WE’RE NOT JAPAN?
Some interesting thoughts from David Rosenberg at Gluskin Sheff:
“Well, rates are at zero. The central bank balance sheet is pregnant. All the fiscal goodies have had no lasting effect. The government is increasingly unpopular (the President’s approval rating in a new poll is at a record low). And now, in the latest tale of accounting gimmickry, a House-Senate conference is moving to establish new rules for all but the largest U.S. banks (who have already been bailed out) that will basically allow them to pretend that the bad loans on their books are actually still good (allowing them to spread their losses for up to 10 years instead of recognizing them immediately). Japan kept zombie banks alive … and so are we (the U.S. that is).
Oh, but I forgot. The demographics are far superior in the U.S.A. As far as I can see, that’s the last final distinction in our favour is labour mobility. However, the huge number of Americans upside-down on their mortgage has rendered that obsolete, and our political system is standing in the way right now of good decision-making. So, if this is turning out to be more Japanese than anyone would have liked or wanted, draw the chart of the Nikkei and JGB yields to get a sense of where market prices are likely headed. Treasury yields at 3% may be as attractive as the 4% yield we had at the turn of the year. “
Source: Gluskin Sheff
We are Japanese if you please;
We are Japanese if you don’t please.
Are we the leaders of the world or not? Then let US advocate debt forgiveness or better yet a bailout of debtors AND savers via a distribution of new legal tender fiat. Jerusalem was DESTROYED because it failed to (permanently) free the debt slaves. Shall we risk the same fate?
My country used to be
Sweet land of liberty
I weep for thee.
Land where the patriots died
Marx and El Deuce stride.
Hasn’t all this crap been tried?
Now by US, how sad.
The same people and entities would just go into debt with the newly distributed currency. If you’re not going to agree ahead of time to ban all of the things that caused the problems (such as loans to people by government force who knowingly couldn’t afford them, and stuff like that), then don’t even bother.
If we wouldn’t be playing a completely different game, with different rules and rule enforcers, and the use of only good old fashioned financial common sense, then don’t bother with a reset button.
BTW, until proven otherwise we are Japan. Yes, they have rotten demographics, but they have always had high levels of personal savings that don’t exist here. The analogy will never be perfect, but it doesn’t have to be. The Nikkei peaked 21 years ago, and is a bout one third of that peak now. That would be roughly DOW 5,000 in 2027. Not many people factoring that outcome into their 401k plans. Yowza. (public employees don’t have to worry, though. They’ll be getting 175% of their final base pay as a pension in 2027, payed for by the private sector)
“The same people and entities would just go into debt with the newly distributed currency. If you’re not going to agree ahead of time to ban all of the things that caused the problems (such as loans to people by government force who knowingly couldn’t afford them, and stuff like that), then don’t even bother.” Frederick
I advocate fundamental reform in money and banking. Speaking of government force, what we currently have is government backed fractional reserve lending in a government enforced monopoly money supply.
“If we wouldn’t be playing a completely different game, with different rules and rule enforcers, and the use of only good old fashioned financial common sense, then don’t bother with a reset button. “ Frederick
I see no such requirement in Deuteronomy 15 and Leviticus 25. And practically speaking, the distribution of new legal tender would vastly increase the reserves of banks so that reserve requirements could be increased, preferably to 100% to prevent the recurrence of the problem.
[snip]
The Nikkei peaked 21 years ago, and is a bout one third of that peak now. That would be roughly DOW 5,000 in 2027. Not many people factoring that outcome into their 401k plans. Frederick
All the more reason to reflate the economy and avoid that fate?
Thanks for the feedback.
Danger drawing analogies between us and Japan without – ya know – massive disclaimers..
Japan’s Nikkei peaked (though data is murky) at over 100 times earnings. Thats double the 2000 peak and 3 to 4 times the 2007 peak of the US market, give or take. So the bubble popped from a much higher level.
Japan’s demographics were vicious, as many note. The US is aging, but the rate is less dramatic and our population will be still be 410 mil in 2050 according to US census.
Further, given the heights that Japan real estate crashed from , one could intuitively argue the zombie banks of Japan were much more zombified and upside down than ours (for now). I mean THEY had A BUBBLE!!! I’m not even sure our banks are zombified at all right now, just no one wants loans. Are our citizens more zombified than Japan’s were? I’ll leave one for you.
For your reading pleasure, I have included this little wisdom McNugget in the “We are not TOTALLY Japan” mini-tirade:
The second development is the reduction of the workweek length (average hours worked per week) from 44 hours to 40 hours between 1988 and 1993, brought about by the 1988 revision of the Labor Standards Law.
http://mostlyeconomics.wordpress.com/2009/05/20/decline-in-productivity-key-to-japans-lost-decade/
The japs stopped working as hard. They made it law. That little fact doesn’t get a lot of play, but during the eighties a bunch of workers were stressing out, killing themselves, and generally working too hard. So they passed a law. The law HAD to have SOME effect on productivity growth.
