We're literally talking billions of dollars here. The SEC needs to step in and stop this, and soon. This is a lot more important than the salaries of investment professionals, for which the Obama Administration today suggested new rules that would allow the SEC to oversee salaries at member firms. Seriously? They don't have enough to do already?

Read the white paper. Then, if you like, drop the very nice folks at the SEC your thoughts. 

The Land of the Setting Sun

Over the years, I've written a lot about Japan. Its economy is very important to the world, and its banks have funded and loaned a great deal to companies outside of Japan. Global growth would have been a lot slower without the Japanese. Up until recently, their population has saved a great deal of its disposable income, and those savings have allowed the Japanese government to run massive deficits.

And we're talking truly massive. Over the last 10 years, the government has seen the level of debt-to-GDP rise from 99% to over 170%, not including local governments. They ran those deficits to try and pull themselves out of the doldrums of their Lost Decade of the '90s, following the crash of their real estate and stock markets, starting in 1989. They built bridges and roads to nowhere, all sorts of programs, quantitative easing, and so on. Sound familiar?

Of course, they were coming out of 2 really large bubbles, far larger than those we've seen recently in the US. I think I remember reading that at one point the land on which the Imperial Palace in Tokyo is built was valued at more than all of the real estate in California. Why not buy Pebble Beach or a few iconic buildings in New York, when they were so cheap?

Today, Japanese real estate is still massively down (on the order of 50-80%, depending on location). And the Nikkei is still down roughly 75%, 20 years later. Do you think the Dow will be at 3,500 in 12 years?

As late as 1999, personal savings plus pensions were running at 12%, and had been as high as 16%. And much of those savings went into government debt. The government kept borrowing, and rates stayed in the area of 1%. Today, a 10-year bond yields 1.3% in Japan, so they could run up a very large debt and the interest-rate cost was not a big factor in the budget.

But now things are changing. Demography is starting to change the landscape.Japan's a rapidly aging nation. The population's shrinking, and the birth rate is among the lowest in the world. And the dependency ratio is starting to rise.