Bank of Japan to be top shareholder of Japan stocks

Somewhat related, it's entirely possible that someday social security will be revamped to include equities similar to how Canada runs its pension plan.

The ideal time for this would be once the current house of cards world economy collapses. Could be 10-15 years off yet.

flocial2• 7 years ago

America by comparison [0]. Japan has a declining population, the pension scheme is considered to be running on fumes by most, and now the stock market is propped up by government itself.

https://www.businessinsider.com/who-actually-owns-the-stock-...

lotsofpulp2• 7 years ago

Same situation in US in my opinion. It’s crazy to not be all in on equity index funds, since everyone is invested in them via 401k and pension funds, of course the government is going to do whatever it takes to prop up the value.

doctorpangloss• 7 years ago

You're getting it backwards my dude.

Baby boomers turned 65 this year, the peak retirement there will ever be in the history of the world.

Individuals selling small amounts of stock, each for slightly below midpoint, actually has a much larger negative effect on prices than one large sale at slightly below midpoint does. Think about what the order book looks like over time.

People expect a sudden recession. The ride to the bottom is going to be a-historically long and slow, as retirement accounts unwind contractually slowly, and big institutional investors wait out lower capital gains taxes.

basetop2• 7 years ago

The government is in a tough spot. The largest retirement asset for most people is their homes. The second largest is their 401k. With baby boomers starting to retire in droves, the government has no choice but to keep housing prices and stock prices inflated so that retirees can cash out. If housing or stock prices decline for an extended period, it would be politically and societally destabilizing.

basetop2• 7 years ago

We are not in as bad a shape as japan, but you are right.

The stock markets around the world have been propped up by central banks since the financial crisis.

The FED stepped in with a few trillion in QE to save wall street. The ECB implemented their own QE. BoJ also in japan. And even china has stepped in to prop up it's stock market although their stock market is much younger, smaller and less systematically important.

And so the world goes round and round. Historically, printing money and artificially propping up assets doesn't end well, but if everyone is doing it, maybe it'll work out?

martinald• 7 years ago

I did read that if you stripped out demographics, Japan was one of the best performing economies on GDP growth per (working) capita and productivity.

I often think the big challenge of economics now is perhaps not managing overall growth but managing sort of "decline" overall with demographic changes. If my theory is right, in 10-15 years after the baby boom generation demography will level out again and we will be back to higher growth.

roenxi4• 7 years ago

I enjoy defending capitalism; I think the principle of funneling resources to people who create more resources is sensible.

It needs to be underscored that whatever this is, it isn't capitalism. Exactly which -ism it is I know not; but it is a terrible idea.

Central banks interfering in markets can only be to raise prices long-term. They aren't going to interfere to drop prices, the political pressure is unbearable over the medium term. I'l jump to the American Fed because I know a bit more about it - they haven't been able to sustain interest rate rises in my lifetime [0], there is a very clear downtrend.

This sort of activity in turn disables all the signals used to vent incompetent companies from the system. A direct result of these policies by the BoJ will be companies that take in resource, and churn out value that is less than the inputs. It is unsustainable, stupid and destructive. There are no excuses for it.

I lump the US Fed's QE programs into the same basket, but at least they muddy the waters enough that the links aren't obvious to a neutral observer. The Bank of Japan's activities are sick.

[0] https://tradingeconomics.com/united-states/interest-rate

dunstad2• 7 years ago

Funneling resources to people who create more resources does make sense, provided the assumption that those specific individuals are the key ingredient to the resource creation.

From what I understand, the people you defend capitalism from tend to assume that those individuals themselves are less relevant than is their place in the larger system.

Does this summary of the arguments line up with your experience?

roenxi4• 7 years ago

Genuinely productive people are pretty rare (1 in 100 type numbers). I can't claim to know exactly what a debate opponent is thinking, but usually I assume:

1) Most people are more involved with the famous and common 'bullshit jobs' instead of the much fewer super-productive jobs - like a couple of farmers who can feed orders of magnitude more people than just themselves. Maybe they haven't interacted with the parts of the economy that do genuine wealth-creation and don't understand it.

2) They don't accept that incentives matter more than inherent nature, so they believe the productive will continue producing even if the incentives to do so are reduced, so resources can be redirected to 'those with needs'.

The second is a pretty defensible position, although obviously I disagree most of the explicit and implicit assumptions.

As an aside, this has already become one of my fastest down-voted comments. Could someone stop by and explain what they don't like about it? I didn't think it was very inflammatory.

TheOperator3• 7 years ago

Depending on field productivity is insanely top-weighted. Take the Music Industry. The Beatles produce incomprehensibly more profitable content than your local garage band. Their value isn't merely a result of capitalism too. Even in a non-capitalistic system they would be highly valuable musicians.

One phenomenon that's been happening is the increasing top-heaviness of society due to automation because you simply need less people to work. The value of labour has plummeted for other reasons as well such as mass immigration and the workforce increasingly incorporating women.

chimpburger3• 7 years ago

Centrally controlled misallocation of public resources on a large scale. A particularly nasty form of Socialism.

toomuchtodo2• 7 years ago

It works for China.

agent008t• 7 years ago

A very similar argument was presented by Andy Haldane of the Bank of England, discussing the reasons for stagnating productivity in the UK.

skybrian2• 7 years ago

If the companies they buy end up making money, might this be an interesting alternative to taxes as a way to fund the government?

harshreality• 7 years ago

Corporate profits come from somewhere. It would be a switch from an income tax to a (hidden) federal consumption tax.

The initial money to pay for stock has to come from somewhere, and that somewhere would be more debt or traditional taxes.

The federal government would control the companies (assuming it acquires majority shares), even if government employees aren't staffing them. That's socialism.

Socialism/communism is bad because if given the opportunity for direct control, government can't help tinkering in business affairs to score political points, rather than because it makes the business better.

skybrian2• 7 years ago

Other than raising the money, that doesn't seem too hard to solve. The Federal Reserve could buy index funds and be a passive investor like everyone else.

I'm reminded of Matt Levine's running joke (?) about whether or not index funds are socialism.

Bank of Japan to be top shareholder of Japan stocks

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