Category: Finance

Summary of Princes of Yen Movie

The Princes of Yen a documentary movie created from the book of the same name. The author Richard Weiner, a renowned and knowledgable economist unlocks the key decisions, ingredients and consequences of Japan’s post-war economy.

Here is a summary of some of the profound points:

Princes of Yen

After the war was over bank loan books deteriorated. Most of the assets the bank held were war bonds and loans to destroyed industries and were hence worthless. The banking sector was virtually bankrupt.

The Central bank of Japan would buy the books, paying good (state) reserves money for assets that were worthless.

Americans facilitated land reform – ownership of land going from owners to workers. The capitalist elite were purged as war criminals.

The central bank gave window guidance to individual commercial banks to the amount and to which sectors loans should be given.

So the central bank could decide which projects should be advanced and which should be shunned

The central bank did this initially to raise the quality of life of the Japanese.

There were some undesirable consequences: companies would not fight for profitability, they would fight for market share. Cartels were introduced to stop excess competition. New entrants and new technology was suppressed.

Japanese companies became dominant in many markets in the world.So window guidance or central bank control became the best argument against free markets.

A war economy where production of weapons was shifted to consumer goods.

They needed a crisis significantly large to remove the vested interest of the ministry of finance in the war economy to move to full american style capitalism.
The crisis convinced the need for change, creating a crisis is the only way for no-one to stop you.

Window guidance increased loan quotas, fuelling a credit boom. Young people in their 20’s and 30’s could buy second homes on modest salaries. It also caused a boom in stock market as well as property.

Economists were tasked to justify the high land prices and some came up with  ‘scarcity’ as the reason.

The labour market boomed sparking fears of a labour shortage, so companies invited final year university students to holiday resorts.

Government also loved it (the increased loan quotas) because tax revenues went up.

Normal manufacturers expanded their finance and treasury divisions to speculate on the market. Some companies like Nissan made more money on the stock market than selling cars.

Some economists said rising productivity explained the performance of Japan’s economy.

In reality Window guidance was creating a giant bubble not Japanese management techniques.

Banks had to expand and extend loans to non-productive borrowers. If there is no growth in demand from low risk borrowers, risk is needed to increase to fulfil quota.

The banking system fuelled the creation of new money and hence the bubble.

Banks would value land very highly so they could fulfil loan quota.

When a country creates too much money, it spills over as international investment. Assets like art and valuables were purchased by Japanese. Buying a staggering 75% of US treasury bonds.

It is difficult to just print money and go on a shopping spree. It only works if markets do not devalue your currency.

America did the same thing where they created money and exchanged it for other strong currency because of the dollar gold standard. Japan did the same thing and it worked because of a significant trade surplus.

Ratio of Non-GDP loans (Money generating) to total loans increases in countries that can be struck by banking crisis.

America golden 1920’s used stocks as collateral for loans. Taking stock price as given, created new money. More money in stock market caused stock prices to rise. Accepting certain percentage of stock as collateral, all banks drove up value.

Growth stopped and window guidance was abolished. Banks realised the majority of 99 trillion yen in loans were going to turn sour they became fearful and stopped loans to speculators and even good (low risk) loans.

This caused 5 million Japanese to lose their jobs. Suicide became leading cause of death for men between the ages of 20 and 44. Between 1990 and 2003, 212 companies went bankrupt. The stock market dropped 80%, land prices fell by 84%. Economists felt relieved as their uncomfortable outlook came to fruition.

The ministry of finance started thinking that interest rates were the main policy tool so they put pressure on the bank of Japan to lower interest rates. Yet to date there is no empirical evidence that lower interest rates lead to increasing GDP growth.

The ministry of finance asked the bank of Japan to sell lots of yen and buy USD. So the value of the Yen would fall, making it cheaper for other countries to import Japanese products causing Japanese exports to pick up.