Add it all up, and we might be Japan, maybe not though. Can we get productive and get our asses back to work? I hope so.
Sayonara!
Can we get productive and get our asses back to work? I hope so. scharfy
Well, if we get really desperate we could repent — bailout everyone and practice genuine capitalism for a change.
Not sure about US banks being zombie banks? Huh? They are completely being propped up (all of them) by govt bailout dollars. This is just delaying the inevitable, they will decimate. We are exactly the same as Japan. I have stated on this website last year, we were heading to the exact same direction as Japan…nothing has changed since then. THEY had a bubble and we didn’t? Talk about American deniability! Japans decline in population was a result of their bubble popping NOT a reason for it. Same thing will happen in the USA, as a result of the upcoming carnage, Japan is just much further along in the process. People have no idea had badly damaged they`re 401k`s and investment accounts are about to get over the next two years because of people like this living in a state of perpetual denial. Sure enough, they will get what they deserve.
Fair points. Note that Japan has had 1% GDP growth for 20 years during the “lost decade”. And CPI is now exactly the same as was in 1992. To me that’s not deflation, but price stability. The only thing that got killed was the Asset prices, they never recovered. Japan’s economy just matured, it could not grow at 8-10% for perpetuity.
Even if we are Japan – not the end of the world. But yea don’t plan on the 401k or the house bailing us out.
And of course we had a bubble, I was arguing that as a matter of relative scale, could be argued that ours wasn’t quite as bubbly as Japan.
Either way we have our work cut out for us.
cheers
Rosie has forgotten the other differences:
(a) household wealth asset mix/risk tolerance
(b) trade/current account
(c) household net worth/national debt
… so his point is not that persuasive.
BTW much has been said about the US’s long-term demographics being better, because of potential immigration, but I’m not sure that viz a viz inflation, it is a guaranteed positive. In the last few years, I hear a lot of stories about highly-educated (young) immigrants returning to their home countries for better opportunities. As well, all the less-educated ones are not going to create inflation since they are at the bottom of the labour pool … it doesn’t matter that they are young. Thus, the US suffers like Japan, that the holders of most of the wealth (and traditionally, very high consumption consumers) is ageing.
Japan does not a continuous war doctrine, and the economic drag of it.
(hillary and the CFR are planing a war in Iran now.)
costofwar.com
This Republic can not afford the police/war state it has become. like cooking frogs, slowly turn up the heat, and they do not notice.
It’s “naked lunch” time ..where everyone is on the end of their own forks. Where the middle classes are directed to eat themselves.
Japan has a truer American system that the U-knighted states, they export peace via capital goods, adding intelligence to raw materials.
they have no steel, yet they export cars, lawn movers, floating docks, etc)
And while some in japan( esp during recent Korean crap), are demanding more $$ be spent on war, the wiser heads are not bowing down to the militarism and know well the costs of such folly.
Not so here, we run “cost plus” wars with private contractors, as we are forced to pay and pay and pay…for wars run on royal oil wars planners.
This is what no one will talk about, the costs on the Republic(real and financial) to run their wars for royal looting of populations.
Again, the Iran war was for bp/royal dutch shell/china oil leases, not for “freedom” not for ridding the world of terrorism,it was for Royal oil.
that it furthered the destruction of the u-knighted states as a Republic,
and an explosion of left/right, eco/tory economics to further destroy our republics abilities to produce anything, ‘cept wars for their control and greed.
The ecos have re-defined the productive people as mere “consumers” NOT producers/workers, This republic has no production, none they exported IT, in a fast move to produce a short-term bump. The various rotten forms of the uknighted states show a on going attacks on the FORM of government, as they royals have always contended the Republic is too large for their liking.
(big is bad/small is beautiful)
The recent pronouncements of the Queen who arrived in her jewels. etc is cut cut cut, (eat yrself), and now repeated by the same tory forces nation-wide.
check Arnold in California, all for the police state, “cut all welfare!’
those land LORDs (who live on pimping the state went straight to the bar), put ALL state workers( the only ones left working) on min wage, that will kill main street as well(they are not looking out for their own interests either-held down via chambermaids “approved topics” illegal immigrants etc), and the sons and daughters of industrial capitalism are ejected upon us from colleges full of eco thoughts, not any real means to further Industrial Capitalism nor peace.
Until we as a Republic export KNOWLEDGE via intensive Capital goods, we are doomed to the tail wags the dog, and the Royals forms of economy’s.
What EVER they are planning in the gang of 8, gang of 20,( inflate yr currencies to pay for the past wars)this weekend is over shadowed by their
“united calls for war on Iran”.
All of the “stimulus” money is spent on police/prisons, and to banks to play with in the fx, NOT develop NOR advance Industrial Capitalism.
Simply, they are NOT loaning it out. This is “fattening frogs for snakes”, simply.
They are the feared “socialist” class, a dictatorship of socialist banks, and a socialist military, laid upon the Productive abilities of the Republic.
Nope, we are not Japan, they export knowledge and peace.