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Author Topic: Japan. The Yen. The Hyperinflation.  (Read 6417 times)
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May 19, 2013, 05:49:40 PM
 #101

The problem with that argument is the long periods of deflation in the 1800s when the currency was gold.
Still seeing deflation as a necessarily bad thing, huh?

No - replying to the post saying that deflation is a result of money printing.  I have an open mind on deflationary currencies in a world where there is a choice of currency.  In a world where there is only 1 legal tender, then yes, deflation is very bad indeed. 
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May 19, 2013, 05:56:36 PM
 #102

The problem with that argument is the long periods of deflation in the 1800s when the currency was gold.
Still seeing deflation as a necessarily bad thing, huh?

No - replying to the post saying that deflation is a result of money printing.  I have an open mind on deflationary currencies in a world where there is a choice of currency.  In a world where there is only 1 legal tender, then yes, deflation is very bad indeed. 
Well, there's your problem. Legal tender.

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May 19, 2013, 05:58:20 PM
 #103

The problem with that argument is the long periods of deflation in the 1800s when the currency was gold.
Still seeing deflation as a necessarily bad thing, huh?

No - replying to the post saying that deflation is a result of money printing.  I have an open mind on deflationary currencies in a world where there is a choice of currency.  In a world where there is only 1 legal tender, then yes, deflation is very bad indeed. 
Well, there's your problem. Legal tender.


And that's why we are here...we have an alternative in Bitcoin that might be the most disruptive innovation of our lifetimes. 
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May 19, 2013, 06:05:00 PM
 #104

The problem with that argument is the long periods of deflation in the 1800s when the currency was gold.
Still seeing deflation as a necessarily bad thing, huh?

No - replying to the post saying that deflation is a result of money printing.  I have an open mind on deflationary currencies in a world where there is a choice of currency.  In a world where there is only 1 legal tender, then yes, deflation is very bad indeed. 
Well, there's your problem. Legal tender.
And that's why we are here...we have an alternative in Bitcoin that might be the most disruptive innovation of our lifetimes. 
Indeed. A currency completely shielded from government force. A currency incapable of being influenced by Keynesian policies. It's going to be amazing.

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May 19, 2013, 06:38:28 PM
 #105

The problem with that argument is the long periods of deflation in the 1800s when the currency was gold.
Still seeing deflation as a necessarily bad thing, huh?

No - replying to the post saying that deflation is a result of money printing.  I have an open mind on deflationary currencies in a world where there is a choice of currency.  In a world where there is only 1 legal tender, then yes, deflation is very bad indeed. 
Well, there's your problem. Legal tender.
And that's why we are here...we have an alternative in Bitcoin that might be the most disruptive innovation of our lifetimes. 
Indeed. A currency completely shielded from government force. A currency incapable of being influenced by Keynesian policies. It's going to be amazing.

I see it like having a ringside seat on history Cheesy  What if the Japanese who are currently hoarding Yen take it into their heads to hoard something else?  Abenomics isn't just an interesting experiment for economists - it might give us an insight into one possible future role for crytpocurrencies. 

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May 19, 2013, 06:42:02 PM
 #106

The Japanese are able to borrow money for less than their inflation rate.

This is the root of your difference in opinion.  You believe there is infinite demand for government debt.  Remember, the bond markets are still markets.  If demand dries up, interest rates will rise.  Unless the central banks can increase demand for bonds without paying more interest, they will be in trouble.  Watch Japan...  the 5 year interest rate jumped up 38.9% this month, most of it in the past week.  This is after then yen fell roughly 30% in the past 6 months.  Demand is leaving bonds, and unless they tighten and strengthen the yen in the near term the long term result will be higher interest and thus deflationary pressure as more profits are needed to service the debt.

That is a good thing!  The Japanese state will be forced by the markets to borrow less and the Japanese consumers will be encouraged to spend more.  That's exactly what you would hope to see happen.

Obviously if capital leaves the bond market it will be invested elsewhere, but this does not necessarily mean consumer spending.

