A global fiasco brewing in Japan. (Will the US follow?)

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100002951/a-global-fiasco-is-brewing-in-japan/

by cwan • 17 years ago

32 45 17 years ago

blogs.telegraph.co.uk

gommm• 17 years ago

So as someone who has assets in Japan, what can I do to protect myself and maybe profit from the looming financial crisis? (reading those kind of articles makes me realize that I really need to read up on economy)

spamizbad• 17 years ago

I'd take what the author says with a grain of salt; he has a history of making stuff up from whole cloth.

Fixnum• 17 years ago

For example?

alanthonyc• 17 years ago

Can you provide some references please? I'm unfamiliar with his work.

fauigerzigerk• 17 years ago

Japan's government debt is awfully high. He hasn't made that up. The demographic situation is also real. And he has mentioned that Japan's debt is mostly domestic debt, which is one reason why Japan has not defaulted yet and why any default could be a stealthier thing than what we know from Latin America or Russia. He also said that it could go on like this for years. So I'm not sure what you find so suspicious about what he says in this article.

cwan• 17 years ago

I did a quick search - I thought what they've been talking about in Zimbabwe was fascinating: http://www.newzimbabwe.com/pages/markets14.17028.html.

The basic idea if you believe that a hyperinflationary environment is coming, you borrow money to invest in hard assets and selected stocks. Hyperinflation will cause the value of the currency to fall dramatically, driving up the value of assets relative to that currency. This is why whenever you see countries devalue their currency to reflect rampant inflation (e.g. most recently Venezuela), people run out to buy whatever they can including TVs, disposable goods because these hold value better than cash.

Of course, if you're wrong and the opposite happens (e.g. deflation where currency rises in value but assets fall), you lose money. That said, I'd agree with the general fundamentals Evans-Pritchard describes - but also as he describes, it's basically unknowable when the crash will happen.

(By way of warning, when it comes to applying theory to practice, be careful when playing between various currencies - e.g. http://www.moneyweek.com/investments/what-is-the-carry-trade... - which is basically what happened when the markets started unravelling in North America)

sailormoon2• 17 years ago

I'd do that, since I want to buy an apartment in Tokyo. But the problem is, I also believe an earthquake is coming ...

Flemlord• 17 years ago

A passive way to protect yourself is to buy commodities like gold, silver and oil. Gold in particular is considered a great hedge against inflation. If JPY begins to inflate, its exchange rate against other currencies will rise and gold prices (as measured in JPY) will increase. You will "profit" in the sense that you can sell your gold to repurchase yen after the inflation stops.

FYI, investing the GLD ETF is the best practical way to buy gold:

http://finance.yahoo.com/q?s=gld

djcapelis4• 17 years ago

There is a gold bubble right now exactly because too many people are giving exactly this advice.

Do you not recognize how often people used to say the same thing about US real estate before 2005?

If you want to hedge against inflation then might I suggest US currency? It's remarkably stable and inflates by only a 3-6 points most years: http://www.inflationdata.com/inflation/images/charts/Annual_...

cstross• 17 years ago

I notice the author has nothing to say about the over-valuation of the Yen, which for the past year or two has been crippling Japan's balance of trade by making exports way too expensive on world markets.

sailormoon2• 17 years ago

I have been wondering for some time why on earth the JCB has been allowing the yen to stay so high. It would seem a no-brainer to sell it down - they have all sorts of incentives. The car companies in particular must be in a state of permanent howling rage about it.

And yet they haven't done it. There must be an awfully good reason for that.

1010011010• 17 years ago

Perhaps governments will stop spending beyond their means and producing fake money with their central banks. Perhaps.

It seems more likely they will blame "the market" and use trouble they created as an excuse to extend their control over their economies.

mortenjorck• 17 years ago

Unfortunately, the market is no better. The governments allow their central banks to print fake money while the market allows its financial institutions to print fake assets.

Whether it's currencies or CDOs, a bubble is a bubble. Valuation is an art that got lost somewhere in the science.

Tichy• 17 years ago

But the market can't force people to buy their assets. Ultimately of course that is true for money, too (people could go back to bartering or whatever), but it seems a much farther stretch.

philwelch8• 17 years ago

You know, gold is "fake money" too. Money of any kind only works because everyone agrees to want it.

BearOfNH• 17 years ago

One difference is that gold is in limited supply, and cannot be instantly materialized by the State. Its scarcity, beauty and durability make it a natural store of value when the printing presses are running overtime.

Of course the State knows this too. In April 1933, less than one month after taking office, FDR signed an executive order confiscating all the private gold in the country. I wouldn't be surprised to see that happen again some day.

A global fiasco brewing in Japan. (Will the US follow?)

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