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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (21972)	1/22/2005 7:51:58 PM
From: mishedlo	Respond to of 116555

The Japan bust started in 1990-1991 finance.yahoo.com^N225&t=my Thus the steep currency rise you show on your charts from 1985 to 1990 is irrelevant. The YEN did rise for 5 years after the bust. futuresource.com You may note that the US$ rose for 2 years after the US stock market bust futuresource.com Why currencies rose for 2-5 years after a bust I will look into later. I find it interesting and did not realize it. My statement "much of the time" does not seem inaccurate. The YEN fell during much of Japan's deflation. It collapsed from 1995 to 1998 and from 2000-2002. Given the entire period from 1990-2005 (15 years) I see the YEN falling close to 1/2 of that time (roughly 7 years by a crude eyeball guess). However the YEN is higher now than 1990 so it did rise faster overall than it fell. Your statement of the YEN tripling is not correct because much of that occurred before the Japan deflationary bust started. Land prices in Japan have fallen every year since 1990 if I am not mistaken. That has happened in spite of interest rates falling to zero and in spite of periodic declines or surges in the strength of the YEN. Since 1990 Japan went from the world's biggest creditor to holding a debt that is now 360% of GDP. Furthermore this enormous debt buildup occurred with Japan printing like mad trying to produce inflation. Here is a crude chart and it does seem I was wrong about oil going up. More than likely I did not go far back enough. futuresource.com As you can see however, oil has skyrocketed for the past 6 years and Japan has still been in deflation for that 6 year period! Thus oil can rise and a country still be undergoing deflation. I do not have a chart of oil in terms of YEN for the past 6 years but I am confident it is pointed up not down for that period. When, not if there is a credit contraction crunch in the US, I believe you will see the same thing happen here as happened in Japan. The big difference right now, in fact perhaps the only difference is the role of China sucking up commodities as it attempts to grow. The deflationary side of that however, is the loss of US jobs and wage pressures to the downside. Those are the two forces at play, and IF China slows while the US is undergoing a credit crunch and housing bust, you better believe deflation will be mammoth no matter what the price of oil does. IMO Regardless of what happens in China, the US is going to bust in a credit/housing crunch and that result will be deflationary. Mish