Wednesday, April 22, 2009

Son of A Japanese Preacher Man

"Knees went rubbery when President Obama delivered his economic speech last week at Georgetown, chastising American business more in sorrow than anger for its pursuit of 'excessive debt,' 'reckless speculation' and 'fleeting profits.' He blamed America's housing bubble and subprime meltdown on a 'perfect storm of irresponsibility.'

"Writing in the New York Times, David Brooks positively dripped that 'Obama is arguing for his activist agenda not on the basis of class-consciousness, which is alien to America, but as a defense of middle-class morality, which is central to it.'

"What should really strike Mr. Obama's listeners, however, is the president's unconscious cribbing from Yasushi Mieno, the Japanese central banker who popped Japan's property and stock market bubble of the late 1980s, ushering in the 'lost decade' that followed. The echoes are uncanny. Mr. Mieno decried an era of greed and corner-cutting and financial engineering, in words almost identical to Mr. Obama's. 'The bubble hurt the soundness and stability of Japanese society,' he said at the time. 'The efforts of labor, which is to work with sweat on your forehead, have been weakened. Morale was reduced and there was unfairness in the distribution of wealth.'

"The real problem, however, wasn't the morals of Japanese society, which were probably no better or worse than they had always been. It was the Bank of Japan and Mr. Mieno's own predecessors who provided the profusion of cheap money in the first place, rolled out in a deliberate attempt to soften the blow to Japanese exporters of their rising uncompetitiveness. The Bank itself underwrote the mountain of bubble credit, to the point where the land under Tokyo's Imperial Palace was worth more than all of California.

"And those who seized on this cheap credit to engage in speculative behavior were, above all, the amakudari, or Finance Ministry mandarins who 'descended from heaven' to take leadership positions at Japan's jusen -- a fair approximation of America's Fannie Mae and Freddie Mac. Jusen were a network of specialized housing lenders that, amid the cheap money boom, experimented with dazzling new innovations such as 100-year mortgages and lending to the real estate speculations of the Japanese mafia.

"Mr. Obama's moralizing understandably strikes a chord, just as Mr. Mieno's did. But don't examine the thesis too closely. It was the ever-changeable errors of monetary policy, not the unchanging shortcomings of human nature, that created both countries' bubbles. Mr. Obama's call for Americans to repent makes a nice homily. The real lesson, however, concerns the systematic mispricing of credit and the corrupting and destabilizing forces that flow from it."

-- Holman W. Jenkins Jr., Wall Street Journal

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