Pretend that 100 yen is equivalent to one dollar. That’s what everyone around here does and it works pretty well.
Now pretend that you have am embarrassing amount of debt in the United States. All of it is, of course, in US dollars. At the moment, if you’re also earning your salary in dollars, you’re pretty screwed. The dollar is so inflated that any debts you’ve collected over the last 10 years are actually way bigger than they look or than they were when you got them. This is a standard risk of taking debt, but our nation’s “activity” over the last 6-or-so years has made it far worse than normal.
Luckily for Electra and I, we’re earning yen. When we got here, you needed about 120 yen to buy a dollar. This was useful for us, since we brought a couple thousand of those with us. On Friday, when I sent money home to make payments on the aforementioned embarrassing debt, I only needed 99 yen to get me one dollar. That’s right, the yen and the dollar are now floating around equality.
But how long will that last? Probably not long. The US is reeling from years of frantically printing money to fund, well, lots of things we never really needed enough to spend well over $1billion/month. We’re also reeling from the fact that nearly all of us have far more debt than we can reasonably handle. The whole country, government included, have been spending like teenagers with a brand new high-limit college student credit card.
Japan, on the other hand, is pretty stable. A little of that change in exchange rate comes from the fact that the Bank of Japan has stopped artificially suppressing the currency’s strength (they used to do that to support the carry trade) but the majority of that effect showed up a couple months ago. This latest drop is pretty much entirely due to the fact that the rest of the financial world is tired of propping the US up and they’re trying to move away from the unstable and unreliable US dollar. They’ve finally decided that even with all the investment they have in our economy, it’s not worth throwing more and more money at us trying to keep us afloat. The US dollar used to be the international currency but it’s quickly changing to euros.
So Electra and I are lucky that for the next 1.5 years or so we’ll be paying down our debts with an advantage, instead of the huge disadvantage that everyone at home is stuck with. I’m posting this because I remember that even with the Internet right there in front of me all day, I never had this kind of perspective from my home in the US. I could see that we were headed for trouble, but I never had the concrete example of seeing the same amount of yen I sent home turn into larger and larger amounts of dollars as each month went by. I’m happy to have more money for the same amount of work, but I know that the costs are going to outweigh the benefits in the long run. I only hope that we can turn this around before we all lose our collective shirts.