One Last Battle!
03-24-2011, 03:53 PM
For the past couple weeks, I have been saying that this crisis in Japan could result in extreme hyperinflation in the mid-long run, but didn't have any established pundits agreeing with me (or at least, I didn't find any by going through my usual news sites). But now:
looks like I am not the only one predicting this. (http://www.zerohedge.com/article/guest-post-land-setting-sun)
Notable quotes:
“I refer to Japan as a bug in search of a windshield. I am not so sure about the timing, however, as the economic and fiscal insanity that is Japan may be able to go on for longer than many think possible. But to me it is not a question of whether there will be a crisis, but when there will be one. This year? 2011? 2012? I doubt Japan makes it to the middle of the decade with a very serious and sad day of reckoning.
The downside to the continuation of running massive deficits is that when the break does come, it will be all the more painful and difficult to deal with as the debt mounts. If there is an upside, it is for the rest of the world to see what can happen to a developed country like Japan when massive deficits are allowed to pile up one after another. It will be a morality play writ large upon the walls, which cannot be dismissed.”
Japan is a one trick pony that just broke two legs and is waiting to be put down. They have experienced a two decade long recession. Their stock market is still 70% below its 1990 peak. They have no natural resources. They allow virtually no immigration. And their population is in a death spiral. The one and only thing they have going for them is their phenomenal ability to manufacture high quality products and export them to the rest of the world. The earthquake and tsunami that struck Japan severely damaged their just in time manufacturing machine. A surging yen would destroy their export machine by making their products more expensive. Hundreds of high tech Toyota, Honda, and Sony factories are shut. Four hundred miles of ports and harbors have been wiped out. There are rolling blackouts, with one million households without electricity. Over 500,000 people are still homeless.
The short-term impact of this disaster will push Japan into recession. The rebuilding efforts over the coming years will create a positive GDP figure, but will not do anything to benefit Japan over the long haul. The billions designated to rebuild will be money not invested in a more beneficial manner. The linear thinkers conclude that over the long-term Japan will be OK. These people are ignoring the double D’s – Debt and Demographics. When Japan entered its two decades of recession and experienced the Kobe earthquake in 1995, its government debt stood at 52% of GDP. Today it stands at 225% of GDP. Twenty one years ago, the Japanese population was still relatively young, with only 12% of the population over 65 years old. The population of Japan peaked in 2004 and now is in relentless decline. Over 23% of the population is over 65 and the median age is 45 years old. For comparison, the median age in the U.S. is 37 years old, with only 13% over 65. The projection portion of the chart below paints a picture of death. The population of Japan is aging rapidly and will decline by 4.4 million, or 3.5% in the next ten years.
Frankly, I have been a bit surprised at all of the people claiming Japan is better off than the US is (even before this disaster, they were much worse). I am Canadian, and thus have less vested interest in one country falling compared to another (if either Japan or the US collapsed, the other would be in deep shit anyway and Canada would be in trouble too), but I can't understand why Americans think they are doing worse than Japanese are.
-Japan has much more debt to their GDP than the US does
-Japan has been printing money like crazy, seemingly to no effect, whereas the US has done it in short, powerful bursts, like the difference between spraying with an AK and taking shots with a sniper rifle. Furthermore, the effects are much more evident in the US than Japan, as the US has had more opportunities for bubbles to pop open than Japan (which is actually better for the US, as malinvestment isn't piling up as much)
-The US has the benefit of being the world's reserve currency, which should keep it floating a bit longer. Japan, on the other hand, has actually been downgraded by the (notoriously slow) ratings agencies.
-Japan's economy is horribly imbalanced compared to the US, relying entirely on a high export/import ratio to survive, whereas the US could probably survive in the end if the dollar went up in value (or down, so long as it didn't reach "massive inflation levels")
-There isn't much of a "wave of change" so to speak in Japan. The two big parties (Democratic party and Liberal Democrats, as I recall) aren't much different in monetary policy, which is ultimately the big issue. In the US, there is an "End the Fed" movement that has been gaining steam rapidly since 2008, as well as the Tea Party and other strong attempts to prevent Washington from destroying the US economy. In Japan, there hasn't been squat (besides a switch from the Liberal Democrats to the Democrats, which isn't touching the underlying problems). Actually, there hasn't been much pushing for radical change since the 60s.
