Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

498 Money, Bank Credit, and Economic Cycleseconomy has played in it. Particularly in the four-year periodbetween 1987 and 1991, the Japanese economy underwentenormous monetary and credit expansion which, as theory suggests,affected mainly the industries furthest from consumption.In fact although the prices of consumer goods rose only byaround 0 to 3 percent each year during this period, the priceof fixed assets, especially land, real estate, stocks, works of artand jewelry, escalated dramatically. Their value increased tomany times its original amount and the respective marketsentered a speculative boom. The crisis hit during the secondquarter of 1991, and the subsequent recession has lasted morethan ten years. A widespread malinvestment of productiveresources has become evident, a problem unknown in Japan inthe past, and has made it necessary for the Japanese economyto initiate a painful, comprehensive realignment process inwhich it continues to be involved at the time of this writing(2001). 109Regarding the effect this worldwide economic crisis hasexerted in Spain, it is necessary to note that it violentlygripped the country in 1992 and the recession lasted almostfive years. All of the typical characteristics of expansion, crisisand recession have again been present in Spain’s immediateeconomic environment, with the possible exceptionthat the artificial expansion was even more exaggerated as a109 The Nikkei 225 index of the Tokyo Stock Exchange dropped fromover 30,000 yen at the beginning of 1990 to less than 12,000 yen in 2001,following the failure of a number of banks and stock market firms (suchas Hokkaido Takushoku, Sanyo and Yamaichi Securities and others).These bankruptcies have seriously harmed the credibility of the country’sfinancial system, which will take a long time to recover. Furthermorethe Japanese bank and stock market crises have fully spread to therest of the Asian markets (the failure of the Peregrine Bank of HongKong, of the Bangkok Bank of Commerce, and of the Bank Korea Firstcome to mind, among others), and in 1997 they even threatened tospread to the rest of the world. On the application of the Austrian theoryto the Japanese recession see the interesting article Yoshio Suzukipresented at the regional meeting of the Mont Pèlerin Society, September25–30, 1994 in Cannes, France. See also the pertinent comments ofHiroyuki Okon in Austrian Economics Newsletter (Winter, 1997): 6–7.