It's Easy to Be Generous With Other People's Money

"It is easy to be conspicuously 'compassionate' if others are being forced to pay the cost." - Murray Rothbard

"The state is a gang of thieves writ large." - Murray Rothbard

Yesterday I sat in the lobby of the Grand Hyatt Hotel in Roppongi waiting for a meeting to start. It was the fifth time I have sat there waiting at the lobby in the last two weeks. It was the first time, though, that I saw that the lobby was crawling with undercover policemen.

My friend told me it was because there was an IMF meeting in the hotel.

Tokyo Tower as seen from the Grand Hyatt

Great! Not only do our masters lord over us and inconvenience our lives, they take our money and give it to each other.

Ron Paul once said, "Foreign aid is the act of taking money from poor people in a rich country and giving it to rich people in a poor country."

And that's just what happened; the Japanese government went and gave away money that they don't have and that is not theirs to give. 

Well, don't believe me. Let's have banker-thief Christine Lagarde IMF Managing Director tell you all about it:

“I warmly welcome today’s announcement by Finance Minister Jun Azumi on the Japanese authorities’ intention to contribute US$60 billion in additional resources to the IMF." 

What?! This country is in desperate financial straits as Hedgeweek reports in Japan's Ticking Time Bomb; "Japan’s debt-to-GDP ratio at 220%, is almost double that of Italy."

Great. Giving away money we don't have. No! Make that borrowing money and then giving it away, because that is de-facto what's happening here. How long can this go on?

Japan Debt to GDP Approaches 300%!!!

The Atlantic has an interesting article that made my eyes bulge out of my head. Why, it was just two years ago that people were sounding the alarm that Japanese debt to GDP had surpassed 200%. Then, last year, it was 230% over GDP.

Now? Here's an article that is talking about the debt nearing 300% of GDP.

From the Atlantic "Will Japan Become Greece?":

Japan's government has borrowed so much and for so long, without having to pay higher interest rates for the privilege, that we've come to assume it can go on for ever. At the same time, this gravity-defying feat may lull us into thinking that public debt can also rise far, far higher in the US without giving rise to serious problems. James Hamilton links to a study that casts doubt on both points.

As is well known, Japan has benefited from low interest rates despite its high debt ratio because nearly all of its public debt is domestically owned, and its savers are a compliant lot. But as Hamilton explains, a demographic transition is getting under way that will thin their ranks. The study by Hoshi and Ito shows that the household savings rate is going to fall, forcing the government--by this time with a debt ratio approaching 300% of GDP--to borrow more heavily from abroad. The pressure would be worse if interest rates start rising in anticipation of the problem.

Remember, what's not sustainable won't be sustained. 

Read more at Will Japan Become Greece?

I've said it a hundred times and will keep saying it, "Got gold?"

Japan’s public debt is almost 240% of GDP = Japan Downgraded AGAIN!

We are f*cked, doomed, scr*wed, whatever you want to call it.


The crisis, folks, is upon us. Mish Shedlock writes in Japanese Debt Downgraded by Fitch; No Urgency for Japan (Until Panic Hits):

Japan’s public debt will hit almost 240 percent of its gross domestic product by the end of the year, Fitch warned.

Did I say that we're  f*cked? I did? OK. Go back to what you we're doing. Nothing to see here, folks. Move along..... Move along.....


No problem, right? We're just a step or two above Spain and Italy and, heck, look at how well they are doing....

Is Japan Heading For A Massive Economic Hit? All of Japan's Nuclear Power Plants About to Go Offline!

Here is an excellent report that was sent to me by my friend Aaron Egon Moser. I've written before about how it is possible that these events could seriously damage the Japanese (then world?) economy in Japan's Double-Edged Sword: What Happens When the Nuclear Power Plants Turn Off? 

To think that Japan can go on from here, into the next fews decades, in an era of declining oil production and rising oil costs and public debt coupled with an aging population problem without a cheap energy source is foolish and completely unrealistic....

In other words, it's not economical. The Center for Global Energy Studies says:

Despite high oil prices, fossil fuels will continue to trump renewable energy sources such as solar and wind power without massive government subsidies, a new investment bank says.

A report by Calgary-based AltaCorp Capital says the “economic realities” of oil and natural gas mean that the world will remain largely dependent on non-renewable energy sources for the foreseeable future.

Japan's government already has the highest debt to GDP levels in the world, it cannot afford to subsidize new industries like solar or wind farms... People will misunderstand what I have written here and say I'm pro-nuclear power. I am not. I am pro-business. I wish we didn't need nuclear power at all. My motivations are purely economical. I wish I could say it were true that Japan didn't need nuclear power to survive but it seems to me, that if I had to put it into a black and white perspective, it's a "damned if you do, damned if you don't" sort of problem for Japan.

