The Economic Crisis We Learned Nothing From

0:00 On the 29th of December 1989, the Nikki,

0:02 Japan's primary stock index, closed at a record high of 38,915.

0:07 After accounting for inflation, it would never again reach this level.

0:12 At this time, Japan was quickly becoming

0:15 the preeeminent economic force in the world.

0:18 Its highly innovative companies were churning out world-class technology.

0:21 Investors were doubling or even tripling their money every other year.

0:25 And all of this was creating some of the highest incomes anywhere on the planet.

0:30 But even during these good times,

0:32 there were problems bubbling away under the surface.

0:35 A long period of easy money and low interest

0:38 rates grew a roster of underperforming and inefficient businesses.

0:42 Speculation ran rampant as people were expecting the technology

0:46 of the day to continue dominating into the future.

0:49 Companies and households loaded up on debt.

0:52 Market returns and loose lending standards like 50-year

0:55 mortgages fueled a real estate bubble that made

0:58 innovation centers like Tokyo and Kyoto some

1:00 of the most expensive places on the planet.

1:03 All of these vulnerabilities were then tested

1:05 by a radical shakeup in global trade relations,

1:08 an aging population, and oh no, I've done it again.

1:11 You're all going to start to think I am mixing

1:13 up these tapes just to make some kind of statement.

1:16 Let's just uh There we go.

1:18 Japan never recovered from the crash that followed.

1:21 For the past 35 years,

1:22 the country has stagnated by almost every conceivable metric.

1:25 Its innovation is lackluster.

1:27 Incomes haven't budged, and the real estate that caused all of these problems.

1:32 Some of those homes are now worth just 1% of what

1:35 they were during what are now known as the bubble years.

1:39 So, you might be thinking,

1:40 "Hang on, a lot of these economic warnings sound very familiar today.

1:44 I know where this is going." This is going to be

1:47 another video talking about how we haven't learned anything from history.

1:51 Right?

1:52 Wrong.

1:52 Japan's lost decades may have been the crisis we refused to learn from.

1:57 But there are some big differences between then

2:00 and now that almost render this comparison completely irrelevant.

2:04 The only problem is those big differences probably aren't in our favor.

2:08 The Bank of Japan pursued an expansionary monetary policy

2:12 which led to a speculative boom in real estate

2:15 and equities which gave rise to fierce competition

2:17 in the banking sector which in turn fueled reckless lending practices.

2:22 Jensen Invidia is making a hundred billion investment in OpenAI.

2:26 The real estate in Tokyo was so expensive

2:29 that people were taking out 100year home loans.

2:32 East PaloAlto was once a pocket of affordability,

2:35 a place where you didn't need tech money or even

2:38 two incomes to live comfortably and raise a family.

2:40 With more than 19 million people crammed into the greater metropolitan area,

2:44 Tokyo is not only one of the most densely populated cities in the world,

2:48 but one of the priciest real estate markets anywhere.

2:50 When Japan surrendered in 1945,

2:53 most of the country wasn't just damaged, it was unusable.

2:57 Factories were turned into rubble.

2:59 Farmland was scorched.

3:00 Ports were in ruin and destruction wasn't limited to a few industrial centers.

3:05 The Allied bombing campaign had effectively

3:07 dismantled the economic backbone of the nation.

3:10 Four in five ships were gone.

3:13 1/3 of all industrial machinery had been destroyed

3:16 along with a quarter of all trains and cars.

3:20 Of course, two cities in particular are remembered in the history books.

3:24 But in the grand scheme of Japan's devastation towards the end of the war,

3:28 they were barely a rounding error.

3:31 64 additional major cities were destroyed by firebombs,

3:34 leaving almost half of all urban areas completely useless.

3:38 Tokyo lost 65% of all its homes.

3:41 Osaka lost 57% and Nagoya, the country's third largest city,

3:46 had lost 89% of habitable dwellings and infrastructure.

3:49 By the end of the war,

3:52 five of the 7 million residents of Tokyo had left the ruined city.

3:57 In total, around 2.75 million Japanese citizens had died during the war,

4:02 and almost 9 million were left homeless afterwards.

4:04 This was not the kind of destruction someone bounces back from.

4:08 You don't lose most of your houses, your shipping fleet,

4:11 your factories, and millions of people,

4:14 and simply just rebuild through willpower.

4:16 Japan's survival required massive outside intervention.

4:19 And the only country with a plan to rebuild it was

4:22 the same country whose previous plan had been to level it.

