Tuesday, January 18, 2011

Japan's Two Decades of Nothing (Musical Tribute)

Here is the stock market.
Here is the CPI data.
Here are the government bonds.

12 comments:

Stagflationary Mark said...

Speaking of crazy low interest rates:

I somehow managed to leave a single penny in my non-IRA brokerage account. (I use treasury direct and bypass my broker entirely except for my IRA.)

It just sits there trying to earn 0.05% annual interest in an FDIC insured bank account.

It is just so pathetic to look at. In theory, it will double to two pennies in 14 centuries at today's interest rates though. I'm not even joking.

1.0005^1400 = 2.01

Have no fear that I'm being ripped off though. They have great customer service. I can call anytime I like to inquire about my penny, lol.

Mr Slippery said...

You would do much better if you invested that penny in a JGB 30 year bond yielding a tasty 2.2%. Earn that extra penny in less than 32 years!

I think Japan is going to blow up when their retirees start cashing bonds in and there are not enough new buyers.

Stagflationary Mark said...

Mr Slippery!

Are you nuts! I can't afford to take that kind of risk. I could lose all the penny in that account! ;)

Charles Kiting said...

A penny embezzled is a penny earned.

watchtower said...

If you took the penny out and they handed you a real copper penny, then you could almost triple it immediately!

http://tinyurl.com/dhcay

getyourselfconnected said...

Dang, you cannot fold a penny very easily!

Stagflationary Mark said...

Charles Kiting, watchtower, & GYSC,

Fantastic commentary!

Seedy, hoardable, and hard to fold?

This must be a "crack-up" boom! :)

Undervalued Penny Haiku

Winterized penny
Safe for all environments
It love you long time

getyourselfconnected said...

Love you long time, classic.

Troy said...

Well the S&P is back to Sep 2008, believe it or not.

So much for the lost decade for that. (evil grin)

I don't know anything but I think the very strong yen has a very deflationary effect on Japan. I hold this opinion due to my experience being a guest worker there and seeing prices on imported stuff trend downward in reaction to the yen strengthening.

So the strong yen does give importers more "producer surplus" as it were, and Japanese buyers are getting more disciplined about bargain-hunting than they were in the late 1980s, when they were largely babes in the woods WRT comparison shopping and thriftyness in general.

Stagflationary Mark said...

Troy,

"I don't know anything but I think the very strong yen has a very deflationary effect on Japan."

That would make sense. Here's a chart.

That said, most of the long-term effect should have been over by about 1995.

1995-04-01 83.6895
2010-12-01 83.3376

It has been one wild ride to get here though.

1998-08-01 144.6800

And then there is this.

1971-01-01 358.0200

Wow.

Troy said...

Actually, the commercial sector used one helluva SMA to figure out when to pass on costs to the consumer.

I was there for most of the 1990s and the effective exchange rate was still ~Y150 in 2000 when I left.

(the fall from 240 to 120 in the late 80s was hidden from consumers by their own bubble time of conspicuous consumption with their increased purchasing power -- they were moving up-market with their purchases and not focused on getting "more" for their money in the 1980s, cf. their Pebble Beach buy during that time)

The move from 120 to 80 is an interesting one. Makes a lot of winners and a lot of losers, but with China's cheap labor I think the winners outnumber the losers, at least for now.

Stagflationary Mark said...

Troy,

Makes a lot of winners and a lot of losers, but with China's cheap labor I think the winners outnumber the losers, at least for now.

What goes around comes around, at least in theory. Someday.

We've managed to introduce global workers and automation faster than we could think up ways to create more jobs. I'm assuming that we won't see 4% unemployment again in my lifetime here in the USA. I hope I'm wrong.