Real Estate/Mortgage Loan/Stock Market

[laserboy]

Are you saying the reason the Japanese asset markets have been depressed the past 15 years is because the average Japanese citizen has a predisposition not to invest in the markets (I do not agree with this assertion, BTW)? Since the Japanese save so much more money than Americans, then where is this money going? I agree with you that it is not going into the stock market, but then that is plainly obvious. Americans were not investing in stocks in the 1930's either. I contend that the depressed markets are the result of the contraction of credit and deflationary monetary conditions even in the face of negative real interest rates.

And to say that the average US citizen invests more than the average Japanese citizen is ludicrous. The average US citizen curently has a ZERO percent savings rate. The average US worker has like 50 grand in their 401K.

And our vast reservoir of wealth and natural resources certainly do not seem to be generating much wealth for the country. The last time I checked, we were running a trade deficit of several hundred billion a year. As opposed to the Japanese who manufacture many consumer goods products and have continued to run a vast budget surplus even throughout their recession. Of course, unlike the US, they actually have a strong manufacturing base and an highly educated workforce.

What do we produce as a country that will sustain our economy in the face of a real estate downturn? Here is a good article on the topic:

http://www.nytimes.com/2005/08/12/op...12krugman.html

[Emperor]

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Since the Japanese save so much more money than Americans, then where is this money going?

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They don't save it they spend it. The cost of living there is higher than in the US, AND they spend it on social welfare programs like European countries do. These are the reasons why their economy, along with France and Germany's has ground to a halt.

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I agree with you that it is not going into the stock market, but then that is plainly obvious. Americans were not investing in stocks in the 1930's either. I contend that the depressed markets are the result of the contraction of credit and deflationary monetary conditions even in the face of negative real interest rates.

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Contraction of Credit? - NOT
Deflation - Maybe, I wonder how many people in Japan see the cost of goods going down? I doubt too many.

I really think the reasons are: 1. They grew overly fast creating a bubble 2. It burst when they out paced the world's demand for their particular markets, for the price they could provide them at. (As the Japanese got wealthy, they were unable to produce products as cheap as before) 3. They started taxing the rich, giving to the poor and encouraging people not to work.

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The average US citizen curently has a ZERO percent savings rate. The average US worker has like 50 grand in their 401K.

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Eh? [img]/images/graemlins/confused.gif[/img]

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The last time I checked, we were running a trade deficit of several hundred billion a year. As opposed to the Japanese who manufacture many consumer goods products and have continued to run a vast budget surplus even throughout their recession.

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Oh Good Point! This is definitely a reason for their slump. While Americans run a HUGE and PROFITABLE trade deficit, by buying lowpriced goods from around the world, and then investing all of that leftover cash into more profitable returns.

Checkout Free Trade to see why running a trade deficit is AWESOME! It also shows how increasing trade deficits are a leading indicator of economic upswings.


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Of course, unlike the US, they actually have a strong manufacturing base and an highly educated workforce.

What do we produce as a country that will sustain our economy in the face of a real estate downturn? Here is a good article on the topic:

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Well if you checkout Exports You will see all of the wonderful things that the US exports... While demonrats believe that JOBS are at the top of the list, it is totally untrue. We export High dollar items. Airplanes. Nuclear Reactor components. Cars. Etc.

Do we risk outstripping demand for those items and running into the same problems that Japan has? We sure do. ESPECIALLY if we keep letting our government stamp each tax dollar into a nickel before passing it on to the "disabled" and the welfare mom's whom we encourage not to work. We may only have 5% unemployment but only 2/5 of the population is employed, and only 2/5 of those are employed at the same place for more than 6mos out of the year. This is an incredible burden on our society and economy.

[laserboy]

I do not disagree with you that the Japanese government has handled their depression with extremely poor fiscal and monetary policy.

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Contraction of Credit? - NOT
Deflation - Maybe, I wonder how many people in Japan see the cost of goods going down? I doubt too many.




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Maybe "contraction" is not the word I was looking for. Perhaps "destruction" of credit. When that many loans go bad, it is essentially equivalent to having billions of dollars sucked out of the asset markets. Furthermore it leaves the banking in shambles and unable to finance further economic expansion. As far as deflation is concerned, this is well documented. Japanese real estate, for example, prices have declined for 15 straight years.

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Eh?


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Bad news on savings

Regarding the trade deficit, I trust Warren Buffett's evaluation of the trade deficit issue more than I trust yours or mine.

Why I'm not buying the U.S. dollar

Also I am not a "democrat". I am probably the most fiscally conservative person I know.

[squiffy]

With regard to savings, the average savings rate in Japan is supposed to be higher than in the U.S. A higher percentage of income. But the Japanese income may or may not be higher than in the U.S.

To the extent that Japanese save, they put their money in bank accounts, not on the stock market.

Also, there are 250 million or so Americans. Perhaps 100 million Japanese. So even if the American savings rate is lower, the total amount and percentage of savings invested in stocks is greater in America.

Some Americans do save and invest.

Also, even if an American and a Japanese earn the same amount, if the Japanese pays more for land and housing as a percentage of income than an American, because of crowding and overpopulation, the Japanese person actually has a lower standard of living.

I moved from LA to Fresno. I could not afford a home in LA. I could afford a 4 bedroom 1800 sq ft home in Fresno in a nice neighborhood.

The numbers never tell the whole story.

Chinese may save 50% of their income, but if they only earn $300 a year per capita, that doesn't make for a huge capital market or stock market, at least not based on individual investment.

You are reading a lot into my statements that I never intended.

In America, over time the percentage of savings invested in stocks has increased tremendously. Due to the rise of cheap internet trading, mutual funds, retirement accounts. Etc. These are all features of the American economy and American laws.

Many other nations simply don't have as well-developed a financial system and most individuals in many other nations don't have ready access to a liquid stock market.

http://www.kc.frb.org/publicat/econrev/pdf/2q94morg.pdf

In Japan, most people put their money in postal savings accounts at low interest. Much less common in Japan to invest in the stock market.

http://www.stat.go.jp/english/data/h...ont.htm#cha4_3

I am just stating simple facts.

A very high percentage of Americans own stocks, relative to citizens in most other nations. That's just true.

And a huge and growing percentage of American individual household wealth is being invested in the stock market. This isn't necessarily the case in other countries. The same shift might be happening, but our shift started a lot earlier and is much more significant in absolute terms.

You are drawing conclusions about things I never mentioned in my original post.

[laserboy]

OK I am just arguing with you over semantics then. I meant that the Japanese do invest, just currently not in the stock or real estate markets.

You are correct that in the US the current model of financial thought currently favors investing in the stock market (stocks always go up in the long run, etc.) and real estate market (real estate only goes up or sideways, etc.)and that in Japan most people currently favor investing in bank accounts. I contend that these trends will shift over time.