Good Debt - Yen Carry Trade - Part II August 7, 2007
Posted by nbeyond in : investment, issues , add a commentFollowing the first post of Good Debt, I have collected some data about Yen value against US dollar. Check out this long-term fluctuation over past 37 years.
Overall, Japanese Yen has gotten stronger starting 1971
If you look at the recent data over last three years, the value of Yen kept dropping. One thing additionally important is that the value of the US dollar has also been plunging against Euro but not as much as Yen.
US Dollar is now even at a humiliating level against Euro. In other words, mighty Euro. This is just an observation for what happened in the past. Nobody wants to keep Yen. Instead, many want to borrow Yens and exchange them to other better valued currency. Just by doing this, they can earn as much of the interest difference and the value of the exchanged currency.
- What if this lower valued Yen against US dollar stops on a sudden?
- What if Yen is getting strong back as used be?
- Who are now paying this price because of the low valued Yen?
- Who are getting benefits thanks to the zero percent interest rate?
Answers for these questions are easily found from daily newspapers. These answers are thinkable and subject to personal belief. Do you see any chance to make a use of this phenomenon?
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Good Debt - Yen Carry Trade - Part I August 2, 2007
Posted by nbeyond in : Out there?, investment, issues , add a commentI did make a comment about debt very beginning in the first post, A simple math and beyond - Does it really work?. In the post, I quoted as
I have reached to the conclusion that there is no good or bad debt. Some define the debt that is tax-deductible to be good and the debt that is non-tax-deductible to be bad. Unless the debt is given to you for example from your parent at a truly zero interest rate, every debt is bad.
According to the quote that assumes conversely that if debt is at zero percent interest rate, the money you borrow is GOOD debt by definition of the quote. Then, the following question is
Who is going to lend you money with no gain (No interest rate)?
nbeyond said to the question in the post: Maybe your family
This means virtually nobody will lend you money for no gain. This is wrong. In Japan, there is no interest rate if you put your money in your saving account. The banks will just hold your money and not return any gain for your deposit. This means if you put your money, in this case Japanese Yen, in the bank, you automatically lose your money as time goes on. This makes Japanese financial policy very weird. But, this is what has been happening last a couple of years, what’s happening now, and what will happen for some time coming. How long? I’d like to say that nobody knows it.
If you have credit or means to borrow this Japanese Yen, you don’t have to pay any interest at all
In summary, there exists Good Debt by definition for the time that this article is written. On the second thought, you must be stupid if you keep Yen. Is this right?
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