The view from our office and thoughts on bubbles

As seen in the picture above, this is the view from our offices in the Marunouchi district of Tokyo. As I look out, I thought about the current economic mess that resulted from, among other things, the bursting of the real estate bubble in the U.S. My mind turned immediately to the strip of land before me, the Imperial Palace grounds. During Japan's heyday, some valued the 2.1 square miles of Imperial Palace land MORE than the entire real estate available in the state of California.

When put in its proper perspective, as seen in the red-circled land below, it is ridiculous that a strip of land so small could equal the value of land in a state that has the 7th largest economy in the world. But that's what people were saying. This underscores how easily asset bubbles can quickly get out of hand when investors form irrationally lofty expectations and greed clouds the better judgment of otherwise smart people. It makes me think that it might take some time for the global economy to be able to unwind and regroup from the mess that we're currently in.



Now that we're hitting winter time, the air is a lot more crisp and clear, which allows us to have these splendid views from our 33rd floor reception area. The jewel of our view, however, is Mt. Fuji, which can be seen off in the distance only on clear days, and usually then only in the morning.

A note about the financial crisis

Everyone has been impacted one way or another in this subprime crisis turned financial meltdown turned economic recession - from lower 401k balances to greater difficulty in getting loans to tighter budgets and perhaps even losing a job. It's hard to say when this will end or if even the worst is behind us. While it seems the government has a determination to deal with the financial crisis, there is still the issue of a sluggish economy that could last a while.

To that end, I've been devouring any and all information about what's going on, trying to deepen my perspective on our times. I thought I'd share some great resources that have helped me along the way.

This American Life - Giant Pool of Money. An audio download of a great discussion about the subprime mortgage crisis and how it got started.

This American Life - Another Frightening Show About the Economy. Another audio download of an interesting, and fascinating, look into how the financial crisis spread from subprime to other parts of the financial system.

These same guys do a daily podcast on NPR called Planet Money that is worth your while to check out.

Charlie Rose - PBS conversationalist. Check out interviews with Warren Buffett, Nouriel Roubini, Paul Volker and the various roundtable discussions.

RealClearMarkets.com - an aggregator of features and op-eds about the markets.

A cure for Japan's bad demographics

While Japan is a crowded place to live, it will only getting less and and less crowded. Japan's population is shrinking, and has been getting smaller since 2007 when births fell below deaths for the first time. If things don't change, Japan's population could halve by the end of this century...a pretty amazing event with severe economic implications.

While Japan still remains the second largest economy in the world, it is still recovering from its late 1980's economic bubble. And demographics as they are, it may continue to muddle along without a fresh injection of labor. With low birth rates, it certainly won't be home grown. Immigration is another route, but Japan is not a very immigrant friendly country. As technologically advanced as Japan is, you'd think that greater automation and perhaps even the use or robots would be the solution. But I never thought in a million years that the Japanese would turn to monkeys to help solve labor shortage. See the video below of my new favorite restaurant.


I want to go there. Who's coming with me? If anyone knows where this restaurant is, please let me know because I want to take my family there and let my son freak out over the monkey bringing him a hot towel and orange juice.

Update on the Taco Truck Law

The "taco truck law" has been overturned by an LA County Superior Court Judge. Here is an LA Times story if you want to read all about it.

It's one thing to require taco truck adherence to health and safety standards. That ultimately is in their best interest, as well as the public's. But this case isn't about public health & safety, it's about two competing business interests - taco truck proprietors on one side and established restaurants and perhaps real estate developers on the other. There has to be more socially optimal resolutions than legislating away the existence of taco trucks. The economist in me thinks, why not let the market decide for themselves?

I doubt this is over. If you want to learn more, go to Save Our Taco Trucks.org for more information, including a petition.

Brother, can you spare some...butter?

Japan is going through a weird butter shortage. I kid you not. For a country that has the second largest economy in the world, with one of the largest per capita GDPs, and is on the leading edge of most technological innovations, it's hard to imagine that it would have a hard time making something as simple as butter.

But it's true. The supermarket in our local area will get butter a few times a week and if you're not there within an hour or two after its restocked, you're evidently out of luck. This is reminiscent of Soviety-era bread lines or the 70's gasoline shortages in the U.S. In response, I've been turned into a butter mule, smuggling in butter at the request of my wife. Luckily, it's not an illicit trade...yet...and I've been spared having to ingest small balloons of butter to evade authorities.

The problem is that demand for milk is falling, which has forced milk producers to cut back their "supply" of cows and milk products, or redirect them into higher margin business like cheese. For you economics buffs out there, you're probably thinking that retailers should just import butter. And would you believe that the domestic butter market is highly protected? There's roughly a 30% tarrif that's levied on all butter imports, along with a 1,000 yen ($10) per kilogram tax placed on all butter imports. Basically, that leads to an 800% increase in the price of imported butter. That's why you NEVER see imported butter in Japan. Now we rarely get to see any butter at all.

If you're interested in a little butter-arbitrage scheme, maybe we can work something out. We can probably make a tiny fortune selling butter to the poor expats in our area! :)

Links:
Japan Today article
Asahi Shinbun