The Yen remained strong as the BOJ was sterilising the Yen – manipulating the value of domestic currency.
The central bank can inject money into the economy by buying assets and withdraw money by selling assets; increasing or decreasing the amount of money in the economy.

Observers suggested domestic demand had to be boosted by government spending. Then loan demand would rise. Government debt was boosted to historic levels. Fundraising was taken from the bond market. So it didn’t change the amount of money out there (Money supply). Government debt subsequently increased massively to 220% of GDP.

This caused the circular argument of “no loan growth, forcing no economic growth because of of no loan growth”. The central bank was losing sight of it’s job, which is to print money.

The central bank can buy out the commercial banks’ bad debt with newly created money. Paying face value for assets.

Which was enhanced by the central bank cornering a market and creating a mini bubble in a market that bank invest heavily to create a large profit for them. For this the tax payer should fit the bill…

“A central bank can increase the amount of money in an economy without limit by simply buying assets from the private sector and paying with newly created credit”

The scenario was:

  • The economy needs money creation
  • Banks need to rid themselves of bad debt
  • Property needs transactions

To fix this scenario the Central bank could print money, buy land from banks and turn the land into parts?

Quantitative easing is another way to inject money into economy.

They could have done this but then nothing would have changed in the economy and economic thinking of the Japanese public. They wanted a crisis, a structural change.
The Bank of Japan was refusing to create more money, they would reduce the money and worsen the recession.
The reason for this was Japan’s economic structure. Monetary easing could produce harm in a delay of structural adjustment.

Turning the war economy into forcing money into sectors selling commercial goods was unknown to incoming/rising workers, they thought it was free market.

The free market gives stock market the control instead of banks, to make people withdraw money from secure banks and put into stock market. Reformers withdrew guarantees and tax benefits on stock investments. Unemployment rose, income and wealth disparities rose.
Putting tax money into banks, nationalising and bankrupting large firms. Foreclosing on borrowers. Weakening the balance sheets of banks.

Vulture funds (largest operator Goldman Sachs)

Great Financial Movies, Documentaries and Series Reviewed

Spolier Alert: Mild spoilers ahead

Leading up to the release of the Big Short, a movie based on the book. Many of these movies are based on books in fact and Hollywood has a fascination with these sorts of Movies. It is a sad reality that in the world of exchange rates massive leverage and bing banking decisions of Bankers and Brokers affect everyone around the world. Nonetheless the movies can be entertaining so I’ve watched and reviewed some from the perspective of knowing a little bit of what is going on.

Financial Movies

Margin Call (5/10) [Rotten Tomato: Audience Score 74%]

A very Hollywood style film with little to no reality. The film takes place over a single day. The day leading to the global financial meltdown. It feels trivial to show just this time when the repercussions, you would think, would be more entertaining to the viewer.

Also financially speaking not too much to go on. The risk analysts at the firm had gone through the numbers and apparently they had over leveraged a particular derivative that was really worthless. Which meant that the company if it did not sell right now would lose more than it’s entire market capitalisation. No charts or figures were ever given, we only see blurry computer screens in the background.

Just an annoying film that ends abruptly about some corporate clown owners of a huge firm that have people that are are selfish and think more about their own career progression than the company / global financial position.

The movie is about the utter ass clowns that started the fire sale of the 2008 financial crisis, and they are portrayed in a neutral light. Also it is show that they had no choice, it was sink or swim.

Sometimes I think some of the scenes in this film were just thrown together.

Rogue Trader (7/10) [Rotten Tomato: Audience Score 52%]

Not an enjoyable film for me, but I would say it is an essential for any potential or current trader. This is the reality of trading, it is the real thing. Perfect film for understanding the negative aspects of leverage and the derivatives market. Moral of the story, don’t use leverage.

The film is a biographical film and probably the most realistic of all the films in this list.

Although not set around a financial crisis, the story revolves around the rogue trader Nick Leeson who single handedly bankrupted a ban in the united kingdom with terrible trading practices.

