September 20, 2007

I bet the Japanese thought lowering rates to near zero would help avoid a stock and housing meltdown. Didn't quite work out like that

The Japan crash was child's play compared to this epic Ponzi Scheme. And for those out there calling "soft landing" (if there's any of those idiots still left), thinking Ben's panicked 1/2 point cut will help end the crisis, or thinking that we'll "bottom out" in just a few months, got some advice for ya.. Look to Japan. And pass the ramen noodles please.


Anonymous said...


What will the japs think of next?

Sandal wearing goldfish tenders!


Lateralus said...

Central Pennsylvania that was relatively untouched up to now just got hit with a local finance company going out of business, 800+ home owners suddenly find out they owe 20k more on their 100k homes and their last two months mortgage checks never made it to the bank.

Tokyo Girl said...

Well, we are still rich.
I wonder why.

Michael said...

"The Japan crash was child's play compared to this epic Ponzi Scheme."

What's the ratio of Japanese housing prices at their peak compared to US peak prices?

Jappo said...

Can someone edumicate me about the general consequences for Japan of lowering the interest rates so far and for so long?

Did it result in a currency devaluation? Is the US now in the same boat as Japan was then?

Inquiring minds want to know.

Give em a prize said...

I nominate George Bush, Alan Greenspan and a few top Hedgies to the Nobel Prize in Chemistry. Why Chemistry? Well they turned the dollar into crap. Now that is some modern day alchemy!

Anonymous said...

The crash in Japan was caused by demographics of a large baby boom leaving their peak spending years. We don't have that preoblem here. oops never mind.

Out at the peak said...

Too bad Bernanke only focused studies on the Great Depression. He needs to focus on what happened in Japan.

Anonymous said...

Just got to love Diana she's got all of this pegged. If more women put logic before nesting instincts the Suzanne realtors of this world would not make a dime!!

area 51 said...

Bear Stearns says the worst is over......

And Here's some required readin' for all HP'ers. Looks like the author, Jon Markman, is an HP'er himself.....

And if you like Fleckenstein, here is a good article pointing out that all these 14x layer upon layer leveraged CDOs are hidden in off balance sheet entities, A La ENRON......

Man this could make the Great Depression look like a pre-season warm-up......

killer bee said...

The BoJ lowered rates to try and goose consumption spending, but the Japs held on tight to their yen and refused to spend. Here in the U.S. we are already at 0% finance rates in some industries when you factor in the dealer incentives and cash back programs.

The only way out of this mess is for the central banks to inflate. Currencies will be devalued and, if everything works out, the burden of public and private debt will be reduced to a manageable level in a few years. The price of everything will double or triple -- sorry renters and pensioners.

Look at the price of gold and oil and try to keep your liquid assets in a currency that inflates the least against these commodities. If you haven't already, buy a few handguns, ammo, and junk silver coins in case things don't work out and the shi*t really hits the fan. The coins are legal tender, so they can't easily outlaw them. The guns & ammo are self explanatory.

forclosureboy said...

I think im turning japanese,
i think im turning japanese,
i really THINK SO!

Vandal said...

What the hell is that thing in the picture? It looks like some kind of splash guard for gorging noodles in a hurry.

Would be nice if we could send one to every Realtor.

Anonymous said...

is that bukaki?

zoiks said...

Hey is that a Japanese Realtwhore(TM) eating ramen?

And what's with that ridiculous looking thing on her face? My wife thinks it's something to keep her hair out of her soup. I thought it was something to keep the mess off her clothes and neck as she horkes down her meal.

Anonymous said...

bla bla bla

Yea, but this time it will be different here in the USA!

RJ said...

The Bank of Japan unleashed a torrent of Yen into the world market and helped to ignite a global monetary inflation.
Just as the BoJ pushed on a string for ten years, it looks like we're going to see the same thing here in the U.S. The FED is trying to keep interest rates well below the real rate of inflation which means financial gains have to be made through asset inflation. But how do you prevent that inflation from spilling over into the rest of the economy? The FED is pumping the broad money supply at a rate of over 14%. Since wages are not keeping up with inflation, economic activity will slow in the face of rising prices leading to recession (we're much closer to recession than government numbers let on). If the FED continues to try and avoid the inevitable correction to one of history's greatest global credit bubbles, they will only succeed in creating a hyperinflationary blowout.

BTW, here's a great article from explaining the government's method of using inflation to tax you on nominal investment gains while you take losses in real terms.

Seizing Your Assets to Cover Retirement Promises

Anonymous said...

Ai dios mio, you know things are bad in the US when even the illegals are abandoning ship.

Hey Canada, don't you know that once you let a few Mexicans in the country, half of Mexico follows behind? Good luck with higher crime rates, inflation (especially housing), increased pollution, welfare costs, longer commutes, corrupt elected officials voted into office by immigrants, higher taxes to pay for infrastructure, Mexicans sending 80% of their earned cash to Mexico instead of putting back in the Canadian economy or paying for the expensive social services they use and abuse, crowded schools that become to deteriorate the entire educational system, expensive tuition costs, etc.

You Canadians must be nuts to turn your beautiful country into another Banana Republic.

(NY Times) Illegal Immigrants Chase False Hope to Canada

Fleeing stepped-up sweeps by the American authorities, illegal immigrants to the United States, mostly Mexican, are arriving in growing numbers at the foot of the bridge in this Canadian border town seeking refugee status.

