Sunday, November 25, 2012

Japan is Collapsing

The financial situation just keeps getting worse in Japan...

I send my son to a very exclusive international private school in Tokyo. It is very expensive too. So expensive is it that just about every family who sends their kids there has their company foot the bill for tax reasons. Me too. I could never afford it; the company pays. If the company didn't pay, he'd go to public school and get a crap education.

At that school there are so many children of foreign ambassadors and the bosses of big Asian and Western companies that the list is like a who's who of Fortune 500 company children.

Then there is our family. I drive a used Toyota four-door and most of the other parents drive new Mercedes Benz or BMW's with the occasional Saab running around. Many children have chauffers drive them to school. 

Not my kid. He's stuck with his hung-over and disheveled and unshaven dad behind the wheel every morning.

Our family is like a desert island in an ocean of opulence at that school.

Or, at least I thought so until the other day. 

I was at the grocery store where I met one of the moms from the school. I see her sometimes; she doesn't work. Her husband is an executive at some big company. She drives around in a very nice Benz. They are rich... Or, like I said, so I thought....

We were on the escalator at the grocery store and she asked me how work was going. I answered that work was tough for us, just like it is for everyone else now. We all have to work 3 times as much for 1/2 the money. She sighed and said,

"Us too. I don't know if we can afford to pay for school anymore!"

That blew me away. Here I thought these folks were loaded with money. Heck, they are, or were. I have a hard time with one kid at that school. She has two!

I said to her,

"Yeah. You know, 20 years ago, I sent two girls through international school at the same time and I don't really remember it being too much trouble, money-wise. Now? Now it's all I can do to work and send one!"

She didn't say anything but I could tell from the expression on her face that she was genuinely worried.

I thought about it and got angry. I am angry at the stupid Japanese government for taking our tax money and bailing out these zombie banks and keeping the status quo intact at the expense of the people and our children's future. I am furious that the situation has gone on for so long. I am angry that it is not only us who is feeling the pain but everyone else I know... I get angry when I read the news and see that 15.7% of all Japanese are under the poverty level. I get pissed off when I see that our debt to GDP is over 237%....

And I really get angry when I read that these idiots in government want to raise our taxes and keep with the failed policies of these last twenty plus years.

And it really really astounds me that the people who got us into this mess can get reelected again. What a farce.

Mish Shedlock writes about the disaster about to befall us:

Japan's grand experiment of decades-long QE coupled with Keynesian foolishness is about to take one last gigantic leap forward before it plunges straight off the cliff into a massive currency crisis.

Please consider the New York Times article A Call for Japan to Take Bolder Monetary Action 

For years, proponents of aggressive monetary policy have offered this unusual piece of advice as a way to end Japan’s deflationary slump and invigorate the economy. Print lots of money, they said. Keep interest rates at zero. Convince the market that Japan will allow inflation for a while. 

Japan’s central bankers long scoffed at such recklessness, which they feared would ignite runaway inflation. But now, the bank’s hand could be forced by an unlikely alliance of economists and lawmakers who have argued for Japan to take more monetary action after more than a decade of weak growth and depressed prices.

Championing their cause is the former prime minister Shinzo Abe, who is favored to return to the top job after nationwide elections next month. Otherwise deeply conservative, Mr. Abe surprised even his own supporters by calling for the Bank of Japan to be much bolder in tackling deflation, the damaging fall in prices, profits and wages that has choked Japan’s economy for 15 years. 

In escalating remarks over the last week, Mr. Abe has said that he will press the Bank of Japan to act on government orders if his Liberal Democratic Party wins the Dec. 16 election and even rewrite Japanese law to reduce the bank’s independence.

In a speech in Tokyo on Thursday, Mr. Abe said he would call for the Bank of Japan to set an inflation target of 2 to 3 percent, far above its current goal of about 1 percent, with an explicit commitment to “unlimited monetary easing” — an open-endedness that has caused jitters among some economists. The bank’s benchmark interest rate should be brought back to zero percent from 0.1 percent, Mr. Abe added.

He went even further over the weekend, saying in the southern city of Kumamoto that he would consider having the bank buy construction bonds directly from the government to finance public works and force money into the economy, according to local news reports. That raises concerns, however, the bank may be called on to bankroll unrestrained spending on more roads and bridges that Japan does not need. 

Economists cite several missteps by the central bank that have entrenched Japan’s deflationary mind-set and made consumers and businesses wary that the bank’s policies will stick. In early 1999, as the country’s economic woes deepened, the bank lowered a benchmark interest rate to virtually zero and said it would keep rates at zero until deflationary concerns disappeared. But an economic uptick in mid-2000 caused the bank to raise that rate to 0.25 percent despite protests from the government that the move was premature.

Monetarist Mush

Anyone who thinks an interest rate hike from 0% to .1% or even .25% has much influence on economic growth has "monetarist mush" for brains. Seriously.

