The recent Bank of Japan meeting and its implications for markets

> Central banks want to cause inflation when they believe unemployment is eminent

Adequate inflation is also a sign of a growing economy. In Japan's case, Japan had full employment for over 20 years and they had no inflation for over 40 years. So no, I don't think curbing potential mass-unemployment was in their reasoning when they had decided to start QE in 2016.

> Inflation allows companies to effectively cut everyone's wages by x% instead of firing x% of workers.

I guess? but only because inflation often is related weaker currency, which increases export (making companies richer). This works for export-led economies like SK and Japan but their export growths are slowing down.

> So the question is 1. are they right that there would be large scale layoffs absent the inflation? and 2. Is it better for everyone to get a pay cut or some people to get laid off?

Well you already have your answer. There has been no mass layoffs absent inflation for a long time.

the US central bank's dual mandate is not universal, most central banks care about price stability

and most central banks are small and most currencies/economies are a lot more vulnerable to exchange rate changes.

because when an economic downturn starts in export oriented smaller economies the following happens. the reversal of a lot of capital/money flows (investment projects put on hold, sovereign and corporate bond market slows/halts), and then as a consequence of this exchange rate drops (the currency of the smaller economy depreciates) ... and at the same time, basically as the other side of this is that everyone buys US assets (reverse flow!), which pushes up the price of the dollar, which is an extra problem for developing economies, makes raising new debt a big problem (servicing rollover debt is a must at least, and developing economies want to outgrow their debt, so they have a high debt load usually), makes everything instantly more expensive.

central banks act as dampers, and there are a bunch of papers about profitability of them, and they detail that by them buying assets when they are undervalued and selling when they are overvalued is their way to dampen these swings and make a profit. which in some cases gets sent to the government budget (eg. in case of Mexico).

so yes, while there are asset bubbles that are a consequence of low interest rates, they are not the purpose, nor they are the main consequence of low interest rates, the main effect is economic growth, which helps to lower unemployment, and to avoid recessions (which easily leads to an unemployment spiral).

I remember that. They started QE to increase consumption and they increased the sales tax? It was baffling to watch.

Many investors would do well to consider a hedge on the currency risk.

After doing research, just got a Yamaha P-515, & been happy with it. What are your requirements?

It's too early to get scared yet, we don't have any idea what's going to happen. In my opinion, a recession is most likely, but could range from nothing much to serious recession. But then who knows what will happen with Ukraine and possibly Taiwan; war tends to stimulate the economy, but also supply chain disruption. No point in worrying until there's something concrete to worry about. Besides, even in the Great Depression unemployment was only 30% or so, so there's a 2/3 chance you'll have a job in the realistic worst-case scenario. Even better chance if you are in software, it's not like there's been an inflation in good developers.

> losing money on every front

I assume you mean stocks/housing? I can't speak for housing, but regarding stocks, do you still think the company has good prospects? If so, now everything is cheaper. In fact, stocks have depreciated, so while your cash might not buy as many consumer goods, it will buy more stocks than before! I think the market still has at least 10% more to go, the S&P is only down from it's all-time pandemic-bubble high, and interest rates are 4% higher. There's been no "capitulation" as far as I can tell--two weeks ago the market went up after the Fed said that money is getting less valuable a little less quickly (that is, inflation is a little less large than before), because the Fed might stop raising rates. Well, maybe, but interest rates are still 4%... Anyway, when the market falls is a great time to buy! "Be greedy when others are fearful"

Cash in USD has been one of the better performing assets of 2022

Whenever anything bad happens you'll be the first one to know.

Don't forget TP! Very important.