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May 19, 2013, 07:01:58 PM
 #107

Relax everything this means Manga sales with skyrocket in the coming future  Cool

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May 19, 2013, 07:08:51 PM
 #108

The problem with that argument is the long periods of deflation in the 1800s when the currency was gold.
Still seeing deflation as a necessarily bad thing, huh?

No - replying to the post saying that deflation is a result of money printing. 
In a gold - or other stable monetary system - economy, deflation is an indication of economic growth. Specifically, that the economy is growing faster than the money supply, and therefore the individual monetary unit is growing more valuable as it represents more real wealth.

Still think Japan's deflation was a problem?

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May 19, 2013, 07:13:41 PM
 #109

The problem with that argument is the long periods of deflation in the 1800s when the currency was gold.
Still seeing deflation as a necessarily bad thing, huh?

No - replying to the post saying that deflation is a result of money printing. 
In a gold - or other stable monetary system - economy, deflation is an indication of economic growth. Specifically, that the economy is growing faster than the money supply, and therefore the individual monetary unit is growing more valuable as it represents more real wealth.

Still think Japan's deflation was a problem?

The confusion comes in because "the economy growing faster" is usually due to automation driving down labor demand.  If you keep your job or have lots of cash, deflation is great.  But, deflation is accompanied by a very tough labor market.  However, if it is a reliable feature in the economy, people learn to use it to their advantage by saving.

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myrkul
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May 19, 2013, 07:22:47 PM
 #110

But, deflation is accompanied by a very tough labor market.
[citation needed] especially given my (admittedly anecdotal) experience in an inflationary economy that the job market sucks.

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May 19, 2013, 07:26:28 PM
 #111

The Japanese are able to borrow money for less than their inflation rate.

This is the root of your difference in opinion.  You believe there is infinite demand for government debt.  Remember, the bond markets are still markets.  If demand dries up, interest rates will rise.  Unless the central banks can increase demand for bonds without paying more interest, they will be in trouble.  Watch Japan...  the 5 year interest rate jumped up 38.9% this month, most of it in the past week.  This is after then yen fell roughly 30% in the past 6 months.  Demand is leaving bonds, and unless they tighten and strengthen the yen in the near term the long term result will be higher interest and thus deflationary pressure as more profits are needed to service the debt.

That is a good thing!  The Japanese state will be forced by the markets to borrow less and the Japanese consumers will be encouraged to spend more.  That's exactly what you would hope to see happen.

Obviously if capital leaves the bond market it will be invested elsewhere, but this does not necessarily mean consumer spending.

I agree.  Its an experiment.  It overthrows everything the Japanese MITI has stood for since the 1950s.  It should fail as Japan has a demographic issue that can't really be fixed. What they are doing is locking themselves out of the international bond market and encouraging Japanese to stop hoarding Yen.  In 2 or 3 years, we will know if its been a worthwhile innovation.  

One interesting idea is that a lot of the hoarded Yen might be converted into Bitcoin and gold.  Both are perfect for a population facing a government that is forcing inflation on them.
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May 19, 2013, 07:50:12 PM
 #112

But, deflation is accompanied by a very tough labor market.
[citation needed] especially given my (admittedly anecdotal) experience in an inflationary economy that the job market sucks.

http://en.wikipedia.org/wiki/The_Wealth_of_Nations

Chapter 1, beginning with "Of the Wages of Labour"

Admittedly rooted in sound money economics, which may not directly apply to modern reality.

https://www.bitcoin.org/bitcoin.pdf
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May 19, 2013, 07:58:24 PM
 #113

But, deflation is accompanied by a very tough labor market.
[citation needed] especially given my (admittedly anecdotal) experience in an inflationary economy that the job market sucks.

http://en.wikipedia.org/wiki/The_Wealth_of_Nations

Chapter 1, beginning with "Of the Wages of Labour"

Admittedly rooted in sound money economics, which may not directly apply to modern reality.
Could you point out where it states that "In an economy where the value of money is increasing, labor is in small demand"?

'Cause I don't see it.

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May 19, 2013, 08:01:10 PM
 #114

Ah, that old chestnut. 
It is not any school. It is the common sense. It is old as the world!

