Sunday, March 27, 2016

The Practice of Arbitrage

While most of the language in the article written by Hirokazu Miyazaki was difficult to understand, it was an intriguing article to follow since she looked at specific traders who lost their jobs due to the Japanese economic disaster in 1996, which was perpetrated by the government. This was a period called the "Big Bang" for the Japanese economy due to the formation of banks within the country. The selling of private Japanese trading firms and replacing them with American trading firms resulted in the loss of many jobs in Japan.

The leading term throughout the entire article was the word "arbitrage." While the article doesn't fully explain what the term actually means, it describes instances of taking advantage of the differences in prices in two or more markets. This concept was used by all of the traders throughout the article and some of the experience it more than others. One of the traders, Taka, explained that golf courses were extremely expensive and exclusive, meaning that it was mostly the rich that could enjoy the golf courses. He suggested that someone buy the golf courses, sell the membership to everyone, and turn it around and make a profit. This was a great example of using arbitrage because it helped me to understand the term a little better.

All in all, the article was hard to read for someone that has never taken an economics class. I found myself turning to Google to find out what words or phrases meant. But Miyazaki did help everyone to understand the collapse of the economy in Japan using these specific traders' lives to tell this story.

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