Have you thought about a possibility of US and Europe’s markets following Japan’s way?
Welcome to a world of 0.3% risk free rate!
But isn’t US and Europe(in general) have much higher birth rates and still seeing population growth? Japan is negative.
I feel that for the other developed countries, there are so many more sectors that you can invest with more confidence for growth. Amazon and AI, intel for more efficient chips, etc.
For Japan, I’m biased, but there aren’t many industries that are seeing growth in demand, or producing innovation. Toyota - people are getting less reliant on cars. Toshiba - the industry has been handed over to China and Korea.
At least for the US, it has companies that are leading innovators in what they do. If the combination of not innovating, no bright outlook for the future, no Capex deployment, no jobs, declining population, etc. comes along, welcome to Japan Inc… But though Apple isn’t wowing anyone like before for quite a while, I doubt that ALL of the industry leaders won’t be able to launch attractive new products and services.
US and Europe are somewhat different from Japan with respect to demographic changes. Japan’s population is declining and aging at a faster pace. Japan is also strongly anti immigration and anti innovation in many ways. I’m not saying that the US or Europe (especially Europe) can’t enter a period of flat or negative growth, but they are just better than Japan.
If you are concerned about asset prices, most market capitalization is globalized. For instance, Apple has been looking to China for revenue growth, and Amazon has been looking to India. Even China goes a step further and invests in Pakistan and Africa. World growth might be slowing, but global economic and political stability are at unprecedented highs.
Yeah, it’s just not really remotely applicable to compare the US or world to japan and 2% inflation, 3% growth coming off of some 5% quarters of growth is not the same as their decade of deflation, not even close. Also, far less hentai.
I thought Hentai was contributing to our growth!
Make sure you don’t have that massive home country bias most have in their Portfolios and you should be OK I do think about this though, because it is the scenario that leveraged etfs would underperform
Even though the chances for such development are not too high, at least not right now, even a small chance of US/Europe entering into a zero/low growth phase is pretty scary. For example, if you think about how pension schemes have been built on higher growth rates (especially in Europe where pensions are for the most part government sponsored) than that what we’re seeing right now, it is pretty clear that in a low growth environment either pensions will get cut or the current generation will pay for the slack in higher taxes/pension contributions.
gdp growth is basically just population growth plus productivity growth. in the US, since population growth is only 0.7% (2017) and productivity growth in the US is somewhere between 1%-1.5% year-over-year, it is foolish to think that the US will growth at a rate faster than 2% for any extended period of time. you cannot fight these two natural forces and any temporary 2%+ periods of gdp growth will be offset later with periods of 2%- gdp growth. if us population growth continues to decline, gdp will also decline. eventually it is not inconceivable that population growth reaches 0% and productivity growth is sub 1%.
See endogenous growth theory, productivity expected to cascade and persist.
^ best case scenario long-term seems to be 1.5%-2% productivity growth. if population growth is nil, gdp is locked in at 1.5%-2%. personally, i think we’re going to run out of high productivity paradigm shifts with time and this % will come down to below 1%. this is more of a law of large numbers perspective but once everyone in the world has a computer in their home that is connected to the internet, i find it hard to see high productivity growth similar to the mid-1900s and earlier. we’re now replacing human energy with automation rather than complementing human energy so labour productivity is going to suck for as long as i’ll live, imo.
Yes, I get that there are issues, but its like clockwork every few years someone will come in here talking about Japan with no idea what they’re saying like liberals comparing everything to fascism.
I think Black Swan misunderstood the point. The question was about US/Europe following Japan’s way in the future. Citing recent growth quarterly growth figures isn’t very relevant in that context. Annual real growth rates have been decreasing steadily for a very long time so it’s definitely not stupid to ask if the trend will continue.
In addition, citing endogenous growth theory (which is a theory among many other theories), as a proof that we’re not heading towards a zero growth environment is pretty weak.
For starters I was a little harsh.
Neoclassical is basically dead and classical is crushed so endogenous is what we primarily have.
As pointed out above, it comes down to population growth which the US still has plenty of as well as immigration. Japan’s has been zero and recently negative the last few years. These situations are not comparable.
^ to be fair, the US is at 0.6% pop growth including immigration, an 80 year low and trending down and this downtrend is during an economic boom. the next recession will probably take the pop growth rate down another 0.2%-0.3%.
agree that comparing a 0.6% grower to a shrinker is not completely appropriate but the US is trending down and Japan has gone from 0.2% to -0.2% over 20 years while the US has gone from 1.2% to 0.6% over that same period. the US will stay above for quite a long time but the two numbers will converge as they have been for the past 20 years.
i wonder what would happen to japan if we gave ubi for babies! bet ya they breed like bunnies! they have weird stuff on the hub btw!
Two years since I started this thread! Are we todat a step closer to Japan’s stimulus-in-perpetuity economics?