Toshio Masuda

Toshio Matsuda, Commentator & Intl Economist

Straight from the Shoulder No.590

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"Straight from the shoulder " by Toshio Masuda June 01, 2010
( Free of charge to the people I met)

So it’s still America after all!

It says “sustainable development with stable politics and a stable economy will begin in the spring of next year, 2011 (March)” and it also says that stocks will soar in the near future, i.e., in July and October of this year.
In the previous issue (No. 589) it also stated that a change in the economy in 2010 will be a change “from a money economy to a real economy.”
It also stated many times that the vast amounts of money from the extremely low interest rates supplied by various countries to extinguish the credit crunch have been separated from the real economy and wildly circulated round the markets. As a result, from March 2009 until April 2010 the markets developed a money bubble.
On the one hand, the zero interest rate and quantitative monetary easing policy that the U.S. led the world in implementing without doubt succeeded in relieving and reorganizing the financial system that was close to collapse. On the other hand, bad effects of the financial crisis remained in countries with weak finances like Greece.
“The national economy will never collapse because of a financial crisis and fiscal crisis” is a theory of mine and at the same time it can be proven by looking at the history of the world economy.
This is because “a credit crunch (financial crisis) and fiscal crisis are problems that can be solved by supplying money.” However “if the real economy collapses then the national economy will collapse.”
You cannot blow your nose with money, which is just paper bills, to say nothing of the fact that you can’t eat it.
It is a truth that people (economies) that don’t eat will die.
Now in this world, only America can provide money that can be used around the world. The euro, the yuan, the yen ? they are local currencies and none of them can be used around the world.
Consequently, currencies other than the U.S. dollar may temporarily prove useful in resolving financial and fiscal problems on a local and national level. However, we are in an age today where economies are borderless and one country’s financial or fiscal problems plunge the world markets into confusion. Ultimately, no matter what far-flung place in the world it is, that region’s financial and fiscal crisis will not be resolved without help from America.
The euro is down due to financial difficulties in Europe. However, the fate of the European economy depends on how much its exports to the U.S. will increase owing to the merits of the weak euro. If its exports to America do not exceed the levels they have been at, the eurozone will fall into a deflationary spiral.

So what is happening in America now?

You can understand the state of the U.S. economy by looking at its households.
According to the latest stress test survey conducted by the Associated Press on America’s households, for the first time more than half the respondents answered “I don’t feel stressed,” marking 53 percent.
Household debt fell 1.7 percent year on year to 13.5 trillion U.S. dollars (about 1,230 trillion yen), the biggest decline since World War 2. In addition, the propensity to save was 4.2 percent, a high rate not seen since 1998. American households that want to be as thrifty as possible, reduce their debts and increase their savings are standing out.
In May, the money (financial) bubble collapsed without causing that much panic. So what will collapse next?
The word “collapse” may not be appropriate, but the answer is related to America’s thriftiness and savings. In other words, at what point will household thriftiness reach its limit and savings turn to consumption?
We investors must now focus on when the attitude of American households will change and seize that moment. It is precisely the turning point of the U.S. economy that will be the biggest chance for us investors.
“This is the best chance!” will be first announced here.
Look out for it.

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