Frankly, it is that last issue that is the biggest problem and what hugely differentiates the US from Japan. The Americans, at the very least, are attempting to save themselves, and they actually have a chance. The Japanese, not so much. The American states have the option of jumping the sinking ship if the USA is doomed, and are already positioning themselves for that, whereas I seriously doubt that is even possible with the Japanese prefectures. If it all goes to hell and the US economy collapses, there are enough freedom loving individuals in the states to lead to freer economies and some measure of recovery in some part of what is left over. If Japan collapses altogether, where will the Japanese go? The status quo is completely unsustainable, and they seem to have left themselves no alternatives for when it all crumbles. They put all their chips in a terrible hand, and seem to have no backup plan whatsoever. I know that the "international community" might want to help, but lets be honest here, if Japan OR the US completely collapse, everyone else will too (Japan's buying of Euro and Treasury bonds keeps the US and Eurozone from simply collapsing altogether, and US and Eurozone intervention prevents the Yen from first shooting up in value, destroying Japan's exports (which is effectively all that is left of the strong economy they had in the 80s) and then in turn shooting down in value and causing hyperinflation (when either the BOJ intervenes and puts in too much money, or when Japan's exports fall apart outright, whichever comes first).
Oh, and the nuclear plant melting down is an entirely different problem (if it forced the Japanese to leave Toyko altogether, it would speed things up), so please don't merge threads. Even assuming everything goes great and the radiation immediately disappears, Japan is STILL going to collapse sooner or later, as it is a lost cause by this point.
Also, don't misinterpret me. I know there are a fair amount of Libertarians in Japan, and I believe there is one party (http://en.wikipedia.org/wiki/Your_Party) in Japan that is quite Libertarian in nature, but they don't have any control over public opinion or public policy like they do in the States. I mean, they are even less influential than the Canadian libertarians, and that is saying quite a lot. I am not one of the "Japan has invoked the WRATH OF GOD" or "Japan has it coming cause they kill whales" people, either.
Sorry for the wall of text.
looks like I am not the only one predicting this. (http://www.zerohedge.com/article/guest-post-land-setting-sun)
Notable quotes:
“I refer to Japan as a bug in search of a windshield. I am not so sure about the timing, however, as the economic and fiscal insanity that is Japan may be able to go on for longer than many think possible. But to me it is not a question of whether there will be a crisis, but when there will be one. This year? 2011? 2012? I doubt Japan makes it to the middle of the decade with a very serious and sad day of reckoning.
The downside to the continuation of running massive deficits is that when the break does come, it will be all the more painful and difficult to deal with as the debt mounts. If there is an upside, it is for the rest of the world to see what can happen to a developed country like Japan when massive deficits are allowed to pile up one after another. It will be a morality play writ large upon the walls, which cannot be dismissed.”
Japan is a one trick pony that just broke two legs and is waiting to be put down. They have experienced a two decade long recession. Their stock market is still 70% below its 1990 peak. They have no natural resources. They allow virtually no immigration. And their population is in a death spiral. The one and only thing they have going for them is their phenomenal ability to manufacture high quality products and export them to the rest of the world. The earthquake and tsunami that struck Japan severely damaged their just in time manufacturing machine. A surging yen would destroy their export machine by making their products more expensive. Hundreds of high tech Toyota, Honda, and Sony factories are shut. Four hundred miles of ports and harbors have been wiped out. There are rolling blackouts, with one million households without electricity. Over 500,000 people are still homeless.
