Me too – your psychology, FS, as reflected in this –

“In the US, everybody’s asking what the Fed can do to support home prices ….”

“Everybody” isn’t asking that, Sir – but you are, and I take it the one then becomes the other, right lad? The Fed created the bubble in house prices, didn’t it? Were you grousing about that while it was happening? I don’t remember it, if you were. Now that the bubble has revealed itself to be what it is/was, you have become part of the Greenspan, Krugman, Angelo Mozilo chorus –

“Bubble Without End – Amen.”

Actually, the high was 75.82 in October 2011, which triggered another massive intervention that was at least briefly successful earlier this year.

Political economy prescriptions should at least incorporate some sense of demographics. For example, Daniel Patrick Moynihan once likened the societal progress of U.S. baby-boomers to a snake eating an elephant and this informed his decisions.

Think about how much U.S. investment preferences, priorities, and politics have morphed over the past 50 years as our society has digested this elephant.

Japan’s demographics are currently diamond-shaped and heading rapidly towards top-heavy. That means that Japan has an overwhelming number of older people and that number is growing every day. (Here is an old, but quick view of population v. age group trends in Japan published by the Japanese themselves: http://warp.ndl.go.jp/info:ndljp/pid/283 520/www.stat.go.jp/english/data/handbook  /img/fig2_3.gif)

So, Japan is a nation of bond holders because it is a nation of elders. And just as U.S. financial advisors suggest to clients that as they age, they should lighten up on their equity allocation in favor of more fixed income allocations, the aging Japanese population has done that same, rational thing and will continue to do so far into the future. (And the Nikkei’s collapse from nearly 39,000 in 1989 to less than 10,000 by the end of the ‘90s certainly helped drive home the downside risk of ignoring that asset allocation advice.)

Add to that the deep respect that elders are accorded in Japanese society, and you can begin to see that this Japanese problem of political economy is as intractable as they come.

Political economy prescriptions should at least incorporate some sense of demographics. For example, Daniel Patrick Moynihan once likened the societal progress of U.S. baby-boomers to a snake eating an elephant and this informed his decisions.

Think about how much U.S. investment preferences, priorities, and politics have morphed over the past 50 years as our society has digested this elephant.

Japan’s demographics are currently diamond-shaped and heading rapidly towards top-heavy. That means that Japan has an overwhelming number of older people and that number is growing every day. (Here is an old, but quick view of population v. age group trends in Japan published by the Japanese themselves: http://warp.ndl.go.jp/info:ndljp/pid/283 520/www.stat.go.jp/english/data/handbook  /img/fig2_3.gif)

So, Japan is a nation of bond holders because it is a nation of elders. And just as U.S. financial advisors suggest to clients that as they age, they should lighten up on their equity allocation in favor of more fixed income allocations, the aging Japanese population has done that same, rational thing and will continue to do so far into the future. (And the Nikkei’s collapse from nearly 39,000 in 1989 to less than 10,000 by the end of the ‘90s certainly helped drive home the downside risk of ignoring that asset allocation advice.)

Add to that the deep respect that elders are accorded in Japanese society, and you can begin to see that this Japanese problem of political economy is as intractable as they come.

I’ve never understood why every U.S. newscast must report the daily motion of the Dow Jones, the S&P 500 *AND* the NASDAQ* and sometimes even the Russel 2000, but an investor has to go out of their way to find out what happened to the Barclays Capital U.S Aggregate Bond Index.

That sounds an awful lot like the German creditor.