Deflation is the natural cure for inflation. Deflation is caused by bursting of bubbles. Bubbles are caused by money printing. So if you don't want deflation stop printing money and stop encouraging speculative behavior of large masses of people. Ordinary people are penalized if they save their money in a bank so they go elsewhere creating bubbles in housing and stock market. Without savings there is no capital. Without capital there is no capitalism. Simple as that.



eeheh, Love the pic. But are you sure we shouldn't just give the Quantitative Easing a couple of more years to see how it works out?

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BTC = Antifragile - "Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty. Robust is not the opposite of fragile.
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May 19, 2013, 08:07:01 PM
 #115

The Japanese are able to borrow money for less than their inflation rate.

This is the root of your difference in opinion.  You believe there is infinite demand for government debt.  Remember, the bond markets are still markets.  If demand dries up, interest rates will rise.  Unless the central banks can increase demand for bonds without paying more interest, they will be in trouble.  Watch Japan...  the 5 year interest rate jumped up 38.9% this month, most of it in the past week.  This is after then yen fell roughly 30% in the past 6 months.  Demand is leaving bonds, and unless they tighten and strengthen the yen in the near term the long term result will be higher interest and thus deflationary pressure as more profits are needed to service the debt.

As long as Japan is in deflationary territory the Bank Of Japan can freely purchase bonds to drive down yields.
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May 19, 2013, 08:11:31 PM
 #116

But, deflation is accompanied by a very tough labor market.
[citation needed] especially given my (admittedly anecdotal) experience in an inflationary economy that the job market sucks.

http://en.wikipedia.org/wiki/The_Wealth_of_Nations

Chapter 1, beginning with "Of the Wages of Labour"

Admittedly rooted in sound money economics, which may not directly apply to modern reality.
Could you point out where it states that "In an economy where the value of money is increasing, labor is in small demand"?

'Cause I don't see it.

I'm not sure about those summaries, I would read the source material.  Anyway, it is not always correlated because deflation doesn't cause a tough labor market.  However, both can be triggered by increasing productive capacity caused by automation replacing human labor.   And it used to be that this was the primary cause of deflation

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May 19, 2013, 08:20:53 PM
 #117

As long as Japan is in deflationary territory the Bank Of Japan can freely purchase bonds to drive down yields.
Japan is NOT in a deflation territory! All official data about inflation there is excluding price of food.
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May 19, 2013, 08:25:47 PM
 #118

But, deflation is accompanied by a very tough labor market.
[citation needed] especially given my (admittedly anecdotal) experience in an inflationary economy that the job market sucks.

http://en.wikipedia.org/wiki/The_Wealth_of_Nations

Chapter 1, beginning with "Of the Wages of Labour"

Admittedly rooted in sound money economics, which may not directly apply to modern reality.
Could you point out where it states that "In an economy where the value of money is increasing, labor is in small demand"?

'Cause I don't see it.

I'm not sure about those summaries, I would read the source material.  Anyway, it is not always correlated because deflation doesn't cause a tough labor market.
Thank you.

Automation can sometimes cause a tough labor market (in the industry undergoing automation), but that's not the same as deflation causing a tough labor market.

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May 19, 2013, 08:32:02 PM
 #119

Japan is a very strange country as it's basically a vassal state since the USA wrote their constitution after WO2 (which is still in effect) making it unconstitutional for Japan to wage war. For the last ten years or so people are starting to increasingly loudly question the constitution. It will be interesting what happens in the next ten years.

Quote
"Article 9 of the Japanese Constitution is a clause in the National Constitution of Japan that prohibits an act of war by the state. The Constitution came into effect on May 3, 1947, following World War II. In its text, the state formally renounces war as a sovereign right and bans settlement of international disputes through the use of force. The article also states that, to accomplish these aims, armed forces with war potential will not be maintained, although Japan maintains de facto armed forces, referred to as the Japan Self-Defense Forces."
http://en.wikipedia.org/wiki/Article_9_of_the_Japanese_Constitution
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May 19, 2013, 10:48:04 PM
 #120

As long as Japan is in deflationary territory the Bank Of Japan can freely purchase bonds to drive down yields.
Japan is NOT in a deflation territory! All official data about inflation there is excluding price of food.


That's false

http://www.stat.go.jp/english/data/cpi/1581.htm
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