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06-27-2017, 08:27 PM | #1036 | |
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I don't get it. It's not like fly-ridden people are starving in the streets. You'd think that even stagnation would produce a mild gain every year just due to inflation. I keep pondering buying in on Japan, but after 20 years, what's changing for the positive? I'm mystified.
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06-27-2017, 08:40 PM | #1037 | |
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Just reading it over on Wikipedia. I know Wikipedia isn't exactly a greatest source, but it's something to look at. https://en.wikipedia.org/wiki/Japane...t_price_bubble
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06-27-2017, 08:50 PM | #1038 | |
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It worries me about the US economy because our interest rate has been in the crapper largely since 9/11. That's gaining on 2 decades. EDIT: Looks like they raised it up in 06, but it has been in essentially 0 since 08 so a decade. That's a long time. https://fred.stlouisfed.org/series/FEDFUNDS |
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06-27-2017, 10:22 PM | #1039 | ||
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I definitely didn't take the right kinds of college courses to understand this stuff. Based on what you said, it sounds like they shifted the economic transmission into first gear and then the gearshift knob came off. So I wonder what has to happen for it to start moving again - it sounds like it has to come from something other than policy.
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06-27-2017, 10:28 PM | #1040 | |
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Ultimately it depends on your risk tolerance, objectives, and your time until retirement. If you are in your 20s or early 30s and self directing, with a taste for a bit of risk, I would forgo the I fund and do US equities. The large cap stuff will capture inflation and do well in a bull market, while the small cap will grab you some nice gains theoretically. I have a taste for throwing in some fixed income, or at least equities that pay strong dividends (check out VYM by Vanguard). When you reinvest proceeds during a market downturn you can strongly improve your dollar cost average over the long turn. VYM has the added benefit of performing well in a bull market as well because it's all large cap. If y'all want, I can dig up some nice textbook type info why this is a good idea in your portfolio. |
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06-27-2017, 10:36 PM | #1041 | |
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Theory is if there are low interest rates industry will expand because money is cheap. Unemployment will fall GDP will rise. Extended periods of growth leads to inflation. Raising interest rates will cause businesses to slow expansion and cook off the economy and wait for the market to catch up with GDP growth. There are a series of interrelated curves (labor, money supply, GDP, and some other shit) that proof it all out but that is the 30,000 ft overview of intermediate macroeconomics. So what Japan did was try to spur growth through interest rates and it didn't do anything. So they've fired their bullets. Again, I'm not an expert, but I'd postulate that what happened here was interest got cheap and business did things other than directly increase production 1. Sit on the cash (see apple) 2. Invest in automation - not sending money home, wrecking the velocity of money 3. Invest overseas - taking it out of the equation completely thus thoroughly wrecking the velocity of money. |
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06-27-2017, 10:45 PM | #1042 | |
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I've put a bit of money into some things like REITs and holding companies that I find interesting. You don't really expect the stock to appreciate, but they throw off huge dividends in the 5 to 8 percent range. I've been treating them kind of like fixed-income, even though I know they're not.
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06-27-2017, 11:06 PM | #1043 | |
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With all of the capital requirement changes that occurred after 2008, banks are required to keep more cash on hand in case of emergencies. Their Tier 1 Capital Ratios for small banks was 5.5-7%, and for large banks it was even less. Now they are required to maintain over 10%. What this means is that a huge bank with 10s of billions of dollars of assets are no longer allowed to lend those 10s of billions. It is required to be dead money. This added to more stringent requirements in lending, so banks can only lend to superbly qualified businesses/individuals makes for a disaster that was really unforseen. Money multiplier theory says that a dollar lent can be multiplied something like 27 times. So if a bank is required to keep 30 billion in dead money, this would have otherwise been an 810 billion dollar infusion into the economy, which would have spurred economic growth. (Imagine your small business getting a small chunk if that). So the banks are taking the money that is being infused by QE and putting it straight towards their reserves, instead of injecting it into the economy. This is why no one has seen any real effect of QE until recently, now that the reserves are topped off and in compliance. I know no one likes big banks, but they are an integral part of our economy, and by handcuffing them it hurts everyone. But Bernie and the like don't recognize this and just want more regulations. They need to be loosened up so the banks are allowed to lend. I know this is kind of long, but it may be the first time anyone has explained to you WHY these new bank regulations are so bad, rather than just saying that big banks are bad and greedy and they deserve to be punished. |
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06-27-2017, 11:10 PM | #1044 | |
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06-27-2017, 11:16 PM | #1045 | |
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06-27-2017, 11:16 PM | #1046 |
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Japan has other options besides QE. It's a Milton Friedman concept known as Helicopter Money. Good article about it here: http://www.economist.com/news/financ...out-cash-money
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06-28-2017, 10:04 AM | #1047 | |
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I'm not informed on banking enough to know what the reserve requirements should be, but I know the regulations are hot garbage. At least the ones that trickled down to my local bank, which I understand are markedly different than commercial banks. |
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06-28-2017, 12:07 PM | #1048 | |
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Actually, BoJ was more concerned with real estate prices continuing to increase and raised interest rates during the equities crash. It didn't work and the real estate market crashed as well. Then they dumped interest rates because they'd gone deflationary but it ended up a spiral w/ people sitting on cash. They were starting to raise rates again in the 2000's until we crapped everything out globally. I'm guessing growth from some of their asian neighbors like S. Korea hurt their economy too. All of the developed nations are struggling w/ birth rates. Most of them are squeaking out some growth with the help of immigration but Japan doesn't have a great culture for that.. Their population peaked in 2007/2008 and is shrinking so uh.. that's not gonna help going forward. I think I saw something that unless their demographics change somehow their population was going to shrink 40% in the next 50 years or so. |
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07-02-2017, 08:33 AM | #1049 |
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I've been thinking that a compound interest account needs to be started ASAP but I'm not sure what to look for.
Any tips on the best accounts to search for? Best rates? If I missed this, let me know the post # to start reading. Thanks |
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07-02-2017, 11:59 AM | #1050 | |
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Compound interest just means interest on interest gained due to the variable of time. It's why those who invest a little bit of money early in life, can have very large sums later while placing less cash in accounts, than someone who starts later in life but places greater capital in account. That can be accomplished through a variety of devices. Stocks, bonds, basic savings account, CDs. What are you looking to do?
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