Interest Rates [Credit] are the Cause and Consequence of the Explosion of Income/Wealth Disparities and, Hence, of the Inherent Instability ofthis Economy:

The Ominous Keynes’ Liquidity Trap.

Everyone Need an Economy, Don’t They?

There Is One Solution That Works:

A Credit Free, Free Market Economy:

The New World Economic Order.

The Only Goal of 1776 – Annuit Cœptis is to Implement It.

They Can Transfer Their Assets & Forget Their Liabilities.

Anyone Can Join But Still Needs to Ask for It.

http://www.17-76.net/

The Purpose Is to Provide Both a New Deal and a New Game.

It is NOT to Fix This Economy Which is Already Beyond Repair.

The Intention Is to Create a New Economy
With the Assets of the Old One Without its Liabilities.

Why Not Insure Against the Worst Case Scenario?

Or perhaps it is just the BoJ was insane.

Reading the FT article on Tokyo ‘floaters’ this looks to be rather too close to the truth for comfort.

Japan has a low birth rate BUT ALSO discourages immigration into Japan. This is an important distinction from some European countries with stable or increasing population due to liberal immigration or immigrant-toleration policies. (Of course, counting immigrants is a hard job as many immigrants are illegal. However, in relative terms, there seems to have been less immigration into Japan than into the UK, The Netherlands, Spain, Italy, etc.)

As far as I can tell, you are partly right.

Japan’s contracting economy and population are linked phenomena. Although most advanced economies have birth rates below replacement levels, Japan’s is one of the lowest. That is at least in part due to lousy growth (the other, IMHO, is that women have better, although still not great, work opportunities, and sex roles have not changed one iota. So young women don’t see marriage as particularly attractive).

Growth is a function of productivity increases and demongraphic growth. It is possible, but admittedly unlikely, to have economic growth with a slightly falling population.

From what I can tell, the carry trade was encouraged (banks were permitted/encouraged it easy for retail investors to put their money overseas) because domestic investments provided little current income. So yes, they institutionalized the carry trade.

“All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other sides of my trades. God Bless America.”

This is a scheme in place for at least a decade to skim everything bit of wealth from this country, support an elite and leave the rest of us to compete with India, Mexico and China for jobs.

One of the reasons Lehman was left to bankruptcy was because it was cheaper for competitors to hire the executives.

But there is so much more to this story that we should be paying attentoin to.

from today’s Guardian http://www.guardian.co.uk/business/2008/oct/17/executivesalaries-banking

“…At one point last week the Morgan Stanley $10.7bn pay pot for the year to date was greater than the entire stock market value of the business. In effect, staff, on receiving their remuneration, could club together and buy the bank…”

Problem is, even without handing over free money, investor find that investing in China is still a lot more profitable; or investing in commodities or the other bubble of the day.

«Fighting deflation with interest rate cuts leads to Japan’s situation – weak money supply growth, continued deflation,»

But the fundamental cause of Japanese deflation is that its population and economy are shrinking. For the USA and the UK it is not the same — it is that they bet on financial services as their export leading sector, and sent to China and India a lot of the rest. Now bad news.

«and a carry trade sucking away the money they manage to create.»

I sometimes suspect that the carry trade was a policy too, to create large foreign assets for an ageing population. Or perhaps it is just the BoJ was insane.

>> I'm still thinking on Mandelbrot , but the problem here with many of these models, is that the quant geeks take a snap shot of events in "real time" and then dream up correlations to fit models that are based on dreams, versus the reality of dynamic events. Obviously these Playstation children with attention deficit disorder want to look at colorful screens and play with interactive relationships, but every time they play the game, they are locked in a game that has limitations, yet they claim they are working with dynamic data that provides continuous connectivity to the system. This is like having a Playstation game, then getting a daily upgrade, which is based on more old data, which is not in the old model, and so this additional model information for some reason validates the model as a predictive tool which will provide information about future events. Obviously, our Attention deficit zombies, who are busy playing with this weeks model version, think they have a model for next week, but as with any kid, they have to re-learn the old model and adjust to old information that has no relationship to the challenges of the version to be released 8 weeks from now.

Ok, put another way, this is like having a Power Point presentation or slide show, or a satellite feed that provides a record of past events, like cars on a highway over a 24 hour period. These gurus think they can account for all the future traffic flow of the event in front of the camera, and so, they extrapolate that fractional section, then tell you they understand all the traffic within the system.

I don't have time for this shit, and Yves is already going bald from pulling her hair out, over posts like this, so, maybe when I remember "that thing" about Mandelbrot, I'll send a chart, which will be worth a thousand words…

I'm sorry…

1) Consumers generally do not delay purchases of items just because the price will be cheaper in the future. They want their stuff now. And because their money goes further, they will likely be patronizing more, not less, businesses.

2) Many businesses will benefit from lower costs. Cost savings can be passed on to consumers and/or used to grow the business.

3) Businesses that thrived on high leverage and mis-allocation of resources will likely fail. Freed up resources will be better put to productive use.

4) Deflation is a contraction of the money supply, one component of which is credit. Falling prices would be a likely consequence of deflation. And as pointed out above, this is a welcome consequence.

5) Once you drive out the over-speculation brought about by bad central bank policy, housing prices will settle (as they are traditionally stable). People can buy when fundamentals are back to normal. They can then rest assured that they have a sound nest egg for the future.

6) There will be an adjustment of dislocated resources. This means there will be hardship for some. But the economy as a whole will be improving and therefore will offer these people new opportunities.

7) Deflation is neither pretty nor ugly nor a cakewalk. It’s just a necessary adjustment. It is the reallocation of resources. It is brought about by years of bad monetary policy that was unsustainable by definition.

Governments thrive on inflation because it allows them to transfer wealth away from the public. It should be no surprise then that they fear deflation. However, they fear for their own well being, not for the public.

I suggest you google some more.