Is US entering Japan's nightmare?

[Astroboy]

American black joke - I like the most.

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[Astroboy]

Bernanke yesterday said he may use less conventional policies, such as buying Treasury securities, to revive the economy, because his room to lower the main U.S. rate from the current 1 percent level is ﾂ"obviously limited.ﾂ" Even so, reducing the rate is ﾂ"certainly feasible,ﾂ" he said.

Policy makers may decide at their next meeting Dec. 15-16 on the details of carrying out such a shift, which might resemble the ﾂ"quantitative easingﾂ" strategy the Bank of Japan pursued in 2001-2006 after driving interest rates close to zero. Bloomberg - Are you a robot?

Lowering FRB base rate => Lower Yield of US T-bonds => Less buyer of T-bonds => FRB may purchase US T-bonds.

So money circles around the same pole.

USA is exactly following the Japan's path.

 

[JerseyBoy]

Lowering FRB base rate => Lower Yield of US T-bonds => Less buyer of T-bonds => FRB may purchase US T-bonds.
So money circles around the same pole.
USA is exactly following the Japan's path.

It is too premature to jump into that conclusion. There are many buyers for T bonds still (even at the zero percent return).
J-Bonds are simply not attractive as its rate has been close to zero and it is based on the country whose economy has been out of steam for many since 90s. So, only Japanese buy them.

Also, selling and buying of the treasury notes is the common monetary tool used by the Fed. So, there is nothing new with what Bernanke & Co. using that method.

 

[Astroboy]

It is too premature to jump into that conclusion. There are many buyers for T bonds still (even at the zero percent return).
J-Bonds are simply not attractive as its rate has been close to zero and it is based on the country whose economy has been out of steam for many since 90s. So, only Japanese buy them.

Yes, it is too early to say.
Okay I will have a look.

 

[JerseyBoy]

Yes, it is too early to say.
Okay I will have a look.

If you are going to live in Japan for many years, you should be more concerned about Japan because Japan has been in a precarious situation due to its high debt rate, low growth, rapidly aging population, and list goes on. Japan's nightmare has not ended yet; I think it has just entered the beginning for the act 2.

 

[Astroboy]

If you are going to live in Japan for many years, you should be more concerned about Japan because Japan has been in a precarious situation due to its high debt rate, low growth, rapidly aging population, and list goes on. Japan's nightmare has not ended yet; I think it has just entered the beginning for the act 2.

YES, I know.

But the point is that All the rest of the world is following Japan's nightmare & path (ageing, low growth, high debt, and list goes on), and the world does not realize that yet.

 

[JerseyBoy]

YES, I know.
But the point is that All the rest of the world is following Japan's nightmare & path (ageing, low growth, high debt, and list goes on), and the world does not realize that yet.

Not "all" countries. Japan is in its own league in that respect. The key players in the world are aware of Japan's economic woes and are trying not to repeat what Japan did or failed to do. The other countries were able to study Japan's basket case closely.

 

[caster51]

GEAB N°29 is available! Phase IV of the Global Systemic crisis: Breakdown of the Global Monetary System by summer 2009
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Israel 'prepared to attack' Iran nuclear plants
The Times & The Sunday Times
http://www.debka.com/headline.php?hid=5747

Bernanke-san' Signals Policy Shift, Evoking Japan Comparison
Bloomberg - Are you a robot?
Fed Bets $3 Trillion; Companies Covet Cash: Commentary Review
Bloomberg - Are you a robot?
The Biggest Bubble of All: Long-term Treasuries?
Home
Poor Life prolongment plan..

The United Nations was subjected by anti-USA?

http://unctad.org/en/docs/wesp2009pr_en.pdf

UN General Assembly Opens With a Denunciation of US Policies
http://www.voanews.com/english/archive/2008-09/2008-09-17-voa7.cfm?CFID=76707881&CFTOKEN=49156747
New U.N. assembly head wants weaker Security Council
New U.N. assembly head wants weaker Security Council
Brazil, Argentina drop dollar for bilateral trade
http://www.iht.com/articles/ap/2008/09/07/business/LA-Brazil-Argentina.php
The Destabilization of Bolivia and the "Kosovo Option"
http://www.uruknet.de/?p=m47392&hd=&size=1&l=e

Time for financial reform, says UN meeting
http://www.gulf-times.com/site/topi...=258473&version=1&template_id=57&parent_id=56
A guide to the Doha UN summit
http://english.aljazeera.net/focus/2008/11/20081128152450921108.html
New meeting to review financial architecture
http://www.gulf-times.com/site/topi...=258441&version=1&template_id=36&parent_id=16
In Doha, UN's Ban Praises Turner While Zoellick Is Absent, UNDP Elusive
http://www.innercitypress.com/ban1doha112808.html

anyway, wild boys want to destroy the US- Brits systems

The other countries were able to study Japan's basket case closely

I think it is impossible..

