A Huge Pension Plan Headed for Bankruptcy The Dow jumped another 195 points on Friday. What do you think? Was that because the economy is so healthy? Are stock market investors looking for years of healthy earnings growth ahead? Did buying the Dow at today’s valuations suddenly become a reasonable investment move?
Or could it be because Japan has just done something monumentally absurd? It is hard to know what attitude to take when talking about Japanese financial policies. Mockery? Pity? Gratitude?
It is easy to mock the Japanese. They have a government debt-to-GDP ratio of 250% – the highest in the world. And year after year – for a quarter of a century – they ‘stimulate’ their economy with QE and deficits.
What do they get for it? Mostly more debt. Stock and housing prices are still just about one-third of what they were 25 years ago. They missed the big dot-com boom of the late 1990s. Then they missed the real estate and finance boom of 2003-07.
Meanwhile, Japan’s celebrated trade surplus is disappearing. And her people are getting old, retiring and dying. Japan has become a huge pension plan headed for bankruptcy.
Japan’s trade balance – after switching off its nuclear power stations in the wake of the Fukushima disaster, Japan’s trade surplus has turned into a deficit (the current account looks better due to the country’s large foreign investments, but has begun to deteriorate as well)
This post was published at Acting-Man on November 4, 2014.
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