Did the Solutions to the Last Credit Crisis Work? (Part 3)

10/22/2008 12:01 am EST

Focus: STRATEGIES

John Jagerson

Co-Founder and Contributor, LearningMarkets.com

The credit crisis in Japan led to an extended period of low or no growth. This was a "problem" when contrasted against the prior decades of very fast growth. In the video I will illustrate this problem by looking at the major Japanese stock index, which is still below prices seen before the crisis.

If this pattern repeats itself in the US by removing returns on investment in the US stock markets, it may ultimately weaken the USD as traders look elsewhere for yields. Similarly, the decline in equities may continue to push the JPY up in the short term, as traders continue to be squeezed by a changing risk environment.

Ultimately the information we learn from this crisis can help us anticipate the next one on the horizon. For example, the Chinese currently face a mass of nonperforming loans that rivals the bad debt problems in the US. When this crisis emerges, you can be prepared to take advantage of it as an investor because you have seen it before.

By John Jagerson, of PFXGlobal.com and LearningMarkets.com.

Watch the accompanying video now:

   

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