General Comment

In the U.S. the real estate price has become about 300% from that of ten years before in average, and now is probably been adjusted for 20 to 30% downwards. And for about 4% is left for FRB as benchmark rate. Who can guarantee this 4% could be enough to normalize the U.S. economy? I think it's danger to rely too much on FRB. I know fiscal policy has not substantially yet implemented in the U.S. In Japan fiscal policy has been implemented for quite a long time(10 years), to bolster GDP, which left enormous national debt. I am surprized, when I came to know that the amount of national debt coincides with the national wealth lost(including the price of real estate) during the same period in Japan($10 trillion). The benchmark rate of central bank is still pegged near 0% in Japan. I hope this is not the case in the U.S.
New system is needed, as "Logic of New Monetary and Tax Policy" published on Tuesday, August 14, 2007 on this blog, which focus much more on the balance sheet of each economic units, to overcome reverse wealth effect.

I would like to show here simple useful figure to capture the scale of bubble in the U.S.

Nowadays,
GDP of U.S. $10 trillion
National debt of U.S. $5 trillion
GDP of Japan $ 5 trillion
National debt of Japan $10 trillion

In Japan, under peak of bubble economy, the price of commercial real estate had been said to be 10 times higher than that of ten years before, and for the price of housing 4 times higher than that of ten years before. So may be its' higher than that of U.S. in average.

Because it took $10 trillion to recover from bubble economy in Japan, and because the scale of the economy of U.S. is about twice as large as that of Japan(by GDP), U.S. probably may need $20 trillion to recover. If the banks in U.S. are the only economic unit which hold the loan to real estates, and consideirng appropriate capital-to-asset ratio as 10%, the banks needs at least $200 billion for capital, in order to maintain financial system.