4:27 Now, the United States didn't rebuild Japan because it felt guilty.

4:31 It rebuilt the country because it found it to be incredibly useful.

4:35 The next battle America set its sight on was fighting communism.

4:38 And to understand why Japan suddenly became the most

4:41 valuable piece of real estate in this battle,

4:43 you only have to look at what was happening across Asia in 1945.

4:48 Immediately after Japan's surrender,

4:50 the Soviet Union was quick to act on the broken empire,

4:54 carving out enormous influence in Manuria and northern Korea,

4:58 territory that Japan held claim to for over a decade.

5:01 Stalin wasted no time filling the vacuum Japanese forces left behind.

5:05 In China, the Communist Party under Maoadong controlled large rural

5:09 territories and was gaining momentum in the Chinese Civil War.

5:12 A war that would end with China becoming a communist state by 1949.

5:17 Other Asian countries such as Indonesia, Malaysia, Thailand, Burma,

5:21 the Philippines, and Vietnam all saw communist factions gain prominence.

5:26 From Washington's perspective, if Japan was lost to communism,

5:29 the consequences would have been enormous.

5:32 Yes, Japan itself had been destroyed.

5:34 But while their industrial capacity was gone, its industrial potential was not.

5:40 They still had one of the highest skilled,

5:43 most technical workforces in the world.

5:45 A destroyed factory can be rebuilt,

5:47 but a skilled workforce is much harder to replace.

5:51 Japan's ports, shipyards, and urban infrastructure were ruins,

5:54 but they were strategically placed ruins on the doorstep of the Pacific.

6:00 Washington understood that if Japan ever recovered,

6:02 it would once again become the most advanced manufacturing center in Asia,

6:07 which meant Japan was simply too important

6:10 for the US to abandon and too dangerous to lose.

6:13 And so, the United States began one of the most

6:16 ambitious nation building projects it had ever undertaken.

6:19 The Supreme Commander for the Allied powers,

6:22 effectively an American military government with the Allied partners kept

6:25 in the loop just enough to say it was a collective effort,

6:28 took control of Japan following the terms of surrender.

6:32 The operation was led by General Douglas MacArthur,

6:34 who was given sweeping authority to reshape Japan.

6:38 He oversaw Japan's new constitution,

6:40 expanded political freedoms, and introduced new civil liberties.

6:44 He did however introduce the Civil Censorship Departments,

6:48 an organization dedicated to restricting Japanese media,

6:52 and crucially to suppress information about

6:54 the human cost of the atomic bombings.

6:57 I suppose it's easy to grant civil liberties when

7:00 you're the one deciding what people are allowed to know.

7:04 Anyway, there were changes introduced to reshape the Japanese economy as well.

7:09 As cold war priorities took shape,

7:11 Washington shifted from punishing Japan to rebuilding it as quickly as possible,

7:16 the Allies pushed to dissolve the Zybatsu, a family-owned monopoly,

7:20 into many different firms called Keretsu with many different shareholders.

7:25 Land reform broke apart the huge landlord estates,

7:29 creating millions of small landowning farmers

7:32 and injecting income into rural Japan.

7:35 Labor reforms legalized unions, strengthened worker protections,

7:38 and helped shape the cooperative corporate

7:41 culture that would later define Japanese industry.

7:44 Tax reforms were introduced to dilute concentrated

7:47 wealth and encourage corporate reinvestment over financial hoarding.

7:51 The United States also rebuilt Japan's financial system from the ground up,

7:56 stabilizing the Bank of Japan and allowing

7:58 American banks to operate inside Japan.

8:00 Modern industrial policy began taking shape as well.

8:04 MacArthur encouraged targeted investment in sectors like steel, ship building,

8:09 chemical and machinery,

8:10 industries that would eventually fuel Japan's exportdriven boom.

8:13 At the same time, the US shipped in food, fuel, medical supplies,

8:19 and raw materials, preventing famine and giving

8:21 Japan the breathing room it needed to rebuild.

8:24 All of this laid the groundwork.

8:26 But the true turning point came in 1950

8:29 when the Korean War erupted and transformed

8:32 Japan from a recovering nation into the industrial

8:35 engine of the United Nations war effort.

8:38 When the Korean War erupted in 1950,

8:42 the recovering Japan unfortunately found itself in the center

8:46 of the most important geopolitical crisis in the early cold war.

8:50 And although Japan never sent any troops,

8:53 it became the primary logistical hub for the entire United Nations war effort.

