As this NYT piece makes clear, differences between theJapan and US bubble economies are now matters of degree rather than kind. There are differences, but the similarities are greater. One similarity the article fails to point out is the extent to which both bubbles relied on absurdly long working hours. Most of the ‘loss’ in output in Japan over the past decade can be explained by the fact that Japanese workers have been steadily cutting back on hours. I predict the same thing for the US over the next ten years. This will mean the end of overblown claims about US economic hegemony, but it will also imply an improvement in the real living standard of American workers.

Meanwhile, the Australian property bubble gets more and more alarming, particularly in Sydney. It’s now reached the final stage. The sceptics have been discredited and are licking their wounds, dire warnings from the Reserve Bank have gone unheeded, and the culture is as obsessed with real estate as the US was with stockmarkets two or three years ago. In these circumstances, even if it is possible for policy action to prick the bubble, no one will be willing to take the blame. This will all end in tears.