"Japanization" or Central Banking Bubble Continuation

SPCFD:SPX   S&P 500 Index
Frustrated by the recovery and growth prospects? There's one very powerful force that may dampen growth for years to come: demographics.

Women and baby boomers entering the American work force helped to supercharge expansions in 1975 and 1983 by filling an increasing number of jobs and purchasing more goods and services.

Baby boomers are starting to retire, and there aren't as many women in the work force. That could take 2 big growth engines out of the economy and curb gains for stocks.


"The wreckage from the latest credit bubble (promises to pay tomorrow what is borrowed today carried to the nth degree leading to infinity) cannot be simply swept aside."


The similarities naturally lead to the question: are we facing a “Japanization” of the U.S.? Pimco’s Mohamed El-Erian believes that we can no longer assume that “Japan could not happen here”. And we should “regret the smug assertions that Japan’s ‘lost decade’ of growth was due to a combination of uniquely Japanese failings”.


3 Reasons This Bubble Will Continue to Grow
"As we’ve been over before, the most important driver behind this rally has been cheap money.

Periods of cheap money policy - low interest rates and sharp increases in money supply - have always resulted in bubbles.

The reason is because cheap money always finds a home. As long as traders can borrow at 0% and buy anything that’s going up and investors are frustrated with less than 1% annual yields in money markets, money will flow to assets classes which offer greater return.

If history is any evidence, the longer the period of cheap money lasts, the longer resulting bubble will last. And, of course, the bigger the eventual price to pay when the party is over."



I understand the sentiment, but that is an enormous hypothesis. There are too many variables to predict the US markets decreasing to '87 crash lows. I highly doubt the US will sit back and let that happen. Sure, they seem to be running out of options currently, but creativity of the human imagination cannot be underestimated.

Yes, baby boomers are retiring and there supposedly aren't as many women in the workforce today, but what happens if and when there's a sudden baby boom created through the fear of not being able to survive as a country tomorrow (or any other reason for that matter)? What if changes in immigration policies create further incentives for immigrants? Sure immigration has its own repercussions, but these ideas are available.

Though I would not be surprised if we revisited 08/09 lows from more bubble bursts.
Interesting thoughts. I'm not sure if I agree with "the fear of not being able to survive as a country tomorrow", would encourage baby making. I think it would be the exact opposite, much like what's going on in Japan, Europe and US cuurently. Other countries might experience an immigration of a youth population, as many citizens realize that there is little to no growth in developed countries. This is because the older generations, the few wealthy and the working poor are sucking out all the tax expendatures and Central Banking easy money. i.e. US Medicare, Social Security and Medicaid, TARP-TALF and QE easy money. Similar patterns took place during the European Victorian Age, while the young left for opportunites in the "new world", United States. Developed countries are suffering from Moral Hazards. The only way to fix that is a depression, much like US Great Depression (similar 1920's moral hazards).
metalhe4der QuantitativeExhaustion
Actually, you would be correct in disagreeing with the reason for baby making, I suppose that was a thoughtless reason there. Although, I agree with the notion that the young population from developed countries may immigrate to places with more opportunities ("emerging nations"), we also cannot forget the potential of youth coming in from developing nations. There are plenty of educated youth overseas looking for international or "developed country" experience.

Besides that, from a core human needs standpoint, we can see the incentive for emigration from developing nations to currently developed nations - some may want more physical security, some may want to take advantage of what the established business/legal/medical environment has to offer, some may want to simply get out of the mess they may be in for potentially more stability...at least in their perception. Their incentives and needs will differ. Aside that, despite the current youth population from developed nations wanting to seek opportunities elsewhere, I cannot see the majority moving overseas JUST for the sake of employment. There's social needs involved too - family, being most important.

However, the biggest point that I'll agree with you on is that we do need a depression. I see it as the only 'natural' solution, and I've been calling for one since the 09 rally. The artificial pumping and financial engineering is not helping real growth at all. But even if it does occur someday, I cannot yet see it potentially hitting '87 lows. As far as the next decade or two, we may as well be stuck in a huge range period (as can be seen with the double bottom and tops above).

All good points! ... if your positive about the future and it sounds like you are. However, you say we need a depression to learn from our mistakes.

Based not on feelings but the past. I see more of a long count dark age coming. Although relative to current times,
much like that after the Renaissance (also during a solar maximum solar peak) which led to the cold dark age solar minimum.

You said...
"There's social needs involved too - family, being most important."
This is the crux of what went wrong with this current social experiment in developed world's --

Corporatocracy & Globalism vs. Ageism -- Destroyed the Family Unit.

Unfortunate however, the majority (baby boomer generation+ 1922 to 1964) only thought about themselves, not others or what's best for there respected nation. The attitude is, "I got mine, go get your own"; lack of diginity or respect at all. This is the complete opposite compared to the adults of the pre WW II era. This attitude goes for Corporations as well. We see no respect for the worker, the community, environment or the country.

In the United States for the most part the baby boom generation+ (many, but not all) has corrupted the family unit. Sex, drugs and money seemed more important to them than raising children. Children picked up these habbits, rebelled against parents just as there parents rebelled against there parents (greatest generation -- adults of the WW2 and economic collapse), and now we have the lowest level of child birth since the 1920's. Europe and Japan are having the same problem.

Demographic shift of top heavy 50+ vs 35 and below, is the end all arguement for me. No births = no growth. Developed world is already maxed out on productivity with diminishing wages (because of globalism), anymore racing to the bottom and they'll riot against the the current system.

Ageism and Socialism-- Two major growing crisis in my view. Too many families that have relatives living in there 70's and 80's will not let them go. Some are even dependant on entitlements such as pentions and SS of there elder relatives. Keeping an elder parent alive or any adult for 1-3+ years when they are for the most part brain dead and body has givin up can cost millions of dollars per person. This is biggest factor for the cost of Medicare reaching 1 trillion a year by 2022, and essentially bankrupting the United States.

I remember my great grandparents of the WW2 generation died with dignity. They thought of the greater good of the human race and there respected society plus grandkids. With the rise of socialism within globalism we have destroyed the community bond and national pride.

I'm prepared for these harsh realties, unless it gets too unbearable than I will give a pass on the living world.