Al Breach was Russia economist with UBS and Goldman Sachs and is currently managing partner of TheBrowser.com. The views expressed are his own.

albreachHOSTENTAL, Switzerland – How bad was Japan’s “lost decade”? As we look east for clues as to the possible fate of western economies, it is worth dwelling on what actually happened, and not just how it was reported.

Japan’s stock market bubble burst at the end of 1989, and house prices started to fall about a year later. Asset prices at the peak were wildly inflated. Stock prices were trading at ratios of well above 50 times boom-time earnings, while the total value of housing represented around 300 percent of GDP.

These bubbles had formed after decades of rapid growth and, critically, even more rapid credit expansion. Total bank credit to the private sector had risen to 200 percent of GDP, doubling over 20 years.

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