Good Debt - Yen Carry Trade - Part I August 2, 2007
Posted by nbeyond in : Out there?, investment, issues , trackbackI 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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