Monday, January 16, 2012

He Wants to Double Our Sales Taxes!? Japanese Prime Minister Noda Has Got To Go!

That's it. He did it. Japanese prime minister Yoshihiko Noda has got to go. He's finished his political career by stating that Japan must fix her debt problem by doubling the Sales Tax by 2015. He's finished his political future by saying that. 

And he did it on a nationally televised TV program. What a twit! 

According to a survey: (whose results I don't believe for a second) 57% of the public oppose raising Sales Tax (trust that there's no one in their right mind would would support a doubling of their taxes - so the real numbers are much higher) and Noda's cabinet's support has dropped to 29%.

Since Noda became prime minister, he had been staying under the radar pretty much since the last guy, can't even remember his name now, you remember? The guy who was prime minister during the earthquake and after the Fukushima disaster?... His wife hated him and everything?...

Ohmura Kon!... Usually can't remember this guy's name either...

Oh, no. Now, I've done it to myself. I can't remember. The Japanese prime ministers keep changing every two weeks so I can't remember their names. What was it? Wait a second. I'll ask my wife...

... a moment later...

No good. She doesn't remember either. I know! I'll look it up! Kan! That's it! Naoto Kan! What a loser.

Now, we have a guy named Yoshihiko Noda and I'l bet you a donut most of you don't know what he looks like.

Japanese prime minister Yoshihiko Noda. Remember the face, he'll be gone by Autumn.

Anyway. Pardon me. Excuse the silly levity. I think it is needed at this time. Why? Because this idiot Noda has gone on a TV show on TV Tokyo channel 7 and actually stated in public that he wants to double our Sales Taxes! No kidding.

For even thinking that, he's got to go.

Prime Minister Yoshihiko Noda said containing Japan’s public debt load, the world’s largest, is critical after Standard & Poor’s downgraded credit ratings on France, Austria and seven other European nations.
Europe’s fiscal situation “isn’t a house burning on the other side of the river,” Noda said on TV Tokyo Holdings Corp.’s program on Jan. 14. “We must have a great sense of crisis.”
Noda reshuffled his cabinet last week, aiming to win support for doubling Japan’s 5 percent national sales tax by 2015 to trim the soaring debt. S&P said in November Noda’s administration hadn’t made progress in tackling the public debt burden, an indication the credit-rating company may be preparing to lower the nation’s sovereign grade.
Japan’s government, which has enjoyed borrowing costs that are around 1 percent, wouldn’t be able to manage its finances if bond yields surged to 3 percent, Noda said last week. The country risks seeing a spike in government bond yields unless it controls a debt load set to approach 230 percent of gross domestic product in 2013, the Organization for Economic Cooperation and Development said on Nov. 28.
Seriously, guys like Noda are just plain dumb. 

Why, oh why, don't any of these Japanese politicians ever come up with a new idea for fixing the debt problem? Here's a novel solution: How about CUTTING GOVERNMENT SPENDING!!!

These political wonks understand nothing about economics. May I recommend the classic book on economics, the one that, if you read it, you'll understand more about economics than 97% of all these politicians and so-called "university trained economists" and that book is Henry Hazlitt's Economics in One Lesson?

Here's the deal, Noda, since you are too busy to bother to learn anything about how the economy works, let me explain it to you: As I said, the government cannot  continually keep taking money from the productive part of society and giving it to the nonproductive part of society. If you take money from Peter to give to Paul - or, in this case, from Taro to give to Takayuki - that distorts the market and allocates money into parts of the economy that wouldn't work if it weren't for these misallocations. 

One day, someone has to pay for taking the money from Taro to give to Takayuki - like today, that's why we're in the financial mess we're in. If you increase taxes, the slow economy will get slower, and people's spending will drop in direct relation to the increase in taxes. It's a proven fact: If you raise taxes by 5% the corresponding decreasing in public spending will be 5%. Why? Because people have a certain set budget to spend on household goods. Just because you raise taxes by 5% doesn't mean mom is going to be able to pay an extra 5% for groceries. No! The amount of groceries she buys will go down by 5% in order to cover the extra taxes. It's very simple math.

Asahi News reports:

According to calculations made by Dai-ichi Life Research Institute Inc., the scheduled hike of the consumption tax rate to 8 percent in April 2014 will mean that a family of four with an annual income between 3.5 million and 4 million yen will pay an additional 72,270 yen in consumption tax, while one with an annual income between 5 million and 5.5 million yen will pay an additional 81,408 yen.
If the sales tax rate is raised to 10 percent, the additional burden, depending on annual income, will increase from between 40,000 and 100,000 yen.
Amazingly, these simple third grade mathematics seems to be incomprehensible and comes as a complete surprise to all Japanese politicians and politicians the world over whenever and wherever taxes are raised.

Also, Mish Shedlock tell us an increase in taxes will cause the yen to skyrocket in value and destroy the export economy of Japan. Japan's debt is already nearing 230% of GDP.

