afford. Send them into debt. Now the banks are losing money on these deals and they are loosing Billions.

    Now those banks were of course owned by guess who? The baby boomers AKA the "Me Generation". Those people came into power at about 1988 to 2000. They had little knowledge on actually how to save so they took nice big paychecks and just overspent. Focusing on them selves so the ones who were the CEO's took most of those moneys and lined there pockets. With many others becoming govt. Officials who took some cut of it through donations to not bother.

    So we have overspending, people who shouldn't have gotten those loans in the first place, and corrupt/inept people in power. All of which are a receipt for disaster.

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