Japan's Debt Explosion Coming Up

UPDATE BELOW

"Japan is spending 25% of its total government tax revenue on interest on debt. It spends 50% on servicing that debt…" - Kyle Bass

Some guy wrote and said that he thinks the Japanese economy is going to be going great within a year. And he thinks I am insane to think otherwise. Well, it's impossible to pick an exact date, but I think it is pretty sure that I am going to be the last one standing here.

I predict that the debt to GDP level in Japan is going to surpass over 250% this year and with it, a crash of the economy coming soon (not to mention overwhelming inflation)... I have been warning that this debt problem cannot continue. In Japan is Collapsing, I wrote

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.

Yep. And they GOT REELECTED and are running the government now.

Er, the definition of insanity is doing the same thing over and over and yet expecting a different result...

Who is the insane one here? The people who elect these folks in government, the government or people like me who warn people to buy precious metals and get out of debt?

I also warned one year ago that the government was going to intentionally devalue the currency. Please refer to: Yen Devaluation Now Imminent? Being Called by Major Financials! Get out of debt - Get your financial house in order now!

No one seemed to believe it at the time, excepting a select few..

Kyle Bass seems to agree with me. This from Zero Hedge "Detonating the Japanese Debt Time Bomb":

The hyper-correlation of Japanese stocks (Bass - The people that buying Japanese stocks, are picking up a dime in front of a bulldozer) and the JPY have led many to believe that Abe's miracle promise will be just the ticket to bring the nation's two-decade slump to an end - a 2% inflation target is all you need.
However, in a brief CNBC interview, Kyle Bass explains that not only are 99.9% of people wrong about the crisis (explaining the critical aspect of the abrupt turn of twenty years of the 'procylicality of thought' - that deflation is the norm), but Abe's actions have actually brought forward the date of the "detonation of Japan's Debt Time Bomb. 

Bass goes on to discuss the US Housing stabilization, European stress, and China's economic opacity (and tensions with Japan), but leaves us with the clear and present danger in Japan that the clock has started on the qualitative shift in participants' minds that the situation is untenable (signs are already among the elite with recent JPY-extricating M&A deals) and "All of the components for this [bomb] to go off 'all of a sudden' are in place." Must watch.

Read more at ZeroHedge

UPDATE: Read: Japan's Chain Of Events: Stagnation -> Monetization -> Devaluation -> Stabilization -> Retaliation -> Hyperinflation

As the world's equity markets prepare to rally on the back of yet more central bank printing as Japan's Shinzo Abe takes the helm with a 2% inflation target and a central bank entirely in his pocket, The Telegraph's Ambrose Evans-Pritchard suggests arather concerning analog for the last time a Japanese prime-minister attempted to salvage his deflation/depression strewn nation.

The 1930s 'brilliant rescue' by Korekiyo Takahashi, who removed Japan from the Gold Standard, ran huge 'Keynesian' budget deficits intentionally, and compelled the Bank of Japan to monetize his debt until the economy was back on its feet managed to devalue the JPY by 60% (40% on a trade-weighted basis). Initially this led to exports rising dramatically and brief optical stability, but the repercussion is the unintended consequence (retaliation) that the world missed then and is missing now. Though the economy appeared to stabilize, the responses of other major exporting nations, implicitly losing in the game of world trade, caused Japan's policies to backfire, slowed growth and left a nation needing to chase its currency still lower - eventually leading to hyperinflation in Japan (and Takahashi's assassination). 

With no Martians to export to, why should we expect any difference this time? and how much easier (and quicker) are trade flows altered in the current world?

More: Japan's Chain Of Events: Stagnation -> Monetization -> Devaluation -> Stabilization -> Retaliation -> Hyperinflation

Proof Again Japan IS (Has?) Collapsing - Bank of Japan Posts ¥233 Billion Loss - Red Ink on Balance Sheet Hits ¥156 Trillion!

