Jim Grant on the empirical case for a lassiez faire response to recessions

The case for better, more robust expansions (followed, of necessity, by lustier, more dynamic contractions) is based on the conviction that failure is an integral part of the capitalist cycle.  The argument is advanced in this chapter without the aid of an econometric model.  Instead, the principal exhibits are historical: America and Japan in both the early 1920s and the early 1990s.  In each era, inflation of one kind or another demanded a public-policy response.  The most successful policy was that of the United States in the early 1920s: a short, sharp depression.  The least successful policy was that of Japan in the early and mid-1990s: a chronic, lingering recession.

~ Jim Grant, The Trouble With Prosperity, p. 117

Jim Grant on Japan's bull-market system of the late 1980s

More than a bull market, Japan invented what enthusiasts believed was a perpetual bull-market system.  Japanese companies bought each others’stocks, and Japanese banks bought their clients’ stocks. These “cross holdings,” so the argument went, would never be sold, so the shares that did remain outstanding were all the more valuable. The most expansive element of the bull-market system was that banks were able to count a percentage of their stocks as a contribution to their own capital.  Thus, as the stock market rose, so did the banks' capital and so did their lending capacity.  The more the banks lent, the greater the prosperity in the markets in which the loans were spent.

~ James Grant, The Trouble With Prosperity, p. 155