8:58 The United States guaranteed Japan security

9:00 through the 1951 US Japan security treaty,

9:04 which allowed American bases and the proverbial

9:07 American nuclear umbrella to anchor Japan's economic revival.

9:11 American ships were repaired in Japanese shipyards.

9:13 American aircraft were serviced in Japanese hangers,

9:16 and American purchase orders poured into Japanese

9:19 factories at a scale no one had predicted.

9:22 This influx of military demand reignited

9:24 industries that had been idle since 1945.

9:28 America needed factories to produce its military equipment,

9:31 and Japan was a perfect manufacturing hub for its weapons in the Pacific.

9:36 Major firms like Mitsubishi, Sumi-tomo,

9:38 and Mitsui were revived by enormous US procurement orders

9:42 for everything from ships and pharmaceuticals to oil, uniforms, and beer.

9:48 By 1953, these special procurement payments amounted to $800 million a year,

9:54 equaling 27% of Japan's total export trade.

9:58 Japan's economy was roaring again with the economy

10:01 growing 10% per year and manufacturers that had

10:05 been making goods for the US military

10:07 started importing other goods back into the US.

10:10 By the mid 1960s, Japan had moved far beyond recovery.

10:13 It was now one of the fastest growing economies on the planet.

10:17 Factories that had once supplied American forces

10:20 in Korea were now exporting to the entire world.

10:24 Japanese radios, cameras, ships, cars,

10:26 and steel were becoming global benchmarks for quality.

10:30 And this success reignited a national confidence

10:33 in Japan that this growth would be sustained forever.

10:37 Growth wasn't just expected.

10:39 It was assumed, baked into corporate plans,

10:42 household budgets, and government policy.

10:44 Japan's technology firms were at the cutting edge.

10:48 Sony, Panasonic, and Sharp were churning out

10:52 worldclass electronics that reshaped global consumer markets.

10:55 From the Walkman in people's pockets

10:57 to stereos in living rooms around the world,

11:00 investors and households convinced themselves

11:03 that Japan's technological rise was permanent.

11:06 The idea that growth could go on forever became so normal

11:10 that it stopped feeling like optimism and started feeling like geometry.

11:13 Green line goes up and to the right.

11:16 Now, it's easy to see how ridiculous this is in hindsight,

11:20 but how many of you have a retirement plan that you're

11:23 quietly assuming will return 10% every year for the next 40 years?

11:29 Anyways, for ordinary people,

11:30 the best way to own a piece of the miracle was to own a piece of Japan itself.

11:35 So, real estate prices surged far beyond anything connected to local wages.

11:41 Large cities like Tokyo, Asaka,

11:44 and Kyoto became some of the most expensive places on the planet.

11:47 Not because there was no more land,

11:49 but because everyone believed land prices would never fall.

11:53 Luxury consumption exploded.

11:55 European fashion houses became household names, and expensive watches,

11:58 handbags, and designer clothing turned into normal status symbols.

12:02 Japan developed one of the largest secondhand luxury markets in the world,

12:07 which goes to show how many people could afford to buy in the first place.

12:11 The banking system amplified all of this.

12:14 Japanese banks were flush with deposits

12:16 from the country's massive trade surplus, and cheap lending became normal.

12:21 Loans flowed to households, corporations,

12:23 and speculative property developers with almost no restraint.

12:26 If you wanted to build it, buy it, or flip it,

12:29 there was a bank ready to help you do it.

12:31 When the first signs of trouble appeared after the Plaza Accord in 1985,

12:35 which we will discuss soon, the government of Japan didn't slow things down.

12:40 They doubled down, terrified of throttling growth

12:43 and losing their dominant position in the global economy.

12:46 Interest rates were cut even lower.

12:49 Loans were given out faster.

12:51 Asset prices went higher.

12:52 And every policy decision was designed to fuel the fire that everyone could see,

12:57 but nobody wanted to extinguish.

13:00 Between 1985 and 1989, the decay more than tripled.

13:04 In 4 years, stock valuations detached from underlying profits.

13:08 But as long as the index number on the evening news kept climbing,

13:13 nobody really cared to ask questions.

13:15 Now, if things are starting to sound a bit familiar,

13:19 there are some differences that I should point out.

13:22 Workers were paid pretty well,

13:24 job benefits were strong, and social cohesion was high.

13:27 The top 1% didn't have nearly the wealth

13:30 that they do here in the United States today,

13:33 and ordinary households felt like participants in the economic miracle.