Still more immigrants, mostly Mexicans living illegally in Florida, have begun trying to make their way past America’s northern border at other locations, the majority of them flying into the airport in Toronto, Canadian officials said Thursday.

The arrivals here began suddenly three weeks ago, just a family or two at first, fueled by the notion — largely unfounded, the authorities here say — that Canada would grant them asylum.

The journey, some of the immigrants said, was first suggested by an organization in Naples, Fla., which charged a fee for assisting with the paperwork. Now the idea has spread on the Internet and through social networks.

Windsor officials, who scrambled to arrange a meeting Thursday in a community center for some of the new arrivals so they could apply for social services, said they were overwhelmed by the sudden onslaught and deeply worried about the days ahead.

Already, they have filled a shelter with 30 single men and are now paying four motels to house families, said Maj. Wilfred Harbin, administrator for the Salvation Army here. Meals were being delivered to the families by taxi cab.

“We have no idea what we are going to do,” said Major Harbin, who said he had heard that as many as 7,000 Mexicans might be seeking refugee status in the coming weeks.

Anonymous said...

The difference this time is that many U.S. companies have foreign revenues. Some, not all.

The real estate index of companies will have a chart that looks like this.

There are others that will skyrocket because of the falling dollar.


Wrong comparison

Japan was a creditor nation, creditor nations undergo deflationary busts, debtors (America) will undergo an inflationary bust. Therefore you should acquire assets with fixed interest debt.

Gold is not included in the assets you should buy - How much did Gold go up in the inflationary 80, 90S?
Don't let the Gold bugs con you with their Inflation hedge/real money nonsense - they are worst than real estate brokers

FlyingMonkeyWarrior said...

Primed for Disaster; Chart from The Daily Reckoning News Letter.

Have a look.

Anonymous said...

Every situation is different. Comparison does not help. The US is far more attractive as a foreign investment and immigration destination than Japan ever was or ever will be.
A weak dollar will cause inflation but we have seen Americans absorb 3x gas prices without batting an eyelid. For proof, look no further than the new SUVs and other gas guzzlers you see every day on the streets.
I am skeptical of massive declines in home prices especially in areas with strong job growth. For every significant decline in home prices, there are buyers out there who are just waiting for the right opprortunity to get in. This is not like catching a falling knife!
For the newly wealthy foreigners, especially Chinese and Indians), the home prices in the US even today are a bargain for the wealth they have accumulated and there are millions of them. The fundamentals regarding prices being out of tune with salaries may be true for the average Jane/Joe who are locals but not true for increasing number of legal immigrants, whose numbers are exploding by the day. Ever taken a walk around the campuses of Cisco, HP, Oracle ? How about visiting the INS offices in big cities? There are several hundred people a day that are becoming permanent residents. They are here to stay!

yom kipur said...

Today you are all forgiven.
HPers and FBers alike.

We all have an oppurtunity to start from scratch, no matter your past.

it is the day of forgivness
Yom Kipur.

Anonymous said...

It will be interesting to see how this plays out as US financial behavior is significantly different that Japan's. We have no fiscal discipline or shame. We will cut back on consumption somewhat but not nearly to the extent that the Japanese did, where it default on a debt was shameful. We just say "sucker" and keep on spending. A harbinger of this difference is the fact that FBs are defaulting on the mortgage debt but staying current on their credit cards. The Japanese had to cut rates to zero to try and get consumers to open up their wallets. Here the problem is that people cannot close their wallet and will push off the losses in terms of debt write down off onto the banking system. Hence our crisis will be in dealing with a banking system that becomes an residential RE holding company that is writing down the losses on the loans backed by depreciating housing assets + current carrying costs. On a macro-economic scale this will be a huge challenge to the economy and the viability of the financial/banking system, now excuse me while I go run up a charge a bit more as I just mailed the bank some jingle mail and need to celebrate because from what I hear I got 6 months free rent coming to me until the bank is forced to take possession of my depreciating $h!tb0x!!

sam said...

Couple points of disagreement- think Japan was bigger than US in terms of size of its GDP. Not backing it up with numbers because I'm lazy & on vacation abroad, but remember when the imperial palace was worth the entire state of CA? That is bigger than US, relatively.

That being said, the point that Fed action will have no impact is spot on. Look at long term rates. 30 year fixed mortages have actually gone up since the cut! To bail out some ARM flippers who can't be helped anyway, you've helped increase the cost that reasonable 30 year fixed people can pay, reducing values further.

Nice work there Ben, but noone (other than the short term equity traders) are buying your Fed vodoo. And those buyers set the long term rates that really make a difference to the mortgage market.

The short term cut is some laxative for the crap pe loans the i-banks took over. But nothing, not a cut to 0 will bring back the recent stupidity of the credit markets. Such stupidity depends on people, foreigners and dumb hedge funds.

the other trader said...

Tokyo Girl said...

Well, we are still rich.
I wonder why.

"I'm betting with you and your country sweety. Abe to Fukuda means more problems for the U.S. Dollar, No?"

I own FXY LEAPS Calls
CPSL- which is my largest holding.

Enough Tokyo in my portfolio?

I am an American, and almost ashamed to say so.

Anonymous said...

What the hell is that thing in the picture? It looks like some kind of splash guard for gorging noodles in a hurry.

It is meant to be a joke; look up "chindogu" on the net -- that is what the title of the book is about.