If Japan starts printing money, that will cause massive inflation.

The only choice is to cut government spending.

Since, Noda is incapable of that, I suggest that Japan will continue to kick the can down the road (until it can't anymore) and that Noda will be forced to resign this year. May I finally make a New Year's prediction?

Current Japanese prime minister Yoshihiko Noda won't last until the end of 2012. Good riddance.

Cutting government spending and taking the pain now is Japan's only hope. The sooner we do it, the better off the country will be. 

Any politician the world over who thinks doubling taxes is the answer to our problems will be out of a job... As s/he should be.


Ryu Oni said...

Very interesting post! Thanks for sharing I do, however, have some comments and questions.
I agree that in order to balance the budget there are parts of government spending which should be cut. For example, spending on ridiculous, non-profitable things, such as America's government budget has over 50% on the military alone, with 43% of the entire worlds total Military budget being taken up by America. That, in my opinion, drastically needs to be cut down.
However, welfare is something people survive on and I don't feel should be outright cut. Each case of welfare should be examined and determined according to circumstance, not a one-glove-fits-all approach. I know several people on welfare because of no jobs available and NONE of them are happy with being in that situation.

Now, please forgive me, my Japanese isn't good enough to follow Japanese politics when covered in the news or on talk segments, could you explain to me what parts of the Japanese government budget should be cut?

"If you increase taxes, the slow economy will get slower, and people's spending will drop in direct relation to the increase in taxes." I hope you're only applying this to the general public and not companies and corporations.
I frequently hear the mantra of the conservative financial elite saying that reducing taxes will give companies the money to create more jobs with "trickle-down" economics, when there is no evidence for that whatsoever (believe me, I've searched long and hard and asked every financial conservative I know who claims this).
Raising taxes on companies that make over a certain amount (lets say 1 Million dollars [not Yen]) will push them to invest in their businesses, so they can write off the expense on a tax return and avoid paying whatever the high tax rate is. Lowering the taxes for companies and the top 1% does nothing but allow them keep much more physical tender in their bank accounts and not in the working economy.

However, when it comes to the lower working and middle classes- I agree, wholeheartedly, that taxes should be kept low (or understandably low, at least) because the real job creators are the lower classes, because there're much more of them than there are of executives. When the masses have money, they will buy things- because they have much more they need to buy than the Rich. And when they buy things, it promotes companies to make things, hire more people, create more jobs, etc. etc.

Again, a very interesting post- thanks!

mikeintokyorogers said...

Dear Ryu,
I strongly urge that you read that classic book "Economics in One Lesson." It explains everything so simply. I have read your blog and read some of your comments and thoughts. I see that you are near a major breakthrough in your thinking about how this all really works (and not that BS they taught us in school). I didn't figure this stuff out until I was 35 or so. You are still young, a good writer (seem sufficiently suspicious of big brother) and have much to offer people. Please read that book!
As for your comments. May I point out some commonly thought fallacies?
1) "spending on ridiculous, non-profitable things" Ryu, the government has no money. There is nothing the government spends money on that is profitable.
2) Does it ever occur to you as strange that, as the government size increases, unemployment and public debt increases? Who pays for these increases? Private businesses. When people are on welfare or work for the government, who pays for it? Private businesses. There is a historically proven causative correlation between size of government and size of unemployment... Take the USSR. The largest social welfare system in history with the largest government control of industry in history, If big government were the answer to our problems, then the Soviet Union would have been a very successful country. But it wasn't. What is the reason for this?
Japan is nearly 300% debt over GDP. They could cut everything across the board by 50% and we'll still be bankrupt in 5 years. Where's your friend going to get money when the government is bankrupt? It's happened many times before.
Anyhow, Ryu, my friend, many questions you ask would be better for you and me if you read that book so that you could ask the question in a better format that shows that you have a better grasp of redistribution and taxation so that we can have a more fruitful conversation.
Will you read that book?
Also, finally, the raising taxes on companies part you wrote is not true. A company making 1 million dollars is nothing. The top 1% is well over 20 million dollars. $1 million dollars is some mom and pop shop on the corner. I know. I own one. Our taxes are way too high. A million dollars today is peanuts for a corporation 株式会社.
Thanks buddy!

mikeintokyorogers said...

Ryu san! I just read this article and it reminded me of your comment. Here's the problem we're in:

Anonymous said...

You guys should listen to Peter Schiff :-)

Mr. Nobody said...

Hello Mike,

Does one saying unpopular things actually ruin ones career in politics? Especially in Japan and it's Liberal machine. I don't know. In many cases it seems that prime ministers are nothing more than messengers from the ruling classes to the masses. They run different schemes, and see what the reaction from the masses will be. If it is too dramatic, the prime minister will be replaced. The scheme may or may not go through, that is another matter. I tend to doubt that just because a politician loses a title, that their career is in fact over.

