<penang@[EMAIL PROTECTED]
> wrote in message
news:33a34946-a02b-44a3-bd6c-cb4d01906d08@[EMAIL PROTECTED]
> On Mar 4, 5:42 am, zhen <wangzhen0...@[EMAIL PROTECTED]
> wrote:
>> Hi everyone:
>>
>> I have a question concern about the economy of Japan.
>>
>> * Whether the short run phillips curve can well explain the relation
>> between unemployment and inflation rate during the last 30 years?
>>
>> * What is the cause of the long time of low inflation and even
>> deflation?
>>
>> Thanx in andvance.
>>
>> Z.
>
>
> I'll answer your second question, sort of. Instead of exploring the
> "cause", I'll talk about the COST instead.
>
> Japan's long time low inflation and even deflation, has a cost. The
> cost is today's world wide recession.
>
> Japan, in its effort to fight inflation, has artificially lowered its
> prime rate to a ultra-low 1%=0.5% level.
>
> In short run, Japan benefitted from it, for the Japanese cor****ations
> and Japanese banks get to enjoy FREE MONEY for their business
> operation/expansion.
>
> But in the long run, not only Japanese cor****ations benefiting from
> it, lots of international hedge funds are also bathing with money,
> thanks to the Japan Free Money policy.
>
> The result is a flood of money world-wide. Money creates more money,
> and the spiral effect of it is the mad rush of merger-acquisitions of
> mega cor****ations worldwide.
>
> That is still okay, if the merger and acquisition are of the top-
> quality kind. Unfortunately, when the top-quality candidates for
> merger/acquisiton are exhausted, the mad-rush turned to lower-quality
> candidates.
>
> Paying good money for good stuffs makes sense. Paying good money for
> lousy stuffs is a waste of money.
>
> This principle can be applied to the paying of super-high premium for
> taking over of low-quality cor****ations.
>
> The money managers for the hedge funds have to answer to their
> investors. If their funds don't perform, they'd be out of jobs. That's
> why the money managers need to make up something to convince their
> clients that their funds are doing well.
>
> The way to do that is simple - keep on buying cor****ations, keep on
> adding to their ****tfolios the Dow Jones top 500 / 5000 / 50000
> companies.
>
> And here the problem lies.
>
> With so much money pumped into low-quality cor****ations that do not
> perform, the money managers need to find some other way to make money
> flow again. So they look for bonds.
>
> At first, good quality bonds are what they invest in. When good bonds
> are snatched up, they turned to lower quality bonds. And when those
> are gone as well, the money manager turned to junk bonds.
>
> Now junk bonds aren't "junked" per se. They are fantastic tools that
> can be used to "tweak" the performance of any money-fund. Junk bonds
> pay HIGH dividends. The more junks you buy, the higher the dividends
> you got.
>
> With so much free money from Japan, why not buying up as much junks as
> possible. After all, the money manager get a cut from the PROFITS. The
> more profit the junk bond pays, the more cut they get.
>
> So the cycle goes.
>
> And when this happens, Wall Street wizards reacted by coming up with
> even more investment vehicles to attract the free money. They invent
> all types of derivatives. There are so many kinds of derivatives that
> the Wall Street wizards offer the world that even an expert can't
> differentiate the good from the bad.
>
> The subprime crisis that we all are so familiar with related to those
> derivatives.
>
> The free flood of money became so bad that not only the hedge funds
> are filled with cash, banks and insurance companies are also filled to
> the brim with cold cash.
>
> They have to invest the cash _somewhere_, for in a competitive arena,
> if your fund performs sub-par, you will lose your job.
>
> So banks and insurance companies all rush head-first into the already
> maddening investment whirlpool. The more money they pump in, the
> bigger the cesspool become.
>
> While this is going on, factories from China and Mexico are pumping
> out all types of gadgets to attract buyers. They also want to get a
> piece of that monetary pie.
>
> With so many new gadgets around, people start buying. But they can't
> buy too much, for the people all have limited income.
>
> This is where banks come in. They start offering people credits,
> credits that are NOT secured. And when that is not enough, they even
> offer people FAKE credits so that they can buy houses, cars, vacations
> that they can't afford.
>
> As we all know, good things always come to an end.
>
> It was fun when people got to spend all those unsecured credits. But
> it ain't fun when the bill arrives.
>
> Remember, those people still basically have to rely on their limited
> income to pay the bills. And when the bill becomes too large, people
> defraud.
>
> When the defraud rate climbs, alarms rang. And when the alarm rangs
> too much, bank panics.
>
> And when that happens, credit shrunk. And when credit shrunk,
> everybody suffers. When people start to get squeeze from all sides,
> they start selling their assets. Part of their assets are bonds, bonds
> that are NOT secured.
>
> And when all those un-secured bonds start flooding the Wall Street,
> prices plummeted.
>
> Now even the banks, who got all the financial connections you can
> imagine, can't sell the bonds they have bought.
>
> All hell broke loose.
>
> People starts to wake up. They start to tally the toll, and they start
> to realize that they were being fooled.
>
> So they cut back spending. They spend less, companies got squeezed.
> Company get the squeeze, they lay people off. People out of jobs, they
> spend even less, and so on, and so forth.
>
> Recession arrives.
>
> In the meantime, the hedge funds are still trying to stay afloat. They
> have to, or else they would die.
>
> How to stay afloat? Commodities !
>
> People might be cutting back their spending, but their cars still
> needs to drink gasoline.
>
> People might cut back on their vacation, but they still need to drink
> milk every morning.
>
> Gasoline, milk, metal, wheat, meat, corn, sugar - all these are
> potentially very valuable items that can make tons of money for the
> hedge funds.
>
> What do you think the hedge fund would do in such scenario?
>
> Of course, all the monies floats into the commodity markets. With lots
> of money chasing after limited commodities, price sky-rocketing.
>
> So we have it. A recession that have ordinary people getting squeeze
> credit-wise, plus a sky-rocketing hike of prices ranging from corn-
> flakes to gasoline.
>
> So what the governments do? At first, they deny everything.
>
> "No recession," they said.
>
> When the situation got worse, they changed their tone to "a slowdown".
> And when the situation got even worse, then they told us that "yes,
> they might be a recession".
>
> And when all the lies doesn't work anymore, the wiseguys from the
> government whipped up a 180 Billion Dollar Rebate, hoping that this
> "magic pill" can somehow cure all the ills.
>
> Will it work?
>
> What do you think??
>
>
He's been asleep for half an hour already. Great bedtime story.:-)
e.
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