Japan's Debt to GDP Hits 400%!

Incredible! Over at Zerohedge, I just read an article entitled: This Is The Biggest Problem Facing The World Today: 9 Countries Have Debt-To-GDP Over 300% (www.zerohedge.com/news/2015-02-23/biggest-problem-facing-world-today-9-countries-have-debt-gdp-over-300)

Here's the chart from that article showing the top 16:

It doesn't comfort me at all that the USA is 16th with debt at 233% of GDP.

There's only one way out of this mess, folks; the governments and central banks must create inflation. The way they will do this is by depreciating our currencies by more printing. 

It's the only way out for them.

Got gold? Silver?

2020 Tokyo Olympics - Bubble, Boom, Bust (Out of Control Gov't Spending & Tax Increases...) Oh, and Don't Mention Fukushima!

“The price of anything is the amount of life you exchange for it.” ~ Henry David Thoreau

Before I go on, let's do some chemistry (oh, I wish!) First off, the elements. I'd like to point out to you, the newest discovery in the elements and that is Governmentium. It is the heaviest of all elements, yet it does absolutely nothing good. It just expands. See the red box at the lower left:

Governmentium: Inert, worthless.

The Urban Dictionary says:

The heaviest chemical element yet known to science. Governmentium (Gv) has 1 neutron, 12 assistant neutrons, 75 deputy neutrons, and 224 assistant deputy neutrons, giving it an atomic mass of 312. These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lepton-like particles called peons. Since Governmentium has no electrons, it is inert. However, it can be detected as it impedes every reaction with which it comes into contact. 

....Governmentium mass will actually increase over time, since each reorganization will cause some morons to become neutrons, forming isodopes. When catalyzed with money, Governmentium becomes Administratium--an element which radiates just as much energy as Governmentium since it has half as many peons but twice as many morons.

Keep that information about Governmentium in mind while you read today's post.

In my last few postings, I complained about the 2020 Olympics coming to Tokyo. Actually, not exactly that; I complained about how the government will use that as an excuse for out-of-control spending and the subsequent taxation.

Well, lo and behold, not 5 days have passed and the hammer has come down. Japanese Prime Minister Shinzo Abe has pronounced that he is going ahead with the increase in sales tax. From the Japan Times "Abe to raise sales tax to 8% as scheduled - More stimulus in works but critics fear hike will hobble recovery":

"Prime Minister Shinzo Abe has decided to raise the consumption tax rate to 8 percent next April as planned, emphasizing the need to demonstrate fiscal discipline by making good on a pledge to the international community, a source close to him said Thursday." 

Oh? So finally this guy wants to show some "fiscal discipline" concerning the Japanese debt to GDP problem? Great. He also admits that a sales tax increase will most probably slow down the economy... He wants to show the critics that the tax increase will not slow down the economy, so what does he do? In true Keynesian fashion he is going to spend more money! The Japan Times article goes on with a laugher and total contradiction of the "fiscal discipline" comment Abe made (polite laughter here).

"Abe, who has been trying to shake the economy out of nearly two decades of deflation, is also considering implementing a stimulus package worth ¥5 trillion to prevent the tax hike from slowing down the economy, the source said." 

See? We have to show fiscal discipline (translation: controlling government spending) by increasing government spending. Let me rephrase that: We have to show some fiscal responsibility by spending more money!

What did I tell you? Throw that ¥5 trillion (¥5 trillion yen? Is that $50 billion USD?) on top of the ¥10 trillion (is that $100 billion?) - it will be much more, you'll see - they plan on spending on the Olympics and you have the government spending $150 billion dollars on crap. ONE HUNDRED AND FIFTY BILLION US DOLLARS!!!!

Ah, but it's just a drop in the bucket, right? The Japanese government is already at least $10.46 trillion dollars in debt - that's nearly 250% of GDP? Another $150 billion is a drop in the bucket, right?

I'll bet lots of people who were cheering the Olympics slapped themselves on the forehead when they heard the news about the tax rise. I didn't. I just thought, "See? I told you so." You just knew that the 2020 Olympics coming to Tokyo would serve, for now, merely as a green light for MORE out of control government spending.

They already said they were going to spend about $10 billion USD... Like I said, I bet you a half a bento it will be waaaaaaaay more than that!

 Tokyo’s winning 2020 Olympics bid will only worsen Japan’s debt headache:

"...The cost of Tokyo’s bid fell between $5 billion and $6 billion. That includes the construction of 11 new sporting venues and 10 temporary ones, at a cost of $3 billion. The Olympic village will cost another $1 billion, according to the IOC.

See? It works already! Like I said, the Olympics are an excuse for more out of control government spending and, with that, a cover to increase the sales tax... It's funny that when the former government who made this tax increase passed the law, Abe and his cronies were against it... Now they are for it.

Who said that these political parties weren't simply two sides of the same coin?

Abe and his cronies claim that the Olympics will charge Japan's infrastructure investment and help the economy. That's bullsh*t folks. Don't forget, that Japan ran up this 245% debt to GDP all through the 80s, 90s, 2000s with wasteful infrastructure investment. How is having an event going to change the equation?

