Japanese reflation

[Shanis]

Today I´ve read that japan now supports their own car trade, they want to do the same as germany, france, england etc do (for whom who don´t know yet: if you buy a car in this countrys you get extra money for scrapping your old car). This may help the car trade in the short term but not in middle to long term because people who now buy the car would buy the car in the next 1 or 2 years anyway. And with the support the government looses money just to make the companys get some money one or two years earlier but to loose the buying power for the next years. In addition the workshops and other trades will have less work because new cars don´t have that many things to be repaired nor that often. I wonder what will happen in the next years with all the economis in the world after such a crisis^^

[fluffy0000]

German Economy Is ‘War Zone’ as Exports Dwindle
By Brian Swint and Jana Randow
March 12 09'(Bloomberg) -- Germany is facing the biggest economic slump since World War II as a reliance on exports shows itself to be the country’s Achilles heel.
Industrial production fell 7.5 percent in January from the previous month, the most on record, a report showed today. Factory orders plunged a record 38 percent that month from a year earlier, and the economy is likely to shrink the most since modern records began in 1950 this year.
“Germany’s industrial landscape now looks like a war zone -- completely obliterated,” said Dominic Bryant, a European economist at BNP Paribas SA in London. “That is the price it is paying for being too focused on exports and not stimulating enough internal demand.”
Companies from carmaker Bayerische Motoren Werke AG to chemical company BASF SE are cutting back production as the collapse in demand for German goods overseas blows back into the domestic economy. With unemployment increasing, Chancellor Angela Merkel is stepping up efforts to stimulate the economy with tax breaks and investments in schools and roads.

The euro fell against the dollar today, trading at $1.2765 as of 3:43 p.m. in Frankfurt. The 16-nation currency has declined about 20 percent since July.

Germany’s economy will shrink 3.7 percent this year, the Kiel-based IfW institute said today, lowering a prediction for a 2.7 percent contraction made in December. Germany’s worst post- war performance so far was a 0.9 percent contraction in 1975.

[rison]

Originally Posted by Shanis

Japans economic situation scares me, Japan was for me always a shining country with a low exchange rate of money but without other bigger economic problems but I´m glad that I got a different point of view while I was in here. But back on topic, I think japan needs to devalue their money, maybe make a new currency like germany did the euro, that would make a new exchange rate and it would me like some kind of clean slate and make japan more simpatico. I mean, with a new currency the products may be sold better in japan and the exchange rate would rise, they get more money for their products abroad without making them more expensive and they can easier pay for their current arrears. If they do it or not, japan has to change something in it´s economic situation or they will get into big trouble.

I dont agree with the bolded.

What Japan needs to do and are very much aware of is revaluation.The US has always pressurized them to do that, Since Japan relies on export mostly, they believe revaluation doesnt help in a sense because it puts their exports like cars and electronics as the same value with others ao people will have to choose on the basis of quality as oposed to price which is why Japanese products have an upper hand.
But this will also curb the inflation and make their economy stabilize.

Now its a choice, Japan may continue delaying with the revaluation or do so.

[Debi]

Originally Posted by kirakira

What are you talking about? Print money to manipulate exchange rate? Sir do you have any idea how macro economics work? If you print money, eventually the cost of material and labour also goes up, you have to jack up the price to make a profit because your cost to produce goes up as well. Now you have to charge more yen for the same good so you are back to square one.

What you are saying is pay your workers less to reduce your cost so you can lower your price. Well duh, just pay them less instead of inflate. Much less damaging to the economy.

If devaluing the yen is all you want, then all you need is to do what the Chinese do to devalue the yen without creating all these problems associated with printing money such as inflation. Inflation isn't a good thing not to mention u need to jack up the interest rate sky high to contain it.

RMB is a managed float, it is not a free float currency and there are restrictions on how much RMB a person can buy. Its just a big open secret that it has been kept artificially low.

I’m majoring in economy, thanks.

In the last decades Japan held one of the lowest inflation rate of all the industrialized countries.

Even if uncontrolled inflation is bad for an economy, controlled inflation is sometimes necessary to reajust unfavorable macro trend.

Devaluate the money, increase liquidity, prevent unemployment, diminish the domestic debt.

In the short term, it can even incite people to invest their saving in fear of seing a devaluation of the money.

In this particular situation, the benefits outweight the losses.

Every major economies manage their currency, the difference is that China use limited floating band.

Using such limitation wouldn’t necessarily devaluate the JPY, it would only stabilize it. It could even limit it’s potential depreciation.

Do you pretend to know better what is best for Japan than the Japanese government itself ?

Japanese economists knows what they are doing.

