Memorial Archives

Bubble Bursts and Currencies - The Japanese Experience
posted Aug 16, 2004 at 10:27PM

1990 marked the top of an equity and real estate bubble of Homeric proportions. In Tokyo bachelor apartments were going for seven figures and multi-generational mortgages were in high fashion.

When the bubble burst there was real fear that the entire Japanese banking sector was going to go belly up due to all the worthless loans they were carrying. Everything was in free-fall..except for thier currency. Deflation is quite rare and is very counterintuitive - which is why the results can be so devestating if you are not aware of how debt can influence currency.

Of course at the present time one could argue that real estate bubbles abound everywhere...particularly in Asia, England and the USA. Will they pop? When? In what order?

What impact will this have on currencies? and thus the price of gold in other currencies?

The notion that gold is a no miss, low risk, blessed by the angels, investment in deflationary environments is simply not true.

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