 

[Astroboy]

Not "all" countries. Japan is in its own league in that respect. The key players in the world are aware of Japan's economic woes and are trying not to repeat what Japan did or failed to do. The other countries were able to study Japan's basket case closely.

Regardless of the wish of the "key players" in the world, the Passage to JAPAN is likely to approach.

Where only last quarter we were worried about inflation, we are now worried about its very rare opposite: deflation," the report said. Falling prices would cut demand and discourage employers from hiring.
Recession seen worsening, deflation a risk

Key element of Japan's nightmare was that it was a balance sheet recession.
When the B/S recession happens, everybody (individuals & corporations) rush to repay their debts to banks.

Even though bank interest rate becomes zero, nobody wants to borrow money for spending/investment. Thus once B/S recession occurs, it's not easy to get out of "Deflation".

Deflation is not always bad if you don't have financial debts.

 

[JerseyBoy]

Deflation is not always bad if you don't have financial debts.

Deflation is not good; if it is a severe deflation, it is always bad.

 

[Astroboy]

Deflation is not good; if it is a severe deflation, it is always bad.

Partly agree. If it's same the deflation as Japan experienced until some months ago,

Deflation is good for the retired people because pension is usually fixed or follow inflation later.

Deflation is good for the people, having bank deposits/cash, because value of money will be relatively more valuable as people can purchase more with the same amount of money.

 

[JerseyBoy]

Partly agree. If it's same the deflation as Japan experienced until some months ago,
Deflation is good for the retired people because pension is usually fixed or follow inflation later.
Deflation is good for the people, having bank deposits/cash, because value of money will be relatively more valuable as people can purchase more with the same amount of money.

You sound like just reading an abbreviated textbook econometric line of thinking.

In the end, the sustained period of deflation will strangle the entire economy through the stifled growth, negative impact on assets, lack of appetite for investments, and etc. There is the synergy in the economic activities. Reduced sales/revenues, lack of investment, deflationary presser on assets, and other negatives will make the government's tax revenues go down. There is a possibility of reduced services or higher taxes (if the government cannot pile up the debts any further). That would affect the retirees.

Note: Deflation tends to feed on itself and it is difficult to put a stop on the self perpetuating deflationary pressure.

 

[Astroboy]

You sounds like just reading a abbreviated textbook econometric line of thinking.
In the end, the sustained period of deflation will strangle the entire economy through the stifled growth, negative impact on assets, lack of appetite for investments, and etc. There is the synergy in the economic activities. Reduced sales/revenues, lack of investment, deflationary presser on assets, and other negatives will make the government's tax revenues go down. There is a possibility of reduced services or higher taxes (if the government cannot pile up the debts any further). That would affect the retirees.

True.

Thus, Fed Cuts Key Rate to a Record Low - a range of zero to 0.25 percent and brought the United States to the zero-rate policies that Japan used for years in its own fight against deflation.
Fed Cuts Key Rate to a Record Low (Published 2008)

Some 70 years ago, Mitsubishi ZERO swept the Pacific Ocean between USA and Japan. From some 10 years ago, BOJ ZERO rate has dominated Japan, and Now Fed's ZERO begin to dominate USA.

After all, all of us love ZERO, don't we?

 

[otoko]

Regardless of the wish of the "key players" in the world, the Passage to JAPAN is likely to approach.
Key element of Japan's nightmare was that it was a balance sheet recession.
When the B/S recession happens, everybody (individuals & corporations) rush to repay their debts to banks.
Even though bank interest rate becomes zero, nobody wants to borrow money for spending/investment. Thus once B/S recession occurs, it's not easy to get out of "Deflation".
Deflation is not always bad if you don't have financial debts.

I guess deflation is not "bad" for families in that wages do not drop but prices do drop. But that is just trying to find something positive in this very poor environment. It was a good observation though.

 

[otoko]

Partly agree. If it's same the deflation as Japan experienced until some months ago,
Deflation is good for the retired people because pension is usually fixed or follow inflation later.
Deflation is good for the people, having bank deposits/cash, because value of money will be relatively more valuable as people can purchase more with the same amount of money.

I think you are taking too positive of a view. The veiw that people living on their pension, okay I can see this point.

If you have debt, like a loan, deflation is not good.

Also the government tries to stop deflation by reducing interest rates. Japan also tried quantitative easing. This did not really work.

I don't think the alternative to quantitative easing was someting that Japan wanted to do. They should have but did not. Like letting businesses fail by applying pressure on their banks, making banks disclose and write down bad debts.

We will see what the Fed does do. They know what happened in Japan.

