Should Inflation Be Our #1 Concern? Then Why Isn't There (Hyper)Inflation in Japan?

[charlie.simm]

Last month, I asked whether or not we're dealing with a gold bubble and there are lots of different opinions:

1) some people agree that we're dealing with a gold bubble and believe the party will be over soon

2) some people agree that we're dealing with a gold bubble but in their opinion, the party is far from being over

3) some people however don't think this is a gold bubble and, instead, firmly believe that the price growth has inflation as its #1 justification

Alright, as far as scenario #3 is concerned, I don't understand how inflation can be the #1 justification. Ok, maybe the numbers authorities give us are overly optimistic, maybe there's more inflation than they want us to believe there is but still, the inflation numbers cannot justify the increase from about $300 to almost $2,000.

Maybe the market is pricing in a HUGE future inflation problem, that's the only inflation-related justification I can think of but as far as the current numbers are concerned, even the most pessimistic interpretation cannot justify a price increase of this magnitude.

"But Interest Rates Are Falling!"

"But Central Banks Are Printing!"

I agree, can't argue with that.

But let's analyze the Japanese situation and their lost decade(s).

Their central bank has been printing money like there's no tomorrow, interest rates are currently at 0, they've been this way for almost 20 years, yet (hyper)inflation hasn't become a problem.

Two charts:

​

Discuss.

 

[erect]

From what I remember about that kyle bass video, Japan's debt is primarily owned domestically .. basically the people buy the bonds as opposed to the fed buying 90% of ours.

The reason this happens is the extreme Japanese pride of the people and a xenophobic fear of of foreigners "owning japan". Basically, they're willing to go down with the ship so the debt is purchased regardless of the (lack of) financial sense it makes.

The problem is that the population is dwindling, the old vastly outnumber the young and the savings of the population is approaching zero fast ... meaning at some point it'll be sold on the open market, with no buyers.

Why hasn't it happened yet? You'll have to ask someone smarter than I who gives a shit about international markets. We've got enough problems over here to worry about.

Debt to GDP ratio and breakdown of what sector it's coming from

 

[BlokBlok]

Good thread, how does Japan measure inflation? In the US we dont include energy and food in inflation calculations which is bullshit.

 

[techmen]

Interesting question why there's no hyperinflation in Japan. I guess because the production of Japan vs the money printing has been in balance of some sorts.

As far as gold concerned. It has been said that gold is being manipulated and it should be much higher than it is right now. Because of several crisis in the world there's less trust in currencies and investors are looking for safe havens so PM's get a higher demand. I wouldn't know if PM's are a bubble. Maybe when the economies get more secure again.

 

[ameyer]

isn't gold used to hedge deflation? :hollering:
other than that, think about how leveraged gold probably is..

Good thread, how does Japan measure inflation? In the US we dont include energy and food in inflation calculations which is bullshit.

why do you think it's bullshit? do you understand the reasons why they are doing that?

 

[charlie.simm]

isn't gold used to hedge deflation? :hollering:

No, gold tends to be affected by deflation in a negative manner. Maybe it doesn't decline as much as other types of assets but historically speaking, gold isn't a hedge against deflation. It's a hedge against inflation.

Again, historically speaking.

Some of the things that are happening right now are unprecedented and for this reason, approaches that worked in the past might be ineffective.

 

[techmen]

why do you think it's bullshit? do you understand the reasons why they are doing that?

No but please explain. Food and energy have become much more expensive so consumers are feeling it in the pocket anyway even if official numbers may hide the real inflation %.

 

[rusvik]

Good thread, how does Japan measure inflation? In the US we dont include energy and food in inflation calculations which is bullshit.

They don't include housing costs either. The real inflation the last 10 years has been astronomical. We have probably lost abou 20% purchasing power against the non Euro/USD zone.

 

[charlie.simm]

They don't include housing costs either. The real inflation the last 10 years has been astronomical. We have probably lost abou 20% purchasing power against the non Euro/USD zone.

I wouldn't call losing 2% per year against countries which aren't in the EUR/USD zone astronomical in Japan's case.

Interest rates have been at zero for about 20 years, their central bank has been unbelievably aggressive and you'd think that under such circumstances, there would be more inflation. Waaaaaay more inflation.

Yet there isn't.

We're not talking about a temporary policy (so something along the lines of "let's keep interest rates at 0 for 2-3 years" for example), we're talking about 20 years.

 

[guerilla]

3) some people however don't think this is a gold bubble and, instead, firmly believe that the price growth has inflation as its #1 justification

Alright, as far as scenario #3 is concerned, I don't understand how inflation can be the #1 justification. Ok, maybe the numbers authorities give us are overly optimistic, maybe there's more inflation than they want us to believe there is but still, the inflation numbers cannot justify the increase from about $300 to almost $2,000.

You're assuming there must be a linear correlation. There is not. Nor does there have to be.

Before taking on topics like this, and asking random assholes like me over the internets on a forum devoted to shooting the shit, maybe invest some time into reading about money and credit theory.

As for why there isn't inflation in Japan, they aren't pursuing a hyper-inflationary path.

You're engaging in the most simplistic of analysis about the most complex of systems devised by man. And then you're asking why more sophisticated analyses arrives at different conclusions...

