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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: PaulM who wrote (13118)	6/14/1998 4:23:00 AM
From: ahhaha	Read Replies (3) \| Respond to of 116796

There is a profound difference between internal domestic transactions and external international transactions. When the Japanese exchanged autos for dollars, they placed the funds in our T-market. That is money we owe them. It exists. Real estate purchased by Japanese was created by loans from Japanese to japanese. They owe themselves. There is no tangible value there. Only names on papers and dreams of great expectations wealth. The worth of the real estate falls. The loans aren't paid. The property reverts back to the banks. Only speculators who borrowed and gambled on higher real estate prices are hurt. No wealth is destroyed because none was created. If a building is bid up and sold, is wealth created? Bank loans have no consequence on domestic yen holders or tax payers. The government doesn't need to bail anyone out just like the American bailout of the S&L's wasn't necessary. In fact, it turned into a disaster for the government. If bank's equity shrinks because of mismanagement, let some other bank buy them cheap. What does the bidding up and down of assets have to do with wealth creation or destruction? I see. If people panic because the media tell them the sky is falling, I guess they better burn down the whole country so then there won't be any real estate to fall on them. High powered reserves, currency reserves, demand deposits, and loans, are very different forms of money. All can effect prices of assets to varying degrees, but you can't ever treat them equivalently. The issue isn't their distorted perception of their productivity, the issue is they sell better products at a cheaper price than we do. They have exchanged wasting assets for assets that have a claim on future value. Our only recourse is to deflate those assets, dollars, by deflating the domestic value of them through inflation. The Japanese shouldn't eliminate their competitive advantage, but it will be reduced when the BOJ pumps. The only distortion that the Japanese have is their fear of foreigners. They fear taking actions that might undermine the perception they have of their insular kingdom and its cultural purity. Mostly they fear losing the wealth advantage accrued from hard work and sacrifice through the adoption of western habits and standards that bring indolence and failure. The only political issue is the one about competitive position. That is not political, it's economic. When you have a rich nation that is about as capitalistic as they come, you don't need to flood the market with money to drive down interest rates. When the MOF directs the BOJ to lower interest rates, it's just a fiat move. The guy goes out and writes on a bulletin board, "the rate is now .5%". Here or in Canada, Australia, France, etc.,you need to have the printing presses running 24 x 7 for months to keep the rate from rising. There is a difference between interest rate policy and monetary policy. The Russian Central Bank raised the discount rate to 150% by fiat in order to discourage borrowings. Before they did that the discount window rate was 60% and was in equilibrium. The Russians made the move to change behavior, but no money was exchanged to accomplish that. If the BOJ open the floodgates, rates would rise, not fall. They wouldn't rise much, but they would rise to say 1.5% initially. The long bond would definitely drop. The stimulus package is a joke. It's pork barrel and pseudo tax cuts. That isn't money and its puny consequences are several years out, if any. Pumping = open market purchases of short term government securities by BOJ for their own account settling immediately. Volume = 1 trillion yen/week sustained for at least two months. The Great depression was already in gear in 1927. Wall Street was drunk and ran the market up. When the party ended, the FED in their infinite wisdom, drained liquidity for the reason of protecting the dollar. This exacerbated the crash's effects and exposed the shaky pyramid of financing that had evolved since WW I. The lesson the FED learned then was to open the money flood gates whenever the country needed to go into a recessive period to weed out the inefficiencies. The market became adjusted to this Pavlovian response, but could never figure out where the true equilibrium rate was until 1980 when they discovered that 21% would do it. Between 15% and 21% very little money changed hands, the market just moved the rate up and the FED didn't interfere. WW II created an environment of unintentional workfare, but the goods and services couldn't be used domestically. During the war economists were worried that after the war, we would just slide back into depression partially because of the debt the war caused. But like the Japanese currently, we owed the money to ourselves. Many have blamed the post WW II inflation on the war financing debt, but that wasn't what caused the inflation. The inflation was caused by misallocation of resources to fight the war which took years to reposition to provide the goods and services being demanded from a productive peacetime people. The Keynesian driven demand outstripped the lagged ability to supply. Just about every law the government passes interferes with constructive economics. To this day our government insists on taxing capital? There is almost no one left on the planet that agrees with that, yet we do it because we are holding up a toast to the glories of the degenerate worlds possible under socialist hegemony. It's hard for me to believe that you said government has no real economic impact. They've made everyone's life miserable including their own and you know it as well as I do. $60k. Wow. If the shoeshine boy ends up earning $6 million in his lifetime I guess he can afford to pay 1% taxes. He can't do that? Get government out of the way with their sanctimonious do-gooding and I'll bet you he can. This misperception stuff won't cut it. I've lived well while everyone in this country has wailed about the evil of the deficit, the national debt, the social security stuff. The reality is 0. The fact is these are all coming down. Not because we have made some noble sacrifice, but because the government can't afford the interest payments necessary to continue extending that debt. Like all debt problems, it is self-correcting. But don't conclude that debt causes interest rates to rise. If you've learned anything in the last 15 years it should be that that is false. Debt does slow what people can do with the money they earn. They have to use some of their earnings to pay interest and pay down principal. Final demand weakens, so demand for money weakens. Interest rates thus fall. Yes, you've been hornswoggled.