Tuesday, September 24, 2013

The Facts: Data Doesn't Lie and "Positive" Writing

Yesterday I met a dear friend of mine. He complained about this blog. He said to me, "Why do you always write such negative things? Why don't you write more positive things about what Abe (Shinzo) is doing? Exports are going up!"

I replied, "Japan just had 14 months of trade deficits in a row for the first time in modern history. Last month was the worst trade deficit in history. Exports went up 14% but that was after more than a 25% decrease in the value in the yen since October 2012 (15% this year alone), which actually, considering accrual accounting, means that exports went down 9% since Oct. 2012."

That was all I said.

BNP Paribas just reported that they estimate that Abenomics will fail. Please refer to: BNP Paribas Gives Abenomics Only 10% Chance of Success? 

I write this stuff because (may I brag?) I'm usually ahead of the curve. I've been complaining about Abenomics since October of 2012... It, seems to me, was easily predictable what was going to happen. I'm glad to see big financials finally coming around and supporting my views.

I don't know how anyone can put on a happy face and spin that into anything positive for the economy... But people do. I seriously doubt that reporting this sort of thing in a positive spin makes it any more potable. 

Look, there's responsible fiscal policy and then there's what the Japanese government (and US government, EU, etc.) are doing: irresponsible deficit spending. Japan has been doing what Abe is doing for over 20 years. The only difference is that Abe has put the deficit spending into hyper-drive.

Over twenty year of deficit spending and infrastructure projects? Look where it has gotten Japan today.

Folks, you couldn't deficit spend like this on your own home and personal finances; you'd go bankrupt. This isn't rocket science. No matter what the government says or how they try to spin things, this is simple math. Mathematics are a bitch and they are consistent as hell. Two plus two will always equal four. It doesn't change.

Japan's low interest rates and easy money policies on steroids will not yield any different results than they already have.

Yahoo reports a week ago in: Analysis - Japan faces record-long trade deficit, little sign can reverse trend

Japan is on course for its longest run of trade deficits, effectively marking the end of the nation's decades-long reliance on exports from the likes of electronics giant Sony and automaker Toyota as a driver of growth and income. Trade figures due on Thursday are likely to show that Japan produced its 14th consecutive deficit in August, matching a 1979-1980 record run during the global oil shock. Economists say the deficits will continue. When Prime Minister Shinzo Abe's reflationary policies weakened the yen after he took power last December, many economists had anticipated a so-called J-curve effect, where a spike in import costs would over time be more than offset by gains in exports. But a closer look at trade statistics shows that the currency's 15 percent decline since the beginning of this year has failed to produce the export turnaround needed to bring the trade balance back into the black and there is little indication it will do so in the future.

Do we need a positive spin on that? How about if they added, "Wonderfully" as the first word in the paragraph?

Like I said, facts and data don't lie. People have lost their ability to take things into perspective. Here's some perspective for you folks who think what Abe is doing is good:

In The Money Stocks reports in Quantitative Easing On Steroids

"The Bank of Japan has stated that they will implement monthly bond purchases in the amount of 7.5 trillion yen (US$78 billion) per month in an attempt to increase inflation to two percent within the next two years. Currently, the United States is buying $85 billion worth bonds every month. It is important to note that Japan's economy is one third of the size as the United States. So it is safe to say, Japan has the printing presses on turbo at this time."

Get that part? Bank of Japan is implementing bond purchases at $78 billion (USD) per month. The Japanese economy is one-third the size of the US. People are up in arms and complaining about so-called "Quantative Easing" in the USA and how that is destroying the US economy... Yet, in comparison of apples to apples percentage of GDP, Japan is spending three times the US!

How does anyone put a positive spin on that? Let's try multi-billionaire Marc Faber... He says of the USA:

"The endgame is a total collapse, but from a higher diving board. The Fed will continue to print and if the stock market goes down 10% they will print even more. And they don’t know anything else to do. And quite frankly, they have boxed themselves into a corner where they are now kind of desperate."

Now, multiply that times three for Japan.

Great! Next up, how does anyone put a positive spin on this chart? The numbers don't lie; politicians and economists do.

For the eight month period, the trade deficit hit a record of ¥6.8 trillion, up 66% from the same period in 2012, and up 332% from 2011. During that period in 2010, Japan had a surplus of ¥4.2 trillion! Japan’s trade fiasco is on a steep downward slope. August was the worst August ever, July the worst July ever, June the worst June ever.... There’s no discernible turning point on the horizon. See more: modernmarketingjapan.blogspot.jp/2013/09/bnp-paribas-gives-abenomics-only-10.html

Like I said, I don't know how to put a positive spin on this sort of data. I'm not talented enough to do that. I do know that when someone reads this and then they get frustrated because "It's all negative news (on this blog)" Then they are making the mistake of attacking the messenger and not the message.

Ignoring bad news and facts and data do not make them disappear.

When a drunk or drug addict or someone with a gambling addiction has a problem, the first thing they have to do is admit it and then look for ways to do something about it. I am merely reporting the facts.

When someone does comes up with new math that can make these bad numbers magically become good, then let me know.

If you want to read happy stuff about the economy, you've come to the wrong place... Hopefully, that situation will only be temporary... But at the way way Shinzo Abe and Japan is going... That won't be soon.

Oh, that sounds negative too! OK. How about this? 

"In a positive note: If you want to read happy stuff about the economy, you might not be in the best place, but you could do worse!. Hopefully, that situation will only be temporary... But, I am absolutely POSITIVE that, at the way way Shinzo Abe and Japan is going... That won't be soon."

But as my wife would say, "If you're so smart, why ain't you rich?"


Andrew Joseph said...

Bravo, Mike... if nothing else, I come to your site for a refreshing view on Japan.
Keep it up!

Aaron Moser said...

Have exports gone up in real terms or nominal terms? If you devalue a currency on one day buy half the next day the price of your nominal exports will look like it went up 100 percent but in real terms it is the same. Unless you measure the real value of the exports you can not get an accurate picture of what is going on in the export market.

Anonymous said...

I've thought about that chart a couple of times lately.

It looks like dripping blood.

I imagine that's not lost on you or most anyone else who's with it.