 

[ThisWebThing]

Should inflation be the #1 concern to the usa? I would think more of a concern would be what the people are voting for.

The fiscal cliff? Really?? Its a bill.... and its coming due. If the bill is coming due and you order another round for everyone... that bill is still coming due.

 

[charlie.simm]

As for why there isn't inflation in Japan, they aren't pursuing a hyper-inflationary path.

Define "hyper-inflationary path" :anon.sml:

Sorry, couldn't help myself <3

Seriously though, please elaborate.

 

[guerilla]

Seriously though, please elaborate.

No. My time is valuable. Do the research. I do not accept the burden of having to educate you. That's your job.

 

[productionhead]

No. My time is valuable. Do the research. I do not accept the burden of having to educate you. That's your job.

 

[ameyer]

No, gold tends to be affected by deflation in a negative manner. Maybe it doesn't decline as much as other types of assets but historically speaking, gold isn't a hedge against deflation. It's a hedge against inflation.

Again, historically speaking.

Some of the things that are happening right now are unprecedented and for this reason, approaches that worked in the past might be ineffective.

well, you must be talking about a total collapse of the world.
afaik most gold investors are not worrying about that and rather hold their position to hedge deflation. (that's why I think #3 is wrong)
edit: or even worse, they hold their position out of greed as they see a bullish trend.. so hedge funds open huge leveraged positions. (which also speaks against #3)

No but please explain.

Did I say I know? The other poster was making claims, I was just trying to see if he even knows what he was talking about.
However, a 3 second google search brought up this:
Inflation - Wikipedia, the free encyclopedia

Core price indices: because food and oil prices can change quickly due to changes in supply and demand conditions in the food and oil markets, it can be difficult to detect the long run trend in price levels when those prices are included. Therefore most statistical agencies also report a measure of 'core inflation', which removes the most volatile components (such as food and oil) from a broad price index like the CPI. Because core inflation is less affected by short run supply and demand conditions in specific markets, central banks rely on it to better measure the inflationary impact of current monetary policy.

Oh wait, that must be a government conspiracy....

 

[charlie.simm]

No. My time is valuable. Do the research. I do not accept the burden of having to educate you. That's your job.

Why make a statement if you don't want to back it up?

You didn't say something blatantly obvious like 1+1 = 2, you made a statement about something that many of the world's most brilliant minds can't agree upon.

"they aren't pursuing a hyper-inflationary path."

Some economists agree, some don't, it's definitely not a painfully obvious black/white situation.

Anyone can say things like:

"there won't be (hyper)inflation in Japan"

"we're not in a gold bubble"

"<insert asset class here> will go up/down"

... and so on.

Then, when asked to explain why, it's easy to simply say "I'm not here to educate you" and it's an attitude which doesn't add value to the discussion.

Making it seem that the truth behind a statement related to an issue that's anything but black/white should be obvious is just a display of arrogance.

 

[charlie.simm]

I ain't even mad.

 

[Moxie]

No. My time is valuable. Do the research. I do not accept the burden of having to educate you. That's your job.

That's not a responsive answer. You made a claim, and now you're claiming it should be accepted without proof.

Is that good argumentation?

Because the burden of proof is on the person claiming it...

DO YOU UNDERSTAND THIS?

So basically, you haven't addressed my argument at all.

If you claim it, why not?

Are you familiar with the burden of proof to publish an academic paper, or to present a case in court? Why would making your claims here be subject to a lower standard of rigor? Why should I just accept something you say as fact?

...You have yet to prove that Americans are 3x more unhealthy than the Japanese.

 

[amateursurgeon]

It's because the Yen is only for show. Everybody know that Japan's real currency is used schoolgirl underpants.

 

[guerilla]

Why make a statement if you don't want to back it up?

What statement did you challenge me on?

You asked me to elaborate. We've had these discussions in threads and by PMs over the last several months. You don't appear to have learned anything from the discussions, or apparently engaged in any scholarship on your own.

So do you really think that I am arrogant because I won't accept a burden to educate you, or are you perhaps arrogant for assuming that I must?

Do you understand what hyperinflation is? Do you understand why and how it happens? Are you boned up on Japanese fiscal policy?

If not, surely you should find that out before starting a discussion thread about a topic you would obviously be ignorant about.

Even if I was to explain these topics to you, you still would be taking my word for it, having done none of the work yourself, independently.

@Moxie, that would be fine I was making a claim and he was challenging it. But he didn't. He wants me to ramble on about monetary and fiscal theory he doesn't understand, ostensibly so he can make another one of these idiotic threads 3 months from now.

I don't have infinite time. Where I make a claim and I won't support it, disregard it. When I challenge people on backing up their claims, it is expressly for the purpose of showing that an unsupported claim is without merit. You're welcome to regard all of my unsupported claims (aka opinions) as without merit. That's your call.

Don't take my word for anything re: money or Japan. It won't cost me any sleep tonight.

I find this stuff very amusing tbh. I have the most posts, and probably, the most words written on this forum. And I probably have written the longest and most detailed discourses of anyone here, and I am actually be called to task as not supporting my opinions. It's very funny.

Mox, if you only displayed such diligence with other posters, but then, that would be a lot of work for you, and you're probably only as consistent as you argue me to be. Neither of us can be everywhere, or everything to everyone at once.