The Lost Decade? Maybe if you invested in the Japanese stock market, but not for anyone else working, consuming, or saving there.
1990’s Japan is probably the most misunderstood and misrepresented economic case study in history. The ruling class would like us to believe that the deflation experienced in Japan was a horrific experience that the US needs to avoid at all costs. The truth is that by any measure aside from their stock market, the deflationary 1990’s were a GREAT decade for Japan. Specifically, GDP per capita in current dollars increased by 50% from 1990-2000, unemployment never cracked 5%, life expectancy remained the highest in the world, and their Gini coefficient remained markedly lower than the US. Full employment, falling prices so you can buy more with your paycheck year over year, health to die for, and a broad based sharing of the progress, where’s the problem? The problem is for the investor class. The Japanese stock market’s broad index value fell by 50%, but therein lies my main point: Deflation favors those who work for their money and disfavors those whose money works for them, a big reason why modern day, mainstream econodemia is attempting to brainwash us that deflation should be fought at all costs.
I make this point today because our Federal Reserve Board just announced a renewed effort to fight deflation. Their plan is akin to Xeroxing money. It doesn’t take a PhD in economics to see that when one party loses his money through a risky bet, replacing his lost money with newly Xeroxed money helps no one but the privileged and politically powerful recipient and hurts everyone else, even if the total supply of money remains constant. The reason for this is that in the absence gifting this new money to fat-cat bankers, the rest of us would enjoy increased purchasing power of the dollars we hold.
Disclosure: no positions