The NYT does not name the economists, but I have no doubt they exist. Highly respected (for no reason) Richard Koo is one of them.

I have written about Koo on numerous occasions. From Japan's decade long experiment resulting in public debt of a 1,000,000,000,000,000 yen (a quadrillion yen), Koo reckons Japan failed to defeat deflation because it did not do enough!

Japan is in a crisis alright, and it was entirely self-made, by politicians listening to clueless economists all begging Japan to do something. 

One Thing Worse 

Central banks are bad enough on their own, but history shows that one thing worse than central banks acting on their own is central banks acting under control of politicians.

Committing to a little inflation will push stock prices higher, while a weaker yen will bolster Japan’s exporters and strengthen corporate balance sheets. Incomes will rise, fueling consumption and raising tax revenue for the government, said Kozo Yamamoto, a lawmaker of Mr. Abe’s Liberal Democratic Party.

“Basically, it’s what the Bank of Japan should have been doing for the past 15 years,” he said. “A few percent of inflation is nothing to be worried about.”

The economy is in the trash can and inflation is nothing to be worried about? Haven't these clowns in the government done enough???? We're doomed! Folks, get canned foods and buy gold and silver while you can.

For more please refer to:
Happy Thanksgiving! Sony and Panasonic are Junk! Japan Has No Leadership! Mish Shedlock Spells it Out!

Also for more absurdity and proof the US education system is in the sh*t can, read thisJapan Was First to Use Nuclear Weapons... On Korea???!!!! Dave in Austin is Confused - You Need to Drink More!


MoT said...

Mike, maybe it's time for some people to stop spending on a Benz and other "wants" and consider belt tightening. Is it so much about image that they'd keep up false pretenses only so nobody would think less of them?

Anonymous said...

re: Japan is collapsing. Sounds like the blog author has had at least 3 children, (whether by one wife,or two, I'm not sure). He's a 'super breeder' therefore, at least compared to most.

With a 'TFR' (Total Fertility Rate - the number of children, on average, given birth, per lifetime, of the 'average woman') of under 1.3, don't blame the politicians necessarily. Look in the mirror.

In the long run, no economy can grow unless population grows. And population can't grow when, like Japan and the Japanese, your births are at a subreplacement level (2.11 to 2.13 TFR is needed, at current mortality rates, JUST FOR EXACT REPLACEMENT of the previous generation).

On average, Japan probably really needs a TFR of 3 to 4 children born per woman per lifetime to GET OUT of it's current (and long running) economic funk.

NOBODY (but 'yours truly' here, i.e., 'me') is telling you this. Why? Because they know the likelihood of people changing and actually DOING THIS is next to 'nil' (zero).

Nonetheless, it is the ONLY REAL CURE! So, someone (i.e., me) is telling you (Japan & the Japanese).

Your ONLY ALTERNATIVE is to allow other nationalities to enter and stay in your nation. But, ONLY IF (again, for the long run), THEY have enough children (give birth to). Or, you'll be in this dilemma again!

diligentdave (USA)

Anonymous said...

Well, things can't be so bad-- I mean you still have a very exclusive international school full of rich people, right?

Did you ever think that one of the problems with Japan's economy is that everyone assumes a paternalistic company to pay for all these benefits for their employees? When businesses are burdened with such costs, the money's got to come from _somewhere_. Companies will either: stiff the employee wages, borrow, suck off the gov't teat, or go under.

Mike, with all due respect, you might be part of the problem...

mike in tokyo rogers said...

Dave is a prime example of the poor education people get through public schooling. For some bizarre reason he thinks that private businesses (that create jobs and build the economy) are "part of the problem" whilst he ignores the fact that Japanese government debt is now over 238% of GDP and we have 15.7% of all Japanese under the poverty level in Japan today. He also fails to recognize that Japan has the highest corporate tax rate in the world. Dave is completely ill-informed and naive.

Anonymous said...

Ignore the socialist. He thinks the government has money as evidenced by his comment: "suck off the gov't teat." He needs to get a lesson in basic economics: the government doesn't have any money. All the money they get, they take by coercion. Hasn't he ever heard of redistribution of wealth? Just where does he think the government gets this money? The government gets it from taxing the public and corporations! So, to take his sick logic further, then we are to say that the problems in Europe, the USA, So. America and Japan are due, in part, by privately run businesses? Astounding! The profligate spending of the government is to be ignored. Spoken like a true socialist, ya gotta admit. Mike! Don't feed the trolls.... Especially the ones who are plainly confused as to basic economics.
-Jeff B.

Anonymous said...

I don't even know where to start in responding to the accusations that you've made against me, or the assumptions that you think I know or don't know about economics or Japan or high society, Mike.

Name-calling on the Internet is never a winning strategy, but good luck with that. If it makes you feel better to disparage my educational background or economic position, then help yourself: I'm a middle-class working schmuck that graduated from a public school.