 

[Astroboy]

Bush unveils $17.4bn car bail-out

The US government will provide $17.4bn (£11.6bn) in loans to troubled US carmakers GM, Chrysler and Ford. President George W Bush said allowing the US car industry to fail would not be "a responsible course of action".

Carmakers will get $13.4bn in short-term financing from the $700bn Wall Street bail-out, and another $4bn will be provided later. The government set a deadline of 31 March for the firms to become viable, officials said.
BBC NEWS | Business | Bush unveils $17.4bn car bail-out

This means that US Big 3 have not prepared the restructuring plan yet as of today.... But US government kindly extends financial supports to them as year-crossing presents.
What a generous government!!

As far as I remember, US Business School Texbooks say "US Capitalism well functionate for reallocating resources to growth sectors more efficiently" ..... meaning it facilitates Zombie companies to walk out and cultivate emerging companies for future growth.

 

[Pachipro]

However, I feel it is only delaying the inevitable and is throwing good money after bad money as they will still go bankrupt. It's almost like trying to fill a milk pail that has a hole in it and then develops another hole. Sooner or later the milk will fall out faster than the pail can be filled up.

 

[JerseyBoy]

This means that US Big 3 have not prepared the restructuring plan yet as of today.... But US government kindly extends financial supports to them as year-crossing presents.
What a generous government!!
As far as I remember, US Business School Texbooks say "US Capitalism well functionate for reallocating resources to growth sectors more efficiently" ..... meaning it facilitates Zombie companies to walk out and cultivate emerging companies for future growth.

Are you aware the Japanese auto industries received the government support during its early stage? It did not become what it is today through the pure open competition.
The US auto industries were mis-managed by its management and US government's industrial policy. After US supported the war ravaged countries (like Japan) by giving me an access to the US market (without asking too much in return), it should have switched the gear once those countries stabilized about 30 to 40 years ago. What US government is doing is what other industrialized countries did decades ago.

 

[caster51]

Great middle east war will approach?
it is Bush's gift to Obama
If Great middle east war will be done, It is likely to become an inflation because of Oil.
It might lead the collapse of the dollar though the dollar is high usually for war.
The crude oil reactionary rise becomes limited, and anti-American nations like Iran, Russia, and Venezuela become poor if not becoming a large Middle East war.

anyway, Israel is busy from a New Year.

 

[Echigo]

This article is quite right. Although the American economists do not agree yet, the US situation is exactly the same as 1989-90 era of Japan. After all, USA lived on only bubble economy for the past years, and the economy is entering into lost decade or endless depression until house price recovery.
When Japan warned USA, they didn't hear us, saying US economy is strong and US-led Global Capitalism is Global Standard. But in fact, is was Global Casino Economy.
Japan needs to develop BRICS markets as an alternative of US market.

A few differences. Japan wasn't sitting on trillions in derivatives losses and wasn't a debtor nation at the time like the US is today. All this bailout money is being printed and added to the money supply and will debase the dollar even further.

 

[JerseyBoy]

A few differences. Japan wasn't sitting on trillions in derivatives losses and wasn't a debtor nation at the time like the US is today. All this bailout money is being printed and added to the money supply and will debase the dollar even further.

Japan's government is also buried with debt (mostly owed by domestic residents and institutions). It can print yens to pay those debts. But, that would cause inflation.
The potential plus is that would help its export business because of the devalued yen.

 

[caster51]

Japan's government is also buried with debt (mostly owed by domestic residents and institutions). It can print yens to pay those debts. But, that would cause inflation.
The potential plus is that would help its export business because of the devalued yen.

at least, inflation is good for japan
anyway Japanese debt is not ploblem at all now
The debt of Japan is still too little.

 

[JerseyBoy]

at least, inflation is good for japan
anyway Japanese debt is not ploblem at all now
The debt of Japan is still too little.

It is huge compared to its GDP.
List of countries by public debt - Wikipedia
Japan has snagged the bronze (3rd place) for the public debt ranking.

 

[caster51]

Japan has snagged the bronze (3rd place) for the public debt ranking.

a bank has big debt more than you
The debt of Japan is still too little with comparison of an increase of net assets.

The problem is whether assets and liabilities are proper.
anyway
There is little debt from other country in Japan.
That is, the Japanese have the property, too.

 

[JerseyBoy]

Japan's public debt: USD 7.5 Trillion (not including the debts by private sectors)
Overseas assets by Japan's public and private sector: USD 7 Trillion
I don't know the total domestic public and private asset values in Japan. But, you don't want to sell your home and assets to pay for debts, as you end up getting loans from someone. Property values in Japan are not set in stone and can go down (as it is likely they will go down).

There was a news article somewhere which reported Japan's public and private debts are bigger than its assets.

Japan's public debts are held by Japanese. Well, there is no surprise there. The yen is not the reserve currency. There is no incentive or benefit for the foreign entities to hold the Japanese debts.