Update below

Hate to say I'm right... Well, actually, no. I am happy to say that I was right when I wrote, "Japan is Collapsing."

Today over at Zerohedge they posted an article that is just jaw dropping. Please refer to: Bank of Japan Posts Whopping ¥233 Billion Loss As Its Soaring Balance Sheet Hits Record ¥156 Trillion

But... but... a central bank can never lose money. Bzzzz, wrong. As it just so happens, the world's most tragicomic farce of a central bank, and one which is about to officially lost its (faux) "independence" and become a branch of the Japanese government if the up and coming PM Abe has his way, the Bank of Japan, just reported that in the quarter ended September 30, the Japanese central bank reported an operating loss of ¥183.4 billion, and a net loss of ¥232.9 billion. As a comparison, the loss in the same period in 2011 was "only" 91 billion. This is a harbinger of the total collapse that is the utterly meaningless capital tranche of all central banks will go through before the terminal phase of the global Keynesian experiment is finally completed.  But in the meantime, enjoy this chart of the Bank of Japan's balance sheet returning back to a record ¥156... trillion.

Read the rest at Zerohedge 

But, but (again as some illiterates think) the 0.0007874% of the foreign public living in Japan whose corporations pay for their children's schooling are part of the problem, right? Laughable.

Update: Incredibly, there will still be some who think that private industry or foreigners are "partially" to blame for Japan's woes (polite snickering, here please) instead of government meddling in the economy. To them, may I present this also from Zerohedge: The Cost Of Kidding Yourself

"...As horrific as these results are (USA), they’re better than Japan’s, whose “lost decade” proved only to be prologue for its “lost-er decade.”  Japan’s share of the world economy fell more than 35% from 2001 to 2011 (literally worse than Zimbabwe) and has now shriveled 54% from its peak.  But Japan’s real collapse did not coincide with the bursting of its stock and real estate bubbles in 1990 and 1991 respectively.  The decline actually began in 1995 when policymakers allowed government debt to exceed 90% of GDP (a milestone the U.S. quietly passed in 2010)…

The more they “fixed” it, the more it broke.  17 years later, the only thing Japan has proved is that smart Japanese economists are about as real as Godzilla.  Time and time again, the country has chosen collapse over admitting failure. On November 19, 2012, Bloomberg reported, “The Japanese government will spend 1 trillion yen ($12.3B) on a second round of fiscal stimulus as it tries to revive an economy at risk of sliding into recession.”  It would be funny if it wasn’t so tragic.

……

To say that Japan is still growing (at least in terms of Yen), but everyone else is growing much, much faster in terms of Yen distorts the reality that  Japan is undeniably shrinking relative to the world (no matter what currency is used). 

Reflections on Hating the Rich and Evidence of More of it to Come

I recently posted a few articles about that examine, from a more practical viewpoint (meaning mine) how government deficit spending and high taxes are destroying the economy (add that to a rapidly aging society which is a problem in the United States but especially in Japan)... It seems obvious to me that anyone with a basic understanding of economics could follow the train of thought.

Me and my wallet

Nevertheless, it seems that far too many people do not. The first post of the topic was entitled Japan is Collapsing. I was writing about how the economy has fallen over these last few years and put the blame squarely on the shoulders of the Japanese government spending us into debt at 237% of GDP. I also pointed out that Japan now has over 15.7% of the population under the poverty line. I even backed up my article with commentary by Mish Shedlock.

Even with those facts, some claim that the fault lies with rich people or private industry. The last letter on that post I received, said this:

Anonymous has left a new comment on your post "Japan is Collapsing":

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.

(No. I said my kid goes to that school and the company pays.... Just like everyone else - it's a corporate tax break! - Mike)

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.

  
This commentator doesn't come out and say it directly but he also blames the rich. Let's examine his last paragraph once again:

"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."

