Save and Conquer

The Fed’s latest move brought to mind the infectious 1980’s hit, Turning Japanese.

I’m turning Japanese
I think I’m turning Japanese
I really think so

If you’ve ever seen the video, you’ll figure out that the song is about masturbation. Dave Fenton of the Vapors alternately confirmed and denied this in interviews. I am wondering what people at the Fed think of the lyrics.

Are they scrunching their eyes in a moment of pleasure, or are they scrunching their eyes so they won’t have to look at the mess we have landed in.

On Tuesday, the Fed set the Fed Funds Rate to a range of between 0 and 0.25 percent. The U.S. Fed Funds rate has never been that low before. Japan’s central bank set its interest rate to zero percent from 2001 to 2006. This was their way to fight a deflation spiral that started with the Japanese recession of 1990.

I have written before about the Japanese Lost Decade. It looks like it has been more of a lost score (20 years) than just a decade.

With rates this low, there is the danger that some banks will borrow money just to turn it around as deposits in other banks just to earn the interest. Other banks in the world started a carry trade where they borrowed from Japan only to invest elsewhere. What is to prevent that from happening here?

It turns out that the best investments for the Japanese during the Lost Decade were outside their country.

Everyone around me is a total stranger
Everyone avoids me like a cyclone ranger
That’s why I’m turning Japanese
I think I’m turning Japanese
I really think so

Related posts on Save and Conquer:

• Can we Avoid Japan’s Lost Decade?
• Asset Allocation During Japan’s Lost Decade

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