Testosterone Pit writes in Tokyo Olympics "Boom" and "Bubble":

These words are already cropping up when discussing real estate developments in the Harumi area, reclaimed land by the Tokyo Bay where the Olympic village will be sandwiched between the two main competition sites. Two dozen high-rises are to be built (though high-rises on reclaimed land did badly during the earthquake in 2011 as the ground “liquefied”) with nearly 11,000 luxury apartments. There will be dining halls, seaside restaurants, and parks. And views of the Rainbow Bridge to Odaiba, a manmade island with hotels and apartment buildings, but not much else. 

All this activity, including new transportation, will jack up apartment prices by 20%, Sanyu Appraisal Corp. announced giddily. This bubble excitement comes on top of the bubble the BOJ’s free trillions are already creating in the Tokyo property market. It would “particularly benefit land owners” in Tokyo Waterfront City, predicted a report published by Macquarie Securities to further stir up bubble enthusiasm. Nomura Securities jumped into the fray with its own prediction that it would “attract a new wave of investors to housing in the bay area” that would “push up property prices.” Alas, if wages remain stuck where they are, and if inflation cuts real wages further, who is going to buy these beauties? The few beneficiaries of Abenomics and foreign investors? 

Yeah, let's build lots of building and sky rises... Just like the late 80s when these things were built in Makuhari. Been there recently? I went there, just last month... These beautiful office buildings and high rises still stand empty... At 50% (or less) occupancy. Huge money losers...

And most Japanese people cheer the 2020 Tokyo Olympics? Incredible. If they are happy now, then I guess they'll all be having orgasms when their sales tax goes to 10%.... Any bets for 15% (or more) by 2025?

The Abe government gets their wish: A smoke screen to cover for more spending. The people cheer on...

"Panem et circenses" (bread and circuses) - 大衆の不満をまぎらわすために提供される)食事と娯楽.　−　Juvenal

No problem about the debt, though... Our kids can pay for it.

-------------

NOTES ON FUKUSHIMA: Never mind yesterday's news (Sept 13, 2013) that completely contradicts what Shinzo Abe said to the Olympic committee. From Japan Times:

A senior official of Tokyo Electric Power Co. admitted during a meeting with opposition lawmakers on Friday that the massive radioactive water buildup at the crippled Fukushima Daiichi nuclear power plant is "not under control." ... that view directly contradicts Prime Minister Shinzo Abe's statement last week to the International Olympic Committee in pushing Tokyo's bid to host the 2020 Summer Olympics.

I said not to mention Fukushima... Well, I lied.... Just like Shinzo Abe. And I don't really think that the radiation from the leaks are all that much of a problem, as opposed to what the media is reporting. But that's the kicker here, isn't it? The media reports one thing and the Japanese government and TEPCO say another.... Will world governments and athlete's believe their media or what the Japanese government says?

I don't think what Abe or TEPCO says have much credibility left. 

Do you?

Here's what Der Spiegal thinks in Germany: http://www.spiegel.de/international/world/inspector-says-japan-needs-international-help-for-nuclear-plant-a-921302.html

Thanks to my friend Mark Davis for the Thoreau quote.

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.

Japan Debt Now 237% of GDP!!!

It has come without much fanfare. In fact, it wasn't even headline news that I saw. Bloomberg now reports that Japan's debt to GDP has hit 237%. Well, they didn't really "announce" it... It was hidden in another article...

No money? No problem, just borrow more!

From an article about the US debt entitled "G-20 Tells U.S. to Avoid Fiscal Cliff as Focus Widens" buried deep-down in the 19th paragraph, it says:

Japan, which has a debt of 237 percent of GDP, is also facing fresh budgetary challenges. Its Ministry of Finance is warning that a refusal by lawmakers to authorize 38.3 trillion yen ($476 billion) in borrowing risks leaving the government unable to hold debt auctions as planned.

Incredible! The Ministry of Finance wants to fix our debt problems by taking on more debt. Well, why not? Look how well it has worked these last 20 + some years!

What is really amazing is, though, it was just last May 22, 2012, to be exact (less than six months ago) that Bloomberg announced that Japan's debt had hit 220% of GDP. From "Japan Must Raise Taxes as Debt to Top 220% of GDP, OECD Says"

Gross public debt will be 223 percent of GDP next year, up from the projected 214 percent in 2012, “pushing Japan’s public finances further into uncharted territory,” the Paris-based OECD said in a report released today.

Only 223%? We wish. 

Folks going from 220% in May 2012 to 237% in November 2012 is almost a 9% increase in six months! At that rate it is equal to 18% a year. 

Those increases are worse than the rates you get when you take loans from yakuza loan sharks.

Doomed?

Everyone knows how "Exponential Growth" works, right? 

Exponential growth says that whenever growth is at a constant percentage, to see how long it will take for any number to double itself is just to take that constant percentage and divide it into 70.

At 18% growth, Japan's debt will double in 3.8 years. That means that Japan, continuing at this rate, will have a debt to income ratio of 474% by about summer of 2016... By 2020, Japan's debt will be 948% of GDP.

This isn't a guess, folks. This is simple math. 

Better get your financial house in order. This cannot go on like this.

Watch this and imagine that this is our debt....

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?"