During this same decade, the United States became the economic superstar, led by surprising productivity gains and vigorous investment in the Internet and other technologies. Our stock markets climbed, with the Nasdaq reaching its all-time high a year ago. Here it was the Federal Reserve, concerned about overheating, that stopped the party by raising interest rates. As in Japan, the markets fell sharply. Investment is slowing.
Consumer confidence is down.
But the differences between Japan in 1989 and America in 2001 are more telling than the similarities. Japan's boom, unlike ours, was fueled by cheap loans, a product of easy money and prodigious domestic savings. By the end of the 1980s, Japan had invested in everything from manufacturing capacity to speculative marble palaces and U.S. golf courses. The result was bad debt that crippled the banking sector and has yet to be cleaned up. Some U.S. investments say, the frenzied Internet ads of the 2000 Super Bowl look just as foolish now.