13:36 Households were also very good at saving.

13:39 Families had cash buffers in bank accounts.

13:42 Their system was not built on maxed

13:44 out credit cards and financing Door Dash orders.

13:48 If a bubble burst, households had cushions.

13:50 Businesses had reserves.

13:51 To the outside world,

13:53 it looked like Japan had found an entirely new economic model.

13:57 A model that combined technology, stability, high savings,

14:00 and a formula that looks like infinite prosperity.

14:04 American executives were flying to Tokyo to study management techniques.

14:08 Economists wrote bestsellers predicting Japan would overtake

14:11 the United States by the early 2000s.

14:14 Japan is often held up by economists and historians as a cautionary tale

14:18 of where we might one day end up if we are not too careful.

14:22 But there is the argument that if we look under the surface just a little bit,

14:26 we are already there.

14:27 And in fact, we may have been there

14:30 for years at this point without even realizing it.

14:33 So, it's time to learn how history works to find out

14:36 if Japan's economic crash would even be that bad by today's standards.

14:40 Today's episode is sponsored by Brilliant.

14:42 Brilliant is a powerful learning platform built around the idea

14:45 that the best way to understand something is to do it.

14:48 With thousands of interactive lessons in maths, science, and computer science,

14:52 it helps you build real intuition through problem solving, not passive watching.

14:57 One course that really stood out to me is scientific thinking.

15:00 It digs into how we form models of the world,

15:04 test ideas, and challenge assumptions.

15:05 Basically, the same tools historians and scientists

15:08 use to make sense of the past.

15:10 It's not a history course,

15:11 but it sharpens the kind of thinking that history actually depends on.

15:15 I've been working through it myself and it's

15:17 made me look at historical analysis differently.

15:20 You start with basic logic puzzles and end up evaluating evidence,

15:24 spotting bias, and asking smarter questions.

15:26 It's surprisingly relevant and honestly pretty addicting.

15:29 And the best parts, you can do it on your own time.

15:33 Whether you've got 5 minutes between errands or an hour to dig deep,

15:37 Brilliant fits around your schedule.

15:38 So, if you're curious about how we learn

15:41 from the past or just want to level up your thinking,

15:44 Brilliant is a great place to start.

15:46 To learn for free on Brilliance, go to brilliant.org/how history works.

15:49 Scan the QR code on screen or click on the link in the description.

15:55 Brilliance also given our viewers 20% off an annual premium subscription,

16:00 which gives you unlimited daily access to everything on Brilliant.

16:03 The turning point in Japan's miracle came

16:06 in 1985 when leaders from the United States, Japan, West Germany, France,

16:11 and the United Kingdom gathered at the Plaza Hotel in New

16:14 York and signed what became known as the Plaza Accord.

16:17 The agreement was designed to push the Japanese

16:20 yen higher and the US dollar lower.

16:23 The United States had started to become

16:26 frustrated with its ballooning trade deficit,

16:28 and Japanese exports were a major political target.

16:32 Strengthening the yen was the diplomatic way

16:34 to ease that pressure without launching a trade war.

16:38 A stronger yen meant Japanese products would cost more

16:41 in the United States and American products would cost less in Japan.

16:45 This effectively meant that Japan was making it harder on themselves to export.

16:50 So why the would they do this to themselves?

16:54 Well, for Japan, signing the agreement maintained good relations with the US

16:59 and was a responsible power in a system the US dominated.

17:03 30% of all exports from Japan were purchased by the United States,

17:07 their largest buyer at the time.

17:09 The problem for Japan, though, was that their economy relied

17:12 heavily on exporting highquality manufactured goods,

17:15 and a stronger yen made those exports more expensive internationally.

17:19 This shift placed an immediate strain on Japan's industries.

17:23 But despite the pressure, the economy kept chugging along.

17:26 A more valuable yen increased Japan's purchasing power abroad,

17:30 making overseas travel, asset purchases, and investments more accessible.

17:34 Japanese firms began purchasing highprofile properties around the world.

17:39 Japanese policy makers were reluctant to let this momentum fade,

17:43 so they responded to export challenges

17:45 by lowering interest rates and expanding credit.

17:49 Their goal was to support domestic demand while exporters adjusted.

17:54 This created an environment of extremely cheap money.

17:58 Banks increased lending.

18:00 Developers expanded projects and corporations

18:03 took advantage of readily available credit.

18:06 Years of optimism were now paired with unusually loose financial conditions.

