Hi Stephen,
<<There is plenty of money in Japan, it`s just that a lot of it is going to waste on prolonging the life of walking deads... >>
Is there really plenty of money in Japan? Or rather are there people who have claims on plenty of money that has already been squandered by the banks that they trusted and that loaned it out to build too many golf courses, unneeded office buildings, and, perhaps especially, way over-priced real estate that was collateralized by still more way over-priced real estate? That money doesn't exist anymore except in Bytesville. The way that they avoided inflation all those years was not only by many of them being thrifty, but also by spending the same ¥ over and over again to buy yet another parcel of land. The reason they can't take steps to "fix" it is because they know how empty their coffers are, and it would start a huge inflationary spiral in the country if they had to actually print the ¥ to end the deflation. It is the reverse of the problem that the Brazilians had a few years ago. Inflation was the evil that the Brazilians learned to live with, deflation is the evil that the Japanese have learned to live with. When the Brazilian government finally ended the inflationary spiral that most everyone knew how to live with, they ended it too quickly, in a matter of a couple of years, and a lot of bankruptcies and pain followed as people weren't sure how to adjust. The same disruption will happen in Japan if they print the ¥ that causes the inflation that is the only way to their deflation, the ruling elderly know this, and don't want to put their generation into that pain. I suspect that they will all just live with it until a younger set of people take over, it may take yet another 10-20 years.
This is another way in which our bubble never got to the proportions of the Japanese bubble. And it is important to avoid getting into that position to begin with. Huge pain is inevitable if we don't. Not just in this country, but around the world. The seeds were there with the internet stocks, they are even still there in the real estate prices in some parts of the country. It is important to try to limit these things as much as possible. |