For what it's worth, I think the Japanese debt is completely unsustainable, but that wasn't what I was trying to explain-- I guess I failed in stating my position about Japanese macroeconomics. I suspect that no matter how clearly I try to explain my position, it will get twisted and my personal background will be attacked with ad hominem slurs.

mike in tokyo rogers said...

Jesus Dave,
You wrote: "If it makes you feel better to disparage my educational background or economic position, then help yourself: I'm a middle-class working schmuck that graduated from a public school. "
OK. You're "a middle-class working schmuck that graduated from a public school." You said it. That doesn't dispel any problems about the Japanese economic problems CAUSED by government policies AND NOT BY the private sector. People like me create jobs and work, people like you think the government does and are Keynesian dolts. STFU!

TED said...


Although I certainly do not agree with everything that you wrote I do remember in posts past that Mike has preached about not name calling while disputing another person's point of view. Obviously that's not true. Especially where you were doing no name calling at all. He called you a dolt and to STFU which I guess means, Shut The F@ck Up. True, it is his blog and he can either allow a comment or not and retaliate to one anyway he wishes. But to say that he doesn't resort to name calling, especially to someone that wasn't calling him names, is well, "childish". I could use worse terms but I want to see this posted and Mike's bashing of me. ;-)

Ted the Turd

Anonymous said...

TED! I think Mike means that commentors cannot Profane each other. No? It should be easy to see that.

Boo said...

Well...getting back to the original post...
1. Mike, maybe you "sent two girls through international school at the same time and I don't really remember it being too much trouble, money-wise" because you were twenty years younger then, and had more tolerance for suffering and pain.
2. If I saw a scene of a bunch of new BMWs, Benzes, etc. and one disheveled unshaven guy with a Camry, I'd assume the guy with the Camry was in much better financial shape than the rest, partly because he's the one who doesn't feel the need for conspicuous consumption.
2. I know plenty of successful Japanese people who went to good public schools in Japan, and sad to say, have not been terribly impressed with the alumni of the international schools here. Maybe your school is different, of course...

Anonymous said...

"one of the problems with Japan's economy is that everyone assumes a paternalistic company to pay for all these benefits for their employees?"

Not unless you're an American expat. I don't think Japanese companies pay for your child's education at a private school.

- Murasaki Shikibu

mike in tokyo rogers said...

Murasaki san Brings up a good point and shows just how far off base Dave Jenkins is. There's 127 million people in this country of which Causcasians don't even number 100,000 and Dave thinks private industry and ex-pats are a "part of the problem" with the economy in Japan. Just shows that Dave lived in the total ex-pat bubble when he was in Japan and has a warped view of life in this country. It goes to show a symptom of modern society that people no longer aspire to become wealthy and have been indoctrinated to think that having money is a bad thing as in terms like "filthy rich"

mike in tokyo rogers said...

Also apologies to Dave for insulting him... My bad. Though I will say that it infuriates me that the notion that private business could be the problem with the economy in any society is just plain crazy and anyone who even considers such an absurd notion should move to North Korea to see how well the other side does things. Private business is the solution to our problems NOT the cause. To think otherwise is, well, just Stupid! (Especially when corporate taxes are 46% in Japan. They take almost half our money already fer chrissakes!) That doesn't make anyone mad?

Anonymous said...

So say you are not able to send your kid to the most expensive school in Tokyo and you claim every other option is crap. Turns out, you are not entitled to that school. If they made a better school, 10x more expensive, you wouldn't be entitled to that either.

If now, in a moment of economic downturn, those schools don't lower prices it must mean they have enough rich people to pay for it. Too bad you can no longer afford it. Too bad that woman won't sell a couple of BMW and perhaps start working to be able to afford the education she wants for her kids. But guess what, if you can't make enough money you can't get in.

If you want to live in a world where all services are private so taxes are low, where only money can get you into the really good stuff, you need to be prepared to not being able to afford the best. It's what you signed up for.

mike in tokyo rogers said...

I answered Anonymous at 12:28 am in my latest post:

Anonymous said...

When I was in college I came home for the weekend and was discussing economics with my grandfather, who was a genius with a 6th grade education. He listened a lot and after letting me regurgitate the Keynesian and Monoterist crap I had been taught by my economics professors, he just said "I ain't never worked for a poor man." A profound economic principle if I ever heard one. Wealth is the basis for having a division of labor and increasing productivity. No rich people, no jobs. - Mark Davis

Anonymous said...

Mike, thanks for the personal insight into Japan that backs up many fears related to the fact that the coming elections will not change Japanese fiscal policy. Like the US, Japan is on a course of money printing without end. Well, there will be an end but it is not pleasant.

I share your frustration with government. I live in Kalifornia, USA, which is led by politicians at least as incompetent as those in your own country. Infuriating.

Anonymous said...

I totally agree,Dave...and I noticed your using of"Latin" got to have at least a I were unshaven and driving a Camry...I would probably be unhappy with offence intended...

Urashima Taro

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