http://investmentwatchblog.com/japans-shocking-keynesian-slip-we-are-worse-than-greece/#.T1_-rXk2Z-w Forget Europe. This is big news for the lucky country. If Japan does a black swan dive into economic chaos, the Oz dollar will drop like a stone, along with employment and house prices.
It's only a Black Swan if no one sees it coming. Japan has been over 200% GDP in debt for quite a while now. But with all of it domestically held and Japanese citizens continuing to save, what this really means is Japan will perpetuate its 20 year deflationary cycle. The alarm bells will start ringing when Japan starts selling its debt overseas. Nothing new here.
How timely, as today a new Martin Armstrong interview with Jim Puplava came out. "Jim welcomes back Martin Armstrong of Armstrong Econonics.com. Martin believes "capital knows something is wrong" and we're past the tipping point of the debt crisis. He sees the crisis rotating from Europe to Japan and finally reaching the US, with devastating results. As to gold, he believes the best thing for gold would be a correction this year and a healthy period of consolidation, setting the stage for a launch higher as the debt crisis worsens." http://www.financialsense.com/finan...crisis-will-rotate-from-europe-to-japan-to-us NB: As of this moment, the MP3 won't download. There is a glitch. They often get this with very recently uploaded interviews. Try later.
While the govenments continue to deny there is a problem we can go forward and continue to live a happy life, stockpiling for the future and moving away from risky situations and places. As soon at is it generally accepted that the global economy is in ruins that will no longer be possible. Whole industries will pack up shop overnight ,millions more will lose their jobs. The longer the lies stay in the headlines the better we and those we warn are so no one here should be rooting for exposure in these matters.
I accept this, but can anyone give their views on how Japans fall will impact Australia, that is, reasons why Japans economy has so much sway over what happens here, and how it affects us in practical terms?
^ http://www.dfat.gov.au/publications/aus_japan/chapter1.html That is chapter 1. Here is the link the entire article. http://www.dfat.gov.au/publications/aus_japan/index.html
Several speakers at the "After America" conference in Sydney this past week were of the opinion that Australia should be looking to the Japanese experience of the last 20 years as a preview of our next 20. Probably a bigger local influence will be our banks ability to loan - some European banks are already pulling out of AsiaPac altogether, and Steve Keen presented some compelling arguments that housing prices are purely a function of the number of mortgages able to be written - if credit available to Australian banks shrinks because of "over there", expect massive housing deflation in Australia, along with the flow on effects for reduced business credit, unemployment, personal bankruptcies etc.
Im not sure house prices are solely a function of the mortgages being written . I think theres quite a few factors involved .Demand , foreign investment ,The stable economy that brings the investors , the clean environment , the relatively safe cities just to name a few. Thats without going into the tax breaks & perks involved There is always more than one thing driving the market It might be part of it but i highly doubt its all of it . That statement alone is one of the reasons keen is a a fool in my books .To blame an entire market on one thing is ridiculous
Demand for housing is going to impacted by the mortgage growth though regardless of clean environment, stable economy etc. Foreign purchasers may have had an effect perhaps. Put it another way, do you think mortgage levels can fall and have house prices go up?
Japanese housewives borrow Yen at 1%,and trade it for AUD giving 5% interest. When they stop doing this,less Aud is being bought,so it falls in value.
Of course it will have an effect. Its all related no doubt . What i said is its not the ONLY thing driving prices. Keens words according to gp was its "purely a function of the number of mortgages being written "
I may be misquoting - however I'm sure he showed it was a leading indicator to falling house prices. Obviously there's other factors at play that cause mortgage loans to slow down. Oh I don't know, European credit crises etc. An interesting graph was one that showed no correlation between household member density and housing prices - i.e. the number of people living in a house was unrelated to wider housing prices. I think falling "people per household" has been quoted a number of times as a factor in Australia's hitherto rising housing prices.
Its a leading indicator because its a fundamental driver of price. This is obvious. Call it leverage as per the stock market and people wouldn't have a problem coming to gripes with it but property people want to avoid this obvious problem and say things like there are other factors affecting demand. Any given demand level is amplified by the amount of leverage available in the system. Slow the growth of mortgage loans and you have the slow down we see now. With 40% of loans sourced overseas and punters worried about the solvency of banks and the downside is open ended with all the flow on effects for the economy. You can gird your loins as per the title or stick your fingers in your ears like some here are want to do. The government allowed the banks to get cheaper funding with those changes a while back and rates still went up out of cycle. end rant -- well for me at least.
What brings you to believe that the Japanese will continue to save? They have managed a 20 year stagflation purely because of their ability of thier own citizens to fund thier own debt. It's now become a demographic problem. With a large portion of the population reaching retirement from now on the funds that have allowed this will be drawn upon to fund Japanese retirements. Japan's ability to dodge the norm (soverign debt crisi) that would come from debt to GDP ratios much lower than this is just about over. The jig is up and Japan will follow Argentina and Greece soon. Only in this case it will be catastrophic when compared to Greece. Only a small percentage of Japanese debt is external while they hold large chunks of the mammoth US debt. When thier citizens retiring overshoots those coming into the workforce dramatically from now on, they won't be able to fund thier debt on the cheap anymore. With 200++% of GDP already what do you think the bond markets are going to price Japanese debt like? That's when the flow on to the US will be very bad as the Japanese can no longer sustain holding so much US debt and they sell it off into the market to lower thier own liabilities.
Seems like every day a new and impossible to ignore piece to a giant jigsaw is given to us. - makes me wish all the more that I could get to more conferences like the after America. On a separate note, attendees of the above conference , any chance of some feedback?
Demographics will kill off this unique ponzi in the long run, this is true. However, while Japan is the fastest ageing population in the modern world, it is still going to take a decade or two more to play out. The Japanese have enough left in reserve to extend and pretend for a while longer and they have a lot of room to move in regards to selling their debt to foreigners. Meanwhile, the straw that will break the camel's back of the world economy is going to come from somewhere else. Doomsayers will look for each and every thing that will be the source of the collapse. How many have we heard? Greek debt crisis, Italian and Spanish debt crisis, US debt saturation, the end of the petrodollar, a hard landing in China etc etc To be sure none of this stuff is helping, but it just goes to show that no one really knows where the final trigger is going to come from. We can see the general trends, but no one knows the specifics or the timing. But I'd be willing to bet an ounce of silver that Japan is not going to be the trigger of the general collapse.
The thing with housing prices is to think of it as instead of buying a house with debt, you are buying debt with a house. This means that if the supply of debt increases you will get more debt for your house as there will be more available and vice versa. Less supply of debt(credit) means your house won't be able to get as much. This is how the price of a house can change significantly with little to no difference in the underlying supply/demand of property itself. Money or debt is itself just a commodity and the value of it is dependent on the supply/demand of it, just like any other commodity, NOT on the face value. Buying something is just barter except most people use money(or debt) and so things tend to get measured more often in that than anything else. But it's still just barter fundamentally. A dollar is worth say 1/400,000 of an average house at the moment. If the supply of dollars(in debt terms) tighten or the demand for them increases they will then command a larger percentage of an average house, say for example 1/300,000 instead. Or to put it in layman's houses prices in such a situation would drop by 25%.
