Sunday, January 16, 2011

Japan's Economists Have Lost Their Minds... Fortune Tellers Haven't...

Students of Austrian economics and those who realize that the current fiat-based money system built on debt and credit is now headed for the end game.

There is not much time left for people to protect their assets and families by divesting out of fiat currency based investments and into commodities and real assets like gold, silver, oil - and, possibly land. This is a well understood trend in the west (unless, of course you are a Keynesian economist or from the Chicago school).

The fast rising price of gold and silver over these last ten years are the proverbial canary in the coalmine. Gold and silver have stupendously outstripped stocks in performance over this time. In fact, silver increased in value over 85% in 2010 alone.

But now, some clowns in Japan are predicting a return to the bubble days of the late 1980's. In fact, they write as if the bubble is a good thing.... 

Japan Times reports:

Remember the bubble? In case you don't, Shukan Gendai (Dec. 20) reminds us that the economic bubble of the late 1980s was an era of rocketing salaries, stock prices and property values, yet accompanied by little inflation. Wealth was seen everywhere. Catching a cab downtown at night required flashing a ¥10,000 bribe at the driver just to get him to stop.

Over 20 years later, the bubble era seems like a wonderful, distant dream. However, 2011 could well be different. According to the weekly, Japan is now on the verge of a new economic bubble for the 21st century.
Some of the major economic indicators already are showing strong promise as we begin the new year. As this story was going to print, the stock markets were climbing, the dollar strengthening, and the price of gold, a favorite asset in bad times, falling.
That last sentence is a real laffer. Gold is falling? Oh really? 10 years ago, gold was $300 (USD) and ounce. Last time I looked (about 5 seconds ago) it was $1,361!
Sorry, but gold, like any other asset has up days and down days... Saying that the price of gold is falling because it has gone down a few percent over this last 10 days is hardly responsible reporting... Gold, as with any other asset, trends are not judged over a few days or weeks.
This writer, obviously not schooled in Austrian economics, doesn't understand cause and effect. The article continues:
On the home front, more money will flow into the equity markets, nudging stock prices higher. That would be thanks in part to a likely 5 percent cut in the corporate tax rate, leaving Japanese companies with more money to invest, Nobuyuki Fujimoto, an executive at Traders Securities Co., Ltd., tells the magazine.
As for the overseas factors, the U.S. Federal Reserve has already been playing the central role. Through its quantitative easing, the Fed is flooding the world with dollars. All that money has to go somewhere, and one favorite spot is Japan, thanks to its relative stability.
"Since the Lehman Shock, a huge amount of quantitative easing has been under way in order to restore the U.S. economy. The global economy is in a state of 'excessive money.' That money has been circulating, including flowing into Japan," says an executive at a major brokerage that the magazine does not identify.
The inflows are already happening, with foreign investors reportedly returning to Japan in search of decent returns after a long absence.
"Data tells us that from November, overseas investors suddenly started buying Japanese stocks. The world is paying attention to Japan's stock markets," the brokerage executive says.

Yes, the Central bankers are all printing money as fast as they can. That money has to go somewhere. Japan has benefitted from the Carry Trade all these years. But with US rates at zero too, the yen carry trade is no longer so attractive. The solution? Buy undervalued Japanese stocks and land. That's what the foeigners are doing.
Japan has benefitted because of bad situations in the USA and the Eurozone... But with Japanese debt surpassing 200% of GDP... This situation will probably end, in a crisis for Japan, this year... Then you'll see everyone run for the exits. (Here is a related article showing Japan's gross debt at 226% of GDP here and here is another article with data from the Wall Street Journal talking about the coming crash of the Japanese Yen. 
Problem is that this fiat currency they are using is quickly losing it's value. What actually is happening is that the west is trying to export its inflation to Japan. 
Hardly a good situation for the Japanese people. 
But, then again, when you are so desperate for some good economic signs, even reading the stars becomes "data." The article continues:
Shukan Economist (Jan. 11), usually a buttoned-down, rational publication, begins its issue by turning to the Chinese zodiac as a guide for how Tokyo stocks will perform this year.
Its article is titled, "A good omen for Japanese stock prices through the zodiac's leaping year of the rabbit." Astrology portends a profitable year ahead, the magazine says. This is the year of the rabbit, after all, and rabbits like to jump. The magazine figures stock prices will jump as well. A data chart purports to show a strong correlation between the animals of the year since 1949 and the historical performance of the Tokyo Stock Market. 
Well, perhaps using a fortune teller to predict the market is strange, but I'll be these fortune tellers were just as right or wrong as main stream economists and writers who failed to predict the 2008 market crash and wrote about how strong our market fundamentals were back than. Chuckle!
This bizarre idea that the bubble was a good thing and its return should be hailed as good news defies logic. Then the writer adds another weird comment that is another total head-scratcher:
Maybe it's too early to bring out the vintage champagne, gold-flake sake and other iconic treats of the late '80s. But after a couple of decades of economic stagnation, even modest signs of growth are worth getting excited about.
Sorry, but two decades of money printing and Japanese stimulus should show anyone that more money printing and stimulus are not the answer to our problems. They certainly do not mean the economy is improving.
If printing money and giving it away did improve the economy, then why would anyof us have to work? Why not just print and print and print and give it all away! We'll all be rich, right? The government can print to its heart's content to pay it bills, right? Wrong.
The bubble of the 80's were good times living on borrowed money. That's why is is called a "bubble" (a "bubble" means artificial growth)  When the bubble burst, the party ended. We've been paying for that party for the last 20 years.... Trust we are still going to be paying for it this year and for the foreseeable future...
Mr. Japan Times writer, if you think living in a bubble situation is good, and that this sort of fake economy means that the real economy is good, then I have a suggestion for you: You can live just like the bubble days! You have a credit card, right? What's to stop you from spending and spending like the 1980's today?... Nothing...
Well, nothing except that you will have to pay for those charges on your credit card and those excesses tomorrow. As it is with the individual, so it goes for the state.
Welcome to economics 101 and the real world.

1 comment:

Anonymous said...

Clueless writers at japan Times. Is it any wonder nobody reads that newspaper anymore?

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