18:11 Real estate values accelerated far beyond income levels,

18:14 and some parcels of land in Tokyo

18:17 reached valuations that were more symbolic than economic.

18:20 The numbers no longer reflected a future expected return.

18:24 They reflected an expectation of endless appreciation.

18:27 Their stock market followed the same pattern.

18:31 Between 1985 and 1989, the NK rose to levels that had

18:35 no meaningful connection to company earnings or growth.

18:39 Prices were driven by liquidity, confidence, and momentum.

18:43 By the late 1980s, speculation had become

18:46 the defining feature of the Japanese economy.

18:48 It was visible in property, in stocks,

18:51 in corporate borrowing, and in household expectations.

18:54 Japanese policymakers started to get concerned by this irrational exuberance.

18:58 And the central bank decided to shift course and raise interest rates.

19:03 Their goal was to cool the most overheated parts of the economy.

19:08 However, just a slight uptick in interest rates was all it took

19:12 to expose the vulnerabilities that ran

19:14 far deeper than anyone cared to acknowledge.

19:17 Property developers struggled to service loans.

19:19 Corporate expansion plans stalled and projects that only worked

19:22 under low interest rates no longer made financial sense.

19:26 Asset prices began declining.

19:27 Land values fell sharply and the decay started to fall from its peak.

19:33 In some regions, real estate prices collapsed

19:35 by 70 to 90% over the following years.

19:38 The bubble had finally burst,

19:40 but it was the aftermath that would define the next several decades.

19:44 Japan had entered a period of deflation.

19:47 Prices were falling, wages remain stagnant,

19:49 and earnings expectations kept declining.

19:52 For what it's worth, these conditions are very rare in advanced

19:57 economies and are extremely hard to reverse.

20:00 Deflation discouraged investment in the Japanese economy.

20:02 Prices and revenue were likely to fall.

20:05 Businesses delayed expansion plans, postponed hiring, and avoided taking risks.

20:10 Households had postponed major purchases, reducing demand even further.

20:14 The banking sector deteriorated under the weight

20:17 of bad loans accumulated during the bubble years.

20:20 Many borrowers couldn't repay their debts, but banks avoided writing them off,

20:25 which weakened the financial system for years.

20:27 Policymakers attempted various forms of stimulus and reform,

20:30 but responses were cautious and incremental.

20:32 None of the measures were aggressive enough to break the deflationary cycle.

20:37 Japan remained stable on the surface.

20:39 There was no sovereign debt crisis,

20:42 no hyperinflation, and no political collapse.

20:44 But the country was stuck in a prolonged period

20:47 of stagnant growth that became known as the lost decades.

20:51 Economic activity fell into a long low frequency drift.

20:55 Living standards plateaued, consumptions remained weak,

20:58 and the optimism that defined the boom years never fully returned.

21:02 By now, you might be thinking, "Okay, so this is where we're going to hear about

21:08 how we're basically going to become Japan." And yes, but also not really.

21:14 Because one important thing to remember here

21:16 is that Japan's lost decades happened under conditions

21:19 that were in many ways far more stable and forgiving than what we have today.

21:25 Japan ran into deflation, a world where prices fell gradually over time.

21:29 Sure, this is bad if you own a home and a mortgage and your salary decreases,

21:34 but I don't even need to go into why that's not an issue for us.

21:38 That is bad for growth and terrible for investment.

21:41 But at least people aren't waking up to find that rent, food,

21:45 and energy are 15% more expensive than they were a year ago.

21:49 Our problem today is inflation where the price of almost

21:53 everything essentially has jumped and wages haven't kept up.

21:56 Tariffs don't help with that because a tariff is a tax on imported goods

22:01 which gets pushed into higher costs

22:03 for businesses and then higher prices for consumers.

22:07 Typically, a 2% inflation rate is considered

22:09 healthy because it encourages people to spend

22:12 and invest today and it makes existing debt slowly easier to pay off over time.

22:17 But once inflation stays above that range,

22:20 it stops being healthy and starts being I can't afford to live anymore.

22:24 And when that happens,

22:26 people do what people always do when the cost of living outruns their income.

22:30 They finance the gap.

22:32 Japan has one of the strongest household saving cultures in the world.

22:35 Even during the asset bubble, families still put aside significant cash.

22:39 When the bubble popped, they lost paper wealth, but they still had actual money.

22:44 In America, we took the borrowing part from the Japanese story,

22:48 but completely forgot the savings part.

