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Gold/Mining/Energy : Gold Price Monitor
GDXJ 101.44+3.5%4:00 PM EST
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To: PaulM who wrote (27988)2/11/1999 12:24:00 AM
From: Hawkmoon  Read Replies (2) of 116756
 
Paul,

Well Japan is an interesting case. They are in depression, that there is no argument.

What inflation does is create an impetus for Japanese consumers to loosen up their savings and purchase items they require since prices will not be going down in an inflationary recovery.

They have that great savings rate because each year products they would normally buy continue to go down in price so why buy now when it will be cheaaper next year. They also fear for their jobs which is exarcerbated by the low consumer demand domestically. Savings without consumption is as much a deathknell for an economy as excessive spending and inflation.

The result has been that the Yen is far more valuable than its economy reflects. It is the result of extremely deflationary monetary policies and poor financial oversight. They really need to write off their bad debt and start over. That is basically what they are talking about here.

So the question is with Japan eventually carrying more debt than the US and their currency devaluing, what impact will that have on the US markets, bond and equities, as well as the trade deficit. I concur that many of those Japanese holding in US equities and bonds will be sold in order to provide capital to bouy their own debt load.

Believe me the Europeans will be under tremendous pressure to open up their markets to more and cheaper Japanese goods. But they have their problems as well with a economic downturn.

Going to be interesting.

Regards,

Ron
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