Japan: Bubble prophet fears new disaster


Japan plans ‘nationalisation’ of factories to save industry - AEP -> telegraph.co.uk/finance/news … ustry.html

Hardly unprecedented, this was British economic policy in the post WW II years.


Yeah - but it did not work out too well for the British aeronautical and automobile engineering industries - both in reasonable shape and with huge potential just after the war but absolute basket cases shortly thereafter - hero to zero in more or less 15 years for both!


Looking into the Japanese real estate mirror: Residential home prices in Japan back to levels last seen 30 years ago in spite of near zero percent mortgage rates. -> doctorhousingbubble.com/japa … age-rates/


Why can’t Japan’s university graduates find a job? -> mainichi.jp/english/english/pers … 5000c.html


China rebukes Japan after both sides’ planes fly near islands -> japantoday.com/category/nati … ar-islands


And we all know the best owner of industrial production capacity is the state. Perhaps the Japanese Ministry of Industry can start setting output targets in tonnes.


Lots of “make work” going on there already.


Clinton assures Japan on islands, invites Abe to U.S. in February - Andrew Quinn -> news.yahoo.com/clinton-assures-j … 33127.html

US position on Japan island control a ‘betrayal’: China - -> scmp.com/news/china/article/ … ayal-china

US Fighters Join Japan’s F-15s Over The Disputed East China Sea Islands -> businessinsider.com/us-f-18- … sea-2013-1

China rejects U.S. decision to support Japan in Diaoyu islands dispute -> english.pravda.ru/hotspots/confl … ects_us-0/


Japan is Collapsing - Mike Rogers -> modernmarketingjapan.blogspot.co … psing.html
Sunday, November 25, 2012

Japan’s Debt Explosion Coming Up -> modernmarketingjapan.blogspot.co … ng-up.html
Sunday, January 20, 2013


If you believe a devaluation is coming then getting out of debt is a bad idea, whatever about buying assets that might hold value through the event (like precious metals or foreign assets). Borrowing hugely in yen to buy liquid assets abroad would seem the most sensible idea. If you believe…


He’s addressing people living in Japan. When currency devaluation happens, the purchasing power of your savings and wages goes down and you must spend more of your income on the basics, that makes debt more difficult to service. It also drives interest rates up which makes debt much harder to service at the same time, now about that wage rise…oh yeah you gotta riot and go on strike.
Might be somewhat different if you are a hedge fund that can borrow at also zero interest. Seems to be some panic buying of Gold in Japan anticipating this.

Tokyo gold hits record high; new stimulus may revive buying - Risa Maeda and Rujun Shen -> in.reuters.com/article/2013/01/1 … Z620130111


It only drives interest rates up if the devaluation is undesired (i.e. if you want to defend the currency), otherwise devaluing the currency and raising interest rates would be entirely self-defeating when your aim is to boost exports and increase domestic inflation. Assuming that you buy a good proportion of imported basics is not realistic in this scenario since the aim is also to make imports more expensive and encourage domestic substitution.

Inflation is not always and everywhere a monetary phenomenon…


Banking systems earn money through interest. Was not that part of the problem in the boom, the house was supposedly “making” 10 to 12% per annum, while money in the bank was earning 3% forcing Irish banks to go on the interbank market and securitisation to look for funds. Just like Japan we are left with zombie banks.

As Japan Stops Saving, a Crisis Looms - A Gary Shilling -> bloomberg.com/news/2012-06-0 … looms.html


Japan should let old ‘hurry up and die’: minister - -> ndtv.com/article/world/japan … ter-320467


Wrong! Wrong! Wrong!

Don’t get me wrong, you’ll find plenty of people saying it, but it isn’t true. The quantity theory of money is just wrong. Velocity, now that’s a different thing…


Yes and no.
Increased money supply will lead to inflation eventually.
The velocity effect just delays the inevitable (assuming it eventually recovers).

The printing of money to overcome the velocity issues just leads to a massive inflationary headache once the velocity returns to normal.


Perhaps if you actually print it, but physical note issuance has remained steady across many currencies. Increasing resreve requirements can quickly reduce velocity…


Well let’s say then we had a fixed never changing quantity of money.

What if the wheat crop one year was only half of the previous year. Would we get inflation in the price there?

Or, a technology that was once used freely to make a particular product had to be legislated against because it was discovered it was polluting. And the alternative technology was much more difficult to use (greater barrier to entry for producers). Would that inflate the price of the particular product?

Or, conversely, a once difficult to make product suddenly became so easy and cheap to make through technological development that everyone started making it. Would that deflate the price of the product?

Or, let’s say that people were allowed to use a cheque drawn against their house to pay for a product. But then, next day (for one reason or another), they couldn’t. Would that be deflationary?

I could go on.

It comes down to more money chasing less goods. Or, more precisely, we get inflation when means of payment increases more rapidly than the total output of goods and services. This, ‘nothing is inflationary except an increase in the quantity of money’ stuff is only a rote learning concept for school children to get them thinking. It bears little resemblence to the much more complex reality.

As an aside. What do you think would happen if we had a fixed amount of money (or better, ‘means of payment’) in the system, but total output of goods and services was steadily increasing? (as generally happens in a modern economy).

Another aside. What would happen to pay increases in an environment where there was no inflation, and what effect would that have on businesses…


Money is not wheat… after that, you get a bit lost.

Let me put it a different way - if some food increases in cost, what does that do to demand for other food, assuming spend on food remains the same?

You are partly confusing pricing effects with inflation, the same mistake Greenspam made with his view that the China price effects indicated benign inflation. In fact, they didn’t. Money was mispriced from the mid-nineties onwards and what we are seeing now is the result of malinvestment due to cheap money.


FYI: Friedman was an acolyte of Irving Fisher. The velocity of circulation has nothing to do with causing inflation.

If both of us attend an auction and each of us has €100 to bid on say, a vase, the maximum price we can bid is €100. If both of us go to the bank and borrow another €100 for the purpose of the auction, we can each bid €200 for the same vase. That is inflation because the vase did not change but the quantity of money available did and since the bank uses fractional reserve there is new money created. The above is an example to make a point, and contrary to the auction example there are no fixed relationship or ratio that exists between the quantity of money and the price level which is what the Quantity theory tries to make out. Mises in the above quote only states that inflation is an increase in the quantity of money. He is warning about the dangers of credit expansion, hyperinflation and governments using monetary policy to create artificial economic prosperity. In his book “Human action”, he argued that inevitably such actions would lead to inflation and then hyperinflation and finally to the “crack up boom” where everyone realises that inflation is out of control and wants to get rid of paper money and exchange them for tangible things, no matter how much it costs to do that. In its most extreme incarnation, nobody wants paper money for exchange then the currency collapses.