[rison]

Originally Posted by Shanis

Today I´ve read that japan now supports their own car trade, they want to do the same as germany, france, england etc do (for whom who don´t know yet: if you buy a car in this countrys you get extra money for scrapping your old car). This may help the car trade in the short term but not in middle to long term because people who now buy the car would buy the car in the next 1 or 2 years anyway. And with the support the government looses money just to make the companys get some money one or two years earlier but to loose the buying power for the next years. In addition the workshops and other trades will have less work because new cars don´t have that many things to be repaired nor that often. I wonder what will happen in the next years with all the economis in the world after such a crisis^^

I agree, this is almost like the same technique used by US housing mortgaging companies, it will only diminish the value of cars and a lot will lose their jobs when the bubble burst.

Can they see that cars aren't cellphones you can trade an old one to get a new one.

[rison]

Originally Posted by Debi

I’m majoring in economy, thanks.

In the last decades Japan held one of the lowest inflation rate of all the industrialized countries.

Even if uncontrolled inflation is bad for an economy, controlled inflation is sometimes necessary to reajust unfavorable macro trend.

Devaluate the money, increase liquidity, prevent unemployment, diminish the domestic debt.

In the short term, it can even incite people to invest their saving in fear of seing a devaluation of the money.

In this particular situation, the benefits outweight the losses.

Every major economies manage their currency, the difference is that China use limited floating band.

Using such limitation wouldn’t necessarily devaluate the JPY, it would only stabilize it. It could even limit it’s potential depreciation.

Do you pretend to know better what is best for Japan than the Japanese government itself ?

Japanese economists knows what they are doing.

Controlled inflation might go out of hand.That was what the Lehman brothers CEO told the everyone during the mortgage crisis.
Printing money causes Hyper inflation, didn't you read that or better google up "the Zimbabwean economy"

The Japanese economy isn't weak, all they need is revaluation as the UK does, although exports will suffer at first but in the long run, the economy will stabilize.

[Debi]

Originally Posted by rison

Controlled inflation might go out of hand.That was what the Lehman brothers CEO told the everyone during the mortgage crisis.
Printing money causes Hyper inflation, didn't you read that or better google up "the Zimbabwean economy"

The Japanese economy isn't weak, all they need is revaluation as the UK does, although exports will suffer at first but in the long run, the economy will stabilize.

What happened in Zimbabwe is totally lame.
We are talking about one of the worst economy of the world anyway.
In such a primitive economy the slightest variation into the supply of money can be dramatic.

We are talking about Japan, the 2nd strongest economy of the world.
The risk of seeing hyperinflation are as low as seeing hyperinflation in the USA.

Is there any optimist people like me or everyone is utterly worried ?

Edit : About the 2nd part of your message, Japan want a short term solution pronto before the unemployment goes that high that it get out of control.

[fluffy0000]

How to Puff Up Earnings, Goldman Sachs Style
By Barry Ritholtz - April 14th, 2009, 8:07AM
Leave it to the clever boys at Goldman Sachs to turn dross into gold: They have come up with a way to hide massive losses so clever, it requires special comment: The Orphan Month.

Yesterday, we noted that the bulk of their profits had come from AIG transfer payments — the theft from taxpayers AIG 100% payouts funded via bailout monies that saw Goldie as one of the largest recipients. Floyd Norris notes that most of the AIG effect was in December. “For the first quarter, the total A.I.G. effect on earnings was, in round numbers, zero.”

How is it possible that this occurred? Isn’t GS on a December to February calendar? Well, there is a small asterisk about that. It seems that GS is moving from a December to a quarterly calendar. Meaning their latest Q is January thru March.

But what of December, with all t he AIG monies and the comparison to the strong December 2007 and all?

In a word, Orphaned:

Goldman’s 2008 fiscal year ended Nov. 30. This year the company is switching to a calendar year. The leaves December as an orphan month, one that will be largely ignored. In Goldman’s news release, and in most of the news reports, the quarter ended March 31 is compared to the quarter last year that ending in February.

The orphan month featured — surprise — lots of writeoffs. The pre-tax loss was $1.3 billion, and the after-tax loss was $780 million.

Would the firm have had a profit if it stuck to its old calendar, and had to include December and exclude March?

Truly astounding . . . the word Chutzpah simply does not do it justice

[Debi]

What we are seeing right now is pretty much a management crisis more than a financial crisis.

They have been too greedy and it is backfiring.

[fluffy0000]

Alan Greenspan and those management types from the Chicago school of Economics have already used this excuse. Here in the US trying to sell the 'management' and excuse of greed for the systematic 'epic fail of the free market' just is not gonna fly? Pls. note Ben Bernanke the head of the Federal Reserve famous last words?
Ben Bernanke
"I expect there will be some failures” of smaller banks. “Among the largest banks, the capital ratios remain good and I don't anticipate any serious problems .

—Federal Reserve Chairman Ben Bernanke in February 2008.

IndyMac Bank failed in July 2008, with $32 billion in assets. Washington Mutual failed in September 2008, the largest bank failure in history with $307 billion in assets. Wachovia was sold to Wells Fargo in October 2008, amid concerns about its financial health, and Citigroup still scrambles to raise cash from both the government and private sources