Arthur Kroeber

What you looked at was the value of the land that they controlled.

So it was essentially a capital ratio where you assumed that the value of their underlying land capital was a permanent contribution

to their wealth and prosperity.

And so the valuations of these stocks, which got, again, crazy, you couldn't justify them by earnings.

They say, well, it doesn't matter because the land that they're sitting on is so valuable.

Then the land values collapsed by 80%.

The stock values had to collapse by a similar amount, 80%.

And everyone was holding shares in one another.

So the banks, their capital got eroded because a lot of their capital was tied up in the land and in the stocks, which were collateralized by land.

And so they were unable to lend.

They just had to deleverage as fast as possible.

The companies had to deleverage as possible, fast as possible.

And so the entire economy got engulfed

by this phenomenon of debt deflation, which basically means that in the act of paying down the debt, because you're doing fire sales of assets, you're reducing the prices of those assets, introducing deflation.

So the real value of your debt continues to grow even as you are supposedly reducing it because of the deflationary effect.

It's very, very difficult to get out.

China does not have this problem at all because they looked at the problems that Japan got into.

They looked at similar problems that Korea had in the late 1990s and they said, we will never allow this kind of cross-shareholding between financial companies and corporations.

It's way too dangerous.

So they have kept the two quarantined.