The short-term impact of this disaster will push Japan into recession. The rebuilding efforts over the coming years will create a positive GDP figure, but will not do anything to benefit Japan over the long haul. The billions designated to rebuild will be money not invested in a more beneficial manner. The linear thinkers conclude that over the long-term Japan will be OK. These people are ignoring the double D’s – Debt and Demographics. When Japan entered its two decades of recession and experienced the Kobe earthquake in 1995, its government debt stood at 52% of GDP. Today it stands at 225% of GDP. Twenty one years ago, the Japanese population was still relatively young, with only 12% of the population over 65 years old. The population of Japan peaked in 2004 and now is in relentless decline. Over 23% of the population is over 65 and the median age is 45 years old. For comparison, the median age in the U.S. is 37 years old, with only 13% over 65. The projection portion of the chart below paints a picture of death. The population of Japan is aging rapidly and will decline by 4.4 million, or 3.5% in the next ten years.
Frankly, I have been a bit surprised at all of the people claiming Japan is better off than the US is (even before this disaster, they were much worse). I am Canadian, and thus have less vested interest in one country falling compared to another (if either Japan or the US collapsed, the other would be in deep shit anyway and Canada would be in trouble too), but I can't understand why Americans think they are doing worse than Japanese are.
-Japan has much more debt to their GDP than the US does
-Japan has been printing money like crazy, seemingly to no effect, whereas the US has done it in short, powerful bursts, like the difference between spraying with an AK and taking shots with a sniper rifle. Furthermore, the effects are much more evident in the US than Japan, as the US has had more opportunities for bubbles to pop open than Japan (which is actually better for the US, as malinvestment isn't piling up as much)
-The US has the benefit of being the world's reserve currency, which should keep it floating a bit longer. Japan, on the other hand, has actually been downgraded by the (notoriously slow) ratings agencies.
-Japan's economy is horribly imbalanced compared to the US, relying entirely on a high export/import ratio to survive, whereas the US could probably survive in the end if the dollar went up in value (or down, so long as it didn't reach "massive inflation levels")
-There isn't much of a "wave of change" so to speak in Japan. The two big parties (Democratic party and Liberal Democrats, as I recall) aren't much different in monetary policy, which is ultimately the big issue. In the US, there is an "End the Fed" movement that has been gaining steam rapidly since 2008, as well as the Tea Party and other strong attempts to prevent Washington from destroying the US economy. In Japan, there hasn't been squat (besides a switch from the Liberal Democrats to the Democrats, which isn't touching the underlying problems). Actually, there hasn't been much pushing for radical change since the 60s.
Frankly, it is that last issue that is the biggest problem and what hugely differentiates the US from Japan. The Americans, at the very least, are attempting to save themselves, and they actually have a chance. The Japanese, not so much. The American states have the option of jumping the sinking ship if the USA is doomed, and are already positioning themselves for that, whereas I seriously doubt that is even possible with the Japanese prefectures. If it all goes to hell and the US economy collapses, there are enough freedom loving individuals in the states to lead to freer economies and some measure of recovery in some part of what is left over. If Japan collapses altogether, where will the Japanese go? The status quo is completely unsustainable, and they seem to have left themselves no alternatives for when it all crumbles. They put all their chips in a terrible hand, and seem to have no backup plan whatsoever. I know that the "international community" might want to help, but lets be honest here, if Japan OR the US completely collapse, everyone else will too (Japan's buying of Euro and Treasury bonds keeps the US and Eurozone from simply collapsing altogether, and US and Eurozone intervention prevents the Yen from first shooting up in value, destroying Japan's exports (which is effectively all that is left of the strong economy they had in the 80s) and then in turn shooting down in value and causing hyperinflation (when either the BOJ intervenes and puts in too much money, or when Japan's exports fall apart outright, whichever comes first).
Oh, and the nuclear plant melting down is an entirely different problem (if it forced the Japanese to leave Toyko altogether, it would speed things up), so please don't merge threads. Even assuming everything goes great and the radiation immediately disappears, Japan is STILL going to collapse sooner or later, as it is a lost cause by this point.
Also, don't misinterpret me. I know there are a fair amount of Libertarians in Japan, and I believe there is one party (http://en.wikipedia.org/wiki/Your_Party) in Japan that is quite Libertarian in nature, but they don't have any control over public opinion or public policy like they do in the States. I mean, they are even less influential than the Canadian libertarians, and that is saying quite a lot. I am not one of the "Japan has invoked the WRATH OF GOD" or "Japan has it coming cause they kill whales" people, either.
Sorry for the wall of text.