I wonder what world this person is speaking about? I'd like to live in a world where taxes are low so I could pay for services. That certainly isn't Japan, I'll tell you that! In Japan corporate taxes are 46%. After that, when I pay my employees, there's another 20% taken off the top of that. I'd consider that outrageously high.

I'll trade back that more than 68% of the money taken from me in taxes and pay for my child's school ten times over.

It's obvious this person thinks government provided services are "good" (kind of reminds me of the British guy who told me NHS (National Health Services) in the UK were great because they were "free!" I asked him how they could be "free" if they are paid for through taxes?)

As I said, his hidden meaning is that government spending is good. This person needs to read the classic "Economics in One Lesson" by Henry Hazlitt to see just how far off base he really is. Yes, my friend, I want to live in a world where taxes are low... Give a guy a break and tell me where that place exists!

Laughingly, he writes, "It's what you signed up for." No. It's not what anyone signed up for. I'll drop the government spending to zero and see my disposable income increase ten-fold and spend it on the real economy; not paying off government debt or having the government hire their crony friends for building bridges to nowhere.

Sorry. Your defense of socialism and government out-of control spending is illogical and ignorant of the situation here in Japan. See? This guy defends the government and socialism... Another under-handed attack on the so-called "rich."

I examined the hatred of the rich in more detail in yesterday's blog post as it has been a subject that I've thought about for a long time and it really has come to the fore over these last 2 years or so (it seems to me). Class warfare is alive and well in the USA.

From yesterday's post, I received two letters that I'd like to repost here:

Michael C commented oo: "The United States and the West Are in Big Trouble....":

I think most of the rich hate in the U.S. stems from the fact they don't pay the same tax rate the rest of us do. It's BS that Romney only pays a 12% tax rate. You can argue it's due to his 'charitable contributions' but he can donate to a non-profit Super Pac to get tax deductions, that spends the donated money supporting Romney, it's a pretty screwed up system.

Also, the fastest growing Rich in the U.S. isn't job creators it's the financial industry. A hedge fund doesn't make it's money from creating jobs, it makes it's money from shuffling around investments.

Entrepreneurs are the ones that create jobs, but the likelihood of getting incredibly rich as an entrepreneur is minuscule to the financial markets.

Almost everything here doesn't really bother me but Michael C seems to make a mistake that is common. Michael, my friend, may I ask you why you think that,

"...hate in the U.S. stems from the fact they (the rich) don't pay the same tax rate the rest of us do. It's BS that Romney only pays a 12% tax rate."

Michael, the problem with the US economy and the collapse of the middle class has zero to do with what tax rate the rich pay versus the middle class. If anything the taxes across the board are way too high. The problem with the US economy is many but it's not what you've been lead to believe with this mass media - soundbite nonsense. 

The real problems are many but just let me name a few: 

1) The Federal Reserve devaluing your money 97% in the last 100 years.

2) US military empire and bases in over 160 countries.

3) Financing foreign wars by borrowing trillions and trillions of dollars from the Japanese and Chinese.

4) Extremely loose monetary policy and low interest rates.

5) US Total Unfunded Liabilities at 99 Trillion Dollars

6) Total US debt as of the writing of this blog: $16,160,432,335,905.30

7) Taking tax monies and bailing out insolvent banks and foreign corporations on the back of the American public.

There's a whole litany of problems for the US economy... Whether or not people like Romney pay 14% or 40% ~ 50% (like everyone else) on $250 million dollars ain't gonna make a drops worth of difference in the Pacific Ocean. 

This one argument has been common and, I think it points to, and makes a strong case for me, that the Hate of the Rich is growing. The "Hate the Rich"  trend is useful for the government as it deflects attention away from government mishandling of the economy. It's also good for the mass media (populism builds ratings and sells advertising).

Think about it.

Finally, I do want to share with you a comment that I basically have no qualms with at all. Anonymous commented on "The United States and the West Are in Big Trouble....":

I think these last blog entrys are really on perception and need to be put into perspective. The United States citizen hates the decline of the middle class, loss of spending power, high unemployment, and the ultra-high concentration of wealth in the hands of a few. 

