Japan's high savings rate meant that banks had huge amounts of money to lend. The banks threw lending standards out the window because they had so much cash to

Japan's high savings rate meant that banks had huge amounts of money to lend. The banks threw lending standards out the window because they had so much cash to lend. When the central bank raised interest rates, the bottom fell out. Here's the important part, though. Because of the cozy relationships between banks and big industrial firms, the banks reacted by making _more_ bad loans to prop up failing firms. Plus, the government raised consumption taxes which fell disproportionately on the lower classes. The tied-up capital combined with the rising taxes on the people who spend the highest percentage of their income hurt a lot more than government spending on infrastructure. Here's my worry about the U.S.: 1. The home buying incentives/modifications are just an excuse to keep trying to re-inflate the housing market much like the Japanese banks kept lending money. 2. Proposed cuts to social security and medicare will hurt the economy by affecting those who spend the highest percentage of their income.