Or could this be an opportunity for Japan to, once again, rise from the ashes of disaster? Watch this thought-provoking interview:

Let's hope that this summer is cool and geo-political problems give Japan breathing room and oil and natural gas prices remain at a relatively low cost. One can hope, right?... Not that "hope" has ever been a very good business plan... 

Here Comes Europe's and Japan's Debt Crisis - Just in Time for Summer

A good friend of mine, John Shippen, who works in the investment banking industry in Japan, says he totally agrees with my take on the disaster heading toward Japan that I wrote about two days ago. Please refer to: Japan's Collapse Will Be Absolute and it Cannot be Stopped - Here's Some BIG Reasons Why. The only thing about that article that John seems to take umbrage with is my description that the "disaster is heading Japan's way." John says it's the opposite. He says that the disaster isn't coming, Japan is intentionally driving into it... He describes it as, "Japan is a bug that's looking for a windshield."


Hope you got a laugh from that. It's the only one you'll get from this post. 


On that note, an easy article this morning for you referring to the huge financial calamity that is quickly heading our way (or, if you prefer, we are heading full speed ahead towards!) If you live in Japan, better put down that coffee before reading this. Hate to spill!


First a few charts from Mish Shedlock about debt in Europe - Sovereign Bond Yields Sharply Higher in Spain, Italy, Portugal:

This debt crisis has terrible repercussions for the world economy and Japan. Reuters has a good article on it entitled: Europe Poses Global Recession Threat: IMF. The article is a good rundown of the debt problem but the solutions they offer of throwing money at the problem are completely wrong (Been there, done that. Didn't work)... For proof of that, just look at how well throwing good money after bad has done for Greece.


Looks bad. These things have a way of getting out of control. But Japan is OK, right? Because these European countries can't print their way out. Japan can. Let's look at a few charts there. Here's a chart that shows the world ratio of debt to GDP:

Here's one to show Japan's debt mountain in yen:

As an important note, as of 2009, the Japanese national public debt, according to my handy-dandy calculations equaled over ¥6 million yen per man, woman and child in the country (about $72,000 USD). That means that if every single one of us coughed up ¥6 million yen and paid off our total debt today, we'd still be back in massive debt tomorrow as the costs of running the Japanese government, social security and health care, etc., etc. are completely out of control.


As of the writing of this post, Japan's national debt according to the Japanese National Debt Clock is: ¥972, 133,157,539,777 (about $11.8 trillion USD) at debt of over ¥7.5 million per person (about $91,000 USD).

To see what the debt is now, at this moment, go see the Japanese National Debt Clock here.


But wait! Things are getting better, right? Wrong! Here's an article you might want to read from a the New York Times that asks the laughable question: "Could Japan's Debt Lead to a Crisis?" (Let me ask you: "Could the next Pope be Catholic?") But, like I said, that article is a year old. I add it because it is a typical example of the confused reporting emanating out of the MSM... "Everything will be alright as long as government's keep printing money! We have to save the system!"


Well, no. We don't have to save the system. We can't save the system. The system is a wreck.


Here's a much more realistic and sober account of the mess we're in from Global Economic and Market Analysis That Matters: Debt Crisis 2012: Forget Europe, Check Out Japan: 

In addition to the current Euro crisis which we discussed here and here, Japan, the world's third largest economy, could have its own debt crisis as early as 2012 bigger than the Euro Zone.

CLICK ON CHART FOR FULL SIZE VIEW

So as long as Japan could keep financing a majority of its debt internally without going through the real test of the brutal bond market, the country most likely would not experience a debt crisis like the one currently festering in Europe.

But the chips seem to have stacked against Japan now.  On top of the new and re-financing needs, the Japanese government estimated that the economy will shrink 0.1% this fiscal year citing supply-chain disruptions from the earthquake and tsunami disaster in March, the strengthening of the yen and the European debt crisis.  Moreover, S&P said in November that Japan might be close to a downgrade.  After a sovereign debt downgrade to Aa3 by Moody's in August, 2011, it'd be hard pressed to think Japanese bond buyers would shrug off yet another credit downgrade.   

Burgeoning debt, coupled with the global and domestic economic slowdown, and continuing political turmoil (Japan has had three Prime Ministers in the last two years, and the current PM Noda’s popularity has fallen since he took office in September), would suggest it is unlikely that Japan could continue to self-contain its debt. 

I think, as I've said many times before.... The summer of 2012 is going to be a very hot one for Japan - as well as all around the world.