Do politicans exploit this angst and muddy the waters for their own gain, you betcha. Mike Rogers decrys cronyism, and I believe is part of the solution. The United States is not the same country it was when M. Rogers left it. 

I proudly voted for Ron Paul. The press decried Ron Paul's idea that the Federal Emergency Management Agency should not bail out rich people who could easily buy private insurance for their expensive beach front properties. 

The upper echelons of the Democrats are fabulously wealthy. The finanical collapse of 2008 was really eye opening for this generation. The banker bailouts proved it was Socialism for the rich, and free market for the rest. One only has to look at the last four president's cabinet members. Its made up of bankers galore. The same type of bankers that are hurting Japan with allowing so much debt. 

Harvard educated Americans become lawyers (mainly corporate) or bankers. People in the mid to late 2000's really thought if they could get a 2nd house they could be famously wealthy.The free market proved otherwise and the government got the tax payer to bail them out. 

Both Obama and Bush 44 voted for the bail out.

Yep! Exactly! Thanks to everyone for reading and commenting.

Public Education is Terrible! Or Can People be THAT Stupid? Japan Was First to Use Nuclear Weapons... On Korea???!!!! Dave in Austin is Confused - You Need to Drink More!

Blogging is a total exercise in frustration. 

The worst part of blogging is getting mail from idiots who think they know what they are talking about. Dave from Texas tells me that, "you are part of the problem" when it comes to Japan's economic conundrum. You see, Dave thinks that government spending of over 237% of GDP is not the problem. Dave also thinks that the current rate of Japanese under the poverty level of 15.7% is somehow caused by privately run businesses trying to compete for good employees under the free market system.

In "Japan is Collapsing," I wrote:

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. 

Dave then writes:

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... 

Riiiiiight! Japan's economic problems are due to the efforts of private businesses! Dave is a fricking genius! I responded:

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.

Jeff B. also blasted Dave in the comments section for thinking the government had their own money and because Dave fails to realize that all the money the government has in the first place is money they took it from privately run businesses. Dave is a total statist fool.

But Dave isn't the worst one - he doesn't deserve the "Total Idiot Award" in the last 24 hours (Sorry Dave). That award goes to someone else even dumber. To prove to you that public education is in the pits and that you must work your ass off to send your kid to a private school or homeschool, read this next letter that I received concerning my article entitled, "Atomic Bombs: Race Hatred and Mass Murder." The reader commented:

"I think you have a very warped sense of history. Japan was, after all, the first country to use a nuclear weapon on Korea. Second, the actual documents show Japan was looking for a CONDITIONAL ceasation to the war. (sic)  Japan's own treatment of the Chinese was the real war crime. So don't be so high and mighty. True, the bombs killed many innocents, but it was total war by all sides. Your generals were to blame, not the U.S."

Jesus! "Total war by all sides" but "Your generals were to blame" incredible! It gets worse, he even spelled "cessation" wrong. Then he writes, "Japan was, after all, the first country to use a nuclear weapon on Korea???" What the heck? Have you ever heard anything like that before? He's kidding, right? Is this what they are teaching in school or did this guy get this from reading comic books? No! I dare say that this guy doesn't read at all.... I mean, how could he with a ridiculous statement like that?

(To read about the atomic bombings, read here: Ralph Raico. If that link doesn't work, use this: http://www.lewrockwell.com/raico/raico22.html).

If you ever needed any evidence that US public education was sh*t, you just found it with the comments by Anonymous. Mr. Anonymous! Please send me the names of the schools you attended. I want to publish that list so that people know where NOT to send their kids!

And if you ever needed evidence that blogging was an exercise in frustration (or becoming a Zen Master) then just read the dumb stuff people like Dave write.

God help us all if this is the education level of the people we are producing today.

I suppose the best recourse on this holiday weekend is to not argue with idiots and drink more.