> email@example.com wrote:
> : But if Japan didn't have its strong work ethic, and if the country could
> : invest its $25 trillion in banks around the world at 6% per year, interest
> : income alone would be $1,500 billion per year, which is $44,118 per household
> : per year. This interest alone is also enough to buy 263 companies the size of
> : Dynamics.
> That's nice. Here's a hypothetical for ya...
> Now, suppose they take this money in, say, oh, 1998, which is yen, and goes
> at the exchange rate of about Y140/$. They get 6%/year. They do this for
> 4 years. Assuming (for grins) they invested 14000 and got $100 for this,
> they now have $126. It is now 2002, and the exchange rate is Y80/$. They
> take their $126 and try to convert it Y. They get 10099.816.
> Question: has this been a GOOD THING or a BAD THING for the investor?
> (Get it through your head; Japan's currency is the YEN, not the DOLLAR.)
Thanks for that explanation, Mike. How many Japanese do you think don't already understand
this explicitly? How many do you think would or have invested their yen in foreign
countries anyway? The answer is:
Their total foreign investment is $600 billion, which is about 2.4%
of their total savings. Even the 2.4% which was invested in
foreign countries didn't have the ROI that their yen back home
had. Ergo, their future foreign investments are likely to remain
as small as they now are.
You missed the bigger picture in your response, though, so please allow me to rephrase the
question as follows:
Japan's current savings of $25 trillion is equivalent to 81.7 billion ounces of gold,
which is up from 65 trillion yen, or 5.6 billion ounces of gold, in 1973. Japan managed to
sock away all this cash mainly because its cost of government during that period was 22
cents of each wage dollar lower than our cost of government (20 cents vs. 42 cents). Our
government squandered more money on welfare than the entire stock market value of each
Fortune 500 Corporation and each acre of farm land, combined, and has nothing to show for
it. The Japanese citizen now has most of that money sitting in private accounts.
Total assets in US banks in 1973 were $832 billion (1975 World Almanac, pg. 97), which was
the equivalent of 26 billion ounces of gold, or 181% of our 1973 Public Debt of $458
billion. Bank assets are now $3.7 trillion,which is only 12.1 billion ounces of gold (@
$306/oz au), and is 67.3% of our 1998 Public Debt of $5.5 trillion.
Consider what this looks like in billions of ounces of gold:
1973 1998 Change
Public Debt 14.3 18.0 3.7
Consumer Debt 8.0 16.0 8.0
Bank Assets 26.0 12.1 -13.9
Net 3.7 -21.9 -25.6
Public Debt 3.2 5.6 2.4
Consumer Debt 0.1 0.6 0.5
Savings 5.6 81.7 76.1
Net 2.3 75.5 73.2
In other words, considering just the changes between 1973 and 1998 in Public Debt,
Consumer Debt, and Savings, the US is short 25.6 billion ounces of gold, and Japan had a
positive increase in its net worth of 73.2 billion ounces of gold.
Another way to look at this is to note that Japan increased its net worth by 47.6 billion
ounces of gold more than the US decreased its net worth. At the current value of the
dollar of $306/oz. of gold, the Japanese increased their net worth by $14,566 billion more
than the US decreased its net worth (which was a decrease of $7,834 billion).
Why, do you think, did these two different cultures take such opposite paths in incomes,
savings, debt, etc.?
> Would you rather have $trillions of debt, or $multi-trillions of savings?
> While an individual could choose to have net debt or net savings, a
> nation cannot, save net debt to foreigners. What ever debt one party
> takes, some other bodies must have saved equal amounts.
> > Something tells me that home loans played a key role in creating much of our
> > debt. Why should Japan follow our example, particularly when our savings
> > policies have BURIED us so deep that you can't find a way out?
> Because US has attracted a lot of capital and created a large net gain
> in the number of jobs, while Japan has not?
What do you think is the long term prognosis of the economy if the role the US played in
increasing "the number of jobs" also decreased the TOTAL GDP, Per Capita GDP,
Per Household GDP, and Per Worker GDP?
For example, a US workforce of 90 million in 1973 produced a GDP which was the equivalent
of 40.6 billion ounces of gold, but a workforce of 130 million in 1998 produced a GDP
which was the equivalent of 24.5 billion ounces of gold:
1973 1998 Change
Workforce (millions) 90 130 40
GDP/billion ozs. gold 40.6 24.5 -16.1
GDP Per Worker/oz. au. 451 188.5 -262.5
GDP Per Worker @ $306/oz $138,006 $57,681 -$80,325
The worker with a thousand ounces of gold in 1973 could have bought a 5 bedroom house in
California, and that thousand ounces of gold would have been the equivalent of 2.2 years
of the average income. The worker with a thousand ounces of gold today can buy that same
house, but now that thousand ounces of gold is equivalent to 5.3 years of the average
The purchasing power of the average US worker declined 58% BECAUSE government policy was
to "create jobs" at all costs, rather than to encourage personal savings.