Mike, I think I might owe you a donut. I vaguely remember a different look to the man from the NHK? website I think.

Doubling sales taxes is currently IMHO, a horrible idea. Like classical inflation, it punishes those at lower incomes, followed by middle incomes the worst. It appears obvious to me that is what Japan's masters want.

Again, just because he leaves office, doesn't mean that in one form or another, it won't pass.

As to what is attributed to him by Bloomberg, with the exception of the increase in sales tax, I agree with what he stated. What is left unsaid, but I believe, should be mentioned: the very essence of the modern banking industry, is to make us all, whether we be nations or individuals, slaves to debt. Because once a nation or individual is in debt, one can get them to do almost anything.

Is Noda "regular" crazy, or "crazy like a fox" crazy? Time will hopefully tell.

Why would the politicians wish to cut government spending? They know which side their bread is buttered on. Their support I don't believe is coming from the masses.

I agree, that politicians don't understand classical macro-economics. Though they understand modern micro-economics perfectly. They know who fills their (c/k)offers and who is the real power, not just in Japan, but globally I think this is the case.

As the formerly Communist countries have shown, the state can continually take greater and greater resources from the private sector. If the state should, is another matter. In our current global no-asset-backed-paper-ponzi-scheme, how does one "undistort" the economic system? At what limit should the state intervene in business? States I think can be given a bit of credit in the growth of business. Because without modern states, at least coming up with rules, and acting as a form of umpire, there would be only tiny markets.

Many economic theories neglect how velocity and local spending can influence the economy. In our post-Bretton Woods world, many people are hooked on what happened previously. In the past, one could increase the debt by 1 dollar, and get an increase in the economy of 1-3 dollars, because of the local multiplier and the high velocity of money in those times. Those days are long gone, but many people are still hooked on the idea.

Mr. Nobody said...


Classically the reason why the wealthy love debt is because the effects are unequal. The wealthy are able to plan ahead, or in many cases, cause things to happen, whereas the rest of the public has to deal with the results of their actions on a day-to-day basis. Since the wealthy are at the top of the pyramid, they get the money first before it has been devalued, and the ones at the bottom get it last, when it has been devalued the most. A 5% increase in debt or taxes might cause a 10% increase in the income of a CEO, a 5% increase in the income of a member of parliament, but a 10% decrease in the income of a construction worker.

I believe that Mish is right more often than wrong. The world and the global economy appears to be in such a bewildering place currently, it's difficult to make very many accurate estimates of the future.

I'm unsure that if the Japanese government starts printing more money it will cause massive inflation, that is, at our current time. I do know that their ability to print money without causing inflation according to Mr. Bass is running out.

The don't believe that cutting government spending is the only way out of the mess that they are currently in. I do believe that in the future, they will run out of options, and that cutting/inflating will then be their only way out.

As to prime ministers leaving, IMHO, it is akin to rearranging the deck chairs on the Titanic.

As I wrote previously, the very essence of the modern banking industry, is to make us all, whether we be nations or individuals, slaves to debt. Because once a nation or individual is in debt, one can get them to do almost anything.

All the best!

Mr. Nobody said...

Greetings Mr. Oni,

I also do believe that the USA government spends too much on the military.

One should try to help ones fellow man, I believe, especially the less fortunate. A current belief is that if the state just taxed people less, then more people would just donate to charities, making the local welfare offices redundant. I think this is a very nice notion. It was tried by our forefathers, and believed to be lacking, so it was determined that the government controlling it and paying for it from tax dollars was a better notion. Maybe they were right. Maybe they were wrong. Or maybe they were half-right.

Should it possibly be paid out of taxes, but run by charities? Why not say, "10% of your tax money will go to the welfare of the less fortunate. To whom do you want to give the money?" I have not read any recent figures, but as I recall, in many parts of the US, welfare departments are like any other bureaucracy, in many cases, 30-40% of the money doesn't actually go to those in need, but to overhead in paperwork and manpower. Who does one trust more, someone who does something for career advancement and a paycheque, or someone who does something generally out of the goodness of their heart, or at least out of duty? Does one trust a Christian, Shinto, Buddhist, Muslim charity generally more or less than a government department? Which is more efficient and which helps more?

As to taxes, many things can be done. I think that a rather large issue is not just the taxes themselves, but the rate that the tax rates and tax laws change. It is a juggling act not just from one year to the next, but in many cases one quarter, or one month to the next because of the changes in the rates and laws. How does one become a good chef when all the ingredients and cooking implements are constantly being changed?

So much of the burden is on the small: the small earner and the small business. How else do the wealthy masters stay in power but by keeping them small?

Kind regards!

mikeintokyorogers said...

Once again Mr. Nobody gives me food for thought and a lesson in civility...
About the prime minister being ruined by stating on Tv he wants to raise taxes, you're right. He's probably NOT ruined in the way things are run by the powers that be. But he's ruined with me!!!! I'd vote him out in a second... Excepting I don't vote!