nikkei and nasdaq(10 yr lag)
Posted by WARREN MOSLER on August 18th, 2011
Their multi year budget surplus and subsequent crash was about 10 years ahead of ours.
Glad we learned from their mistakes…
Click here for larger graph
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August 18th, 2011 at 4:20 pm
So are you predicting a steady decline in our stock market? Both you and Warren Buffet have said to buy stocks. (You mentioned in a previous comment, 08/11/2011 that you would buy stocks if you had dollars to invest) When they say this isn’t like 2008, maybe it’s going to be even worse…?
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Art Reply:
August 19th, 2011 at 7:01 am
@Colin,
Demographics appear to play a huge role in this. See links below.
The problem is that this is the inverse of the last 40 or so years, which have conditioned macro and policy thinking. As Japan shows, deficits (and ultimate “debt” to GDP ratios) may have to be far larger than anyone currently thinks to support “normal” economic performance. We’re not going to shift paradigm quickly enough to prevent significant damage from occurring, imo.
http://symmetrycapital.net/idlespeculation/20100721_interview_macunovich.pdf
http://mechonomic.blogspot.com/2011/08/deflation-is-long-term-threat-for-stock.html
Plenty more of this work out there (start with “age structure”; also, look for a Cowles Foundation paper by John Geanakoplos et al on it, c 2001-2002; give a shout if you can’t find it).
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Art Reply:
August 19th, 2011 at 7:06 am
P.S. The graph is no coincidence, given that Japan’s Baby Boomers (a residual of their demographic transition in the 19th century which preceded the west’s)are about 10 years ahead of the ones in most northern/western democracies today.
Shifts in age structure might also have driven 80% of all inflation readings, ie, relative rather than absolute price changes, but we’ve thought of them as inflation, when for the most part, we’ve been measuring something else. Which really illuminates just how draconian Trichet et al at the ECB are at the moment, and how needlessly sadistic Volcker’s Fed tenure was.
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F. Reply:
August 19th, 2011 at 10:40 am
@Art,
Japan is also terrible at immigration, can’t restock the population.
August 18th, 2011 at 5:51 pm
Glad we learned from their mistakes…
do I sense sarcasm perhaps??!? LOL
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August 18th, 2011 at 9:36 pm
Past results may indicate future performance. The views expressed may contain certain forward-looking statements. Although they are forecasts, actual results may not be meaningfully different. This material represents an assessment of the market and conditions at a particular time and is pretty much a guarantee of future results. :)
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August 19th, 2011 at 10:01 am
Congrats, Warren, Mr. Krugman just quoted you!
Although he didn’t mention your name – why am I not surprised with that.
“Instead of turning into Greece, we’ve turned into Japan, except much worse.”
http://krugman.blogs.nytimes.com/2011/08/19/awesome-wrongness-2/
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Unforgiven Reply:
August 19th, 2011 at 11:44 am
@rvm,
I just posted there with a link back to this article.
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rvm Reply:
August 19th, 2011 at 12:00 pm
Nice!
I tried to see when Warren used the line for the first time. I linked to one of his blogs from November 2010, although he certainly used the line earliear than that.
Anyway we did the right thing.
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Mario Reply:
August 19th, 2011 at 12:53 pm
@rvm,
what a little xxxx!!! I can’t believe Krugman!! He now is obligated to write an article promoting MMT.
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August 19th, 2011 at 11:51 am
And it also looks like Barry Ritholtz copied you as well (without attribution, of course), with his chart of the SPX and the MSCI Japan Index. Here.
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ESM Reply:
August 19th, 2011 at 12:03 pm
@mike norman,
Barry’s chart looks a lot more provocative than Warren’s. Warren’s chart looks like two completely unrelated time series which have been time offset and scaled to make their global peaks match. Barry must have done a little more data massaging. Still, I’m not very impressed by people going out of their way to make misleading graphs…
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August 19th, 2011 at 2:49 pm
new phrase MMT-er’s can use. I wrote this in a blog post today and found it amusing, particularly since it’s so patriotic. Although it could possibly be misunderstood to mean we are even more hawkish than hawks! LOL
“We are above and beyond deficit doves and hawks. We are deficit eagles!”
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