22:51 Households carry record levels of debt

22:54 and have almost nothing in reserve for emergencies.

22:58 Even food is now being financed through buy now, pay later services like Clana.

23:04 Japan entered its stagnation with balance sheets

23:07 that could survive decades of low growth.

23:10 We are entering ours with balance sheets that can barely survive a month.

23:16 Inequality is another major difference.

23:18 Japan's wealth distribution is far flatter

23:20 than almost any other developed economy.

23:23 During the boom, the gains actually reached ordinary workers.

23:27 People didn't feel locked out of prosperity.

23:30 In fact, they very much felt included in it.

23:33 When the bubble burst, the pain spread across a broad middle,

23:37 not concentrated among people who already had the least.

23:40 In highly unequal societies,

23:42 the same stagnation became a social pressure cooker.

23:45 Economic problems turn into political ones very quickly.

23:49 Corporate culture played a stabilizing role as well.

23:52 In Japan, layoffs are never a go-to solution for struggling economies.

23:57 Firing an employee is seen as a last resort,

24:00 not a clever way to appease shareholders.

24:03 In America, layoffs are the first lever companies will pull.

24:07 If a stagnation hits this system,

24:09 the pain spreads directly into the labor market and then the political system.

24:14 Japan also had a far more equitable wealth system.

24:17 They have heavy inheritance taxes.

24:19 So, as wealth transfers between generations,

24:22 a meaningful portion is reinvested back

24:25 into the economy instead of hoarded in asset values.

24:29 This slows the creation of permanent

24:31 dynasties and keeps inequality from getting worse.

24:35 In countries where inheritance taxes are weak, politically untouchable,

24:38 or easy to avoid, wealth compounds upwards and stays there.

24:42 Over decades, that creates economic pressure points Japan didn't face.

24:47 And then there's the public infrastructure.

24:49 Japan used its boom years to build systems that actually function well.

24:54 reliable public transport, accessible health care,

24:57 and social services that don't collapse under mild stress.

25:01 When growth slowed, those systems remained in place.

25:05 People could still get to work.

25:07 They could still see a doctor.

25:09 They still had institutions they could depend on.

25:11 If you run a similar stagnation through countries where the trains barely run,

25:16 hospitals are overloaded,

25:17 and basic administration is held together with duct tape,

25:20 the outcome looks very different.

25:22 And finally, there's something Japan never had to worry about.

25:26 The global demand for the US dollar.

25:29 For decades, the American consumer has been effectively subsidized by the rest

25:33 of the world because everyone needs dollars and US assets to trade,

25:37 borrow, and store wealth.

25:39 That foreign demand allows the US to run

25:42 enormous trade deficits without collapsing its currency.

25:45 In practical terms, it means the US can import far more

25:49 than it produces because everyone else is willing to hold the IUS.

25:53 If that demand ever weakens, the subsidy ends and Americans suddenly pay

25:58 the cost of what they actually consume.

26:00 So yeah, when people warn that we don't want to become Japan,

26:04 what they usually mean is we don't want slow growth.

26:08 But Japan went through slow growth with high savings,

26:11 low inequality, employment stability, and functioning public systems.

26:15 It wasn't ideal, but it was survivable.

26:18 If something similar hit America today,

26:20 we'd be facing it with record debt, low savings, high inequality,

26:26 fragile public systems,

26:27 and political institutions that struggle with normal years,

26:31 let alone a lost decade.

26:33 Japan had guard rails while we've been quietly removing ours for years.

26:38 Which leads to the uncomfortable conclusion.

26:41 Japan's lost decades, the scenario everyone treats as a nightmare,

26:44 might actually have been a soft landing.

26:47 And if that was the soft landing, what does the hard landing look like?

26:53 Japan made major investments into public transport,

26:55 healthcare, and social services,

26:57 guardrails that the US simply does not have today.

27:01 If something similar happened in America, the fallout would look very different.

27:06 Now, is a Japan style stagnation guaranteed?

27:09 Maybe not.

27:10 We've gotten very good at avoiding economic crisis, or at least delaying them.

27:16 But the more we avoid small downturns,

27:18 the more pressure we build into the system.

27:21 And when you suppress every tiny burn,

27:24 the whole forest saves its anger for one giant meltdown.

27:27 If you want to see how we got to a world where

27:31 recessions barely happen and why that might actually be making everything worse,

27:34 go watch our video on how we forgotten how to have a healthy recession.

27:38 And don't forget to like and subscribe to keep on learning how history works.