If you ever wanted to know how terrible trading can be, this is the film to watch. It is not enjoyable, it is frustrating and the recklessness of the main character will piss you off. No wonder the rotten tomato audience didn’t like it…it is old as well. Anyway the verdict is an essential watch for any trader.

The Big Short (6/10)

[Rotten Tomato: Audience Score 88%]

It’s a bit hollywood, appealing to the normal people. They tried too hard to make something that is boring sound interesting. It is a good movie for the novice to enjoy.

Financial Documentaries

Inside Job (9/10) [Rotten Tomato: Audience Score 91%]

Warning: This movie might annoy you or piss you off

An awesome documentary exposing the disgusting rotten financial events, institutions and governments that led to the financial crisis in 2008. Narrated by Matt Damon and with interviews with good guys and bad guys, as well as great explanations of what really went on when those Capitalist bastard decided to deceive and burn the rest of the world.

The main cause of all of this was the Greed of disgusting humans.

Another shocking thing that comes out is the amount of academic community member were paid to praise the terrible decisions and deregulation of banks. Rating agencies: Moody’s, Standard and Poor’s and Fitch also gave these CDO and CDS instruments triple AAA ratings because they make money when they do. Ratings agencies opinions mean nothing.

The financial institutions even got the government (tax-payers money) to bail them out…

It is sad that no one is looking out for the public, only themselves.

Don’t ever use leverage, don’t ever use money you don’t have.

A financial engineer gets paid 4 to 100 times more than a real engineer. A real engineer builds bridges. A financial engineer builds dreams and those dreams turn out to be nightmares that they don’t have to endure.

Here is the PDF mentioned that exposes before the fact called Who’s Holding the Bag

Princes of the Yen (8/10)

A profound look at how the central bank and finance ministry work together or not. It highlights the ways in which an economy is highly controlled by government intervention and it exposes what is seemingly profound truths that relate to many economy. It is based on the Japanese post-war economy and what led it to prosper and fall.

Unfortunately not too much info about the negative interest rates and how it became like that and what is means. It is also taken primarily from a single person’s viewpoint but this guy clearly knows his stuff and is a professor of economics, Richard Werner.

View the Summary of points in the Princes of the Yen

97% owned ( 8/10 )

An in-depth look into what is really going on in the British economy with regards to money creation. It can be likened to the commercial bank and central bank actions throughout the world after the dropping of the gold dollar standard.

See the Summary of 97% Owned Financial Documentary

Enron the smartest guys in the room

Money for nothing, inside the Federal reserve

End of the Road, how money became worthless (9/10)

Another classic movie movie showing the debasing of world currencies through the removal of the Dollar-Gold standard by Nixon on 15th August 1971. Ending the Bretton-woods system.

The movie suggests the economy is just a massive Ponzi scheme held up only by people’s belief that the US can pay back this money, the truth is it cannot.

Proven 100% failure rate, FIAT currencies always fail

All currencies have tethered their currencies to the US dollar ie. fresh air.

A very simple explanation, to a very difficult topic.

One thing that this movie disregards is the group that creates the majority of money…commercial banks, not central banks.

They were saying buy gold when the movie was released 2012, when it was $1700 a fine ounce.

Take home: Become more economically aware, empower yourself, don’t let the people running the Ponzi scheme guide your decisions.

The China Hustle (8/10)

One from netflix, showing how US companies made dual/foreign listings of Chinese stocks on US exchanges that had false financials.

The real companies were not as great as they were made out to be across the pond.

A nice documentary about how shareholders can be the idiots left holding the bag,

Financial Series

Dirty Money (8/10)

A netflix original series exposing people and organisations that broke the law and cheated in order to make more money.

Billions

Follow Bobby Axelrod an insider trader billionaire with a hedge fund called Axe Capital and the District attorney trying to take him down.

A semi-realistic look into the world of high finance.