Guest Post: The Future of America Is Japan: Runaway Deficits, Runaway Debts

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

If you want a look at the fiscal future of the U.S., look west to Japan, a nation that sits precariously on a fiscal cliff a thousand feet high.

If you want to know how the Keynesian Cargo Cult's grand experiment in borrowing money to fund bloated fiefdoms, rapacious cartels and bridges to nowhere ends, just look west (from California) to Japan. The Japanese State, partly because they seem to believe in the Cargo Cult, and partly to avoid exposing the insolvency of their crony-capitalist financial sector, has been borrowing and spending money on a vast scale for two decades.

The Keynesian Cargo Cult's primary article of faith is that borrowing and blowing huge sums of money on anything and everything will magically restore "aggregate demand," i.e. the animal spirits that drive people to borrow and blow money on consumption. This is of course pure insanity, as people cannot borrow if their balance sheet has been destroyed, their real incomes are declining and they have lost trust in institutions that fear transparency and the truth like the Devil fears garlic.

Recall that the Federal Reserve's Survey of Consumer Finances for 2007-2010 found that the median net worth of households fell a staggering 39%, from $126,400 to $77,300, and average household income fell 11% from $88,300 to $78,500.

But rather than face the fraud and corruption at the heart of American (and Japanese) finance and governance, the Keynesians just want to leave the predatory, parasitic crony-capitalist Status Quo intact and create an illusory world of bogus "demand" and grotesque malinvestment funded by ever-increasing debt. In effect, the entire Keynesian Project seeks to reinflate asset and government revenue bubbles--the very causes of the global financial meltdown.

Let's see how the Keynesian protection of a corrupt, parastic Status Quo and pursuit of monumental malinvestment has worked for Japan. Here is the Ministry of Finance's Highlights of the Budget for FY2012 (via Andrew P.). Consider the ramifications of these numbers:

REVENUES: 90,334 (billion yen)

Tax revenues: 42,346
Other revenues: 3,744

Government Bond Issues (borrowing): 44,244


National Debt Service (interest): 21,944

Social Security: 26,390

Other: 42,000

So interest on the debt and Social Security are 114% of tax revenues. Put another way, tax revenues don't even cover interest on the runaway debt and Social Security costs.

An amazing 49% of the governments budget is borrowed money. Even with near-zero yields on Japanese government bonds (less than 1%), 52% of tax revenues are spent on national debt interest.

Recall that the interest rate Japan's government is paying on its stupendous debt is about 1%. Were that to double to a mere 2%, all of the new debt would go just to pay the interest on existing debt.

This is truly the Red Queen's Race. (Losing the Red Queen's Race - February 17, 2010) And it's been going on a long, long time. Japan's budget/borrowing imbalance was already severe a decade ago when I wrote this: Japan's Runaway Debt Train (2001).

Since 2005, annual borrowing has increased 10,000 billion yen (BY) while expenditures rose by 8,000 BY. Tax revenues have been stagnant at 44,000 BY while the interest expense has risen 19% and Social Security costs have increased by 29%.


You see what's happening: tax revenues are unchanged from seven years ago while interest and Social Security costs increase dramatically as the debt inexorably expands and more retirees qualify for Social Security.

Now take a look at the 2012 United States federal budget. Net interest on the $16 trillion national debt is "only" $242 billion, while Social Security costs totaled $778 billion. So far, debt and Social Security ($1 trillion) are "only" 40% of total tax revenues, but like Japan, rapidly rising debt will increase interest while a rapidly increasing population of retirees qualifying for Social Security will drive those costs dramatically higher in the years ahead.

Given $2.47 trillion in total tax revenues, $3.8 trillion in expenditures and a deficit of $1.3 trillion, 34% of the Federal budget is borrowed money. We are borrowing 52% of total tax revenues.

Does anyone seriously think this is the "road to recovery"? If you want a look at the fiscal future of the U.S., look west to Japan, a nation that sits precariously on a fiscal cliff a thousand feet high.


NEW VIDEO with Max Keiser: Bernanke's Inflation Paradox

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bank guy in Brussels's picture

We will be lucky to have it as good as Japan has, economically speaking, since the 22 years after their 1989-90 crash ...

Life stayed pretty good for most Japanese, as people were largely kept in jobs and with incomes

Not a bad run even if Japan 'implodes', as so many people keep (wrongfully) predicting

Gully Foyle's picture

The Vapors

Turning Japanese Lyrics

I've got your picture of me and you
You wrote "I love you" I wrote "me too"
I sit there staring and there's nothing else to do
Oh it's in color Your hair is brown
Your eyes are hazel And soft as clouds
I often kiss you when there's no one else around

I've got your picture, I've got your picture
I'd like a million of you all round my cell
I want a doctor to take your picture
So I can look at you from inside as well
You've got me turning up and turning down
And turning in and turning 'round

I'm turning Japanese
I think I'm turning Japanese
I really think so
Turning Japanese
I think I'm turning Japanese
I really think so
I'm turning Japanese
I think I'm turning Japanese
I really think so
Turning Japanese
I think I'm turning Japanese
I really think so

I've got your picture, I've got your picture
I'd like a million of them all round my cell
I want the doctor to take a picture
So I can look at you from inside as well
You've got me turning up and turning down and turning in and turning 'round

I'm turning Japanese
I think I'm turning Japanese
I really think so
Turning Japanese
I think I'm turning Japanese
I really think so
I'm turning Japanese
I think I'm turning Japanese
I really think so
Turning Japanese
I think I'm turning Japanese
I really think so

No sex, no drugs, no wine, no women
No fun, no sin, no you, no wonder it's dark
Everyone around me is a total stranger
Everyone avoids me like a cyclone ranger
That's why I'm turning Japanese
I think I'm turning Japanese
I really think so
Turning Japanese
I think I'm turning Japanese
I really think so
I'm turning Japanese
I think I'm turning Japanese
I really think so
Turning Japanese
I think I'm turning Japanese
I really think so

Turning Japanese
I think I'm turning Japanese
I really think so
Turning Japanese
I think I'm turning Japanese
I really think so
Turning Japanese
I think I'm turning Japanese
I really think so
(think so think so think so)
Turning Japanese
I think I'm turning Japanese
I really think so

Pladizow's picture

Japan?  America should be so lucky!

THX 1178's picture

No, we will hyperinflate to pay it off. Any day now...

asteroids's picture

Probably not. In the end it's all about demographics. Older Japanese will drop like flies in the next decade, Americans follow about 6 years after that. Expect inflation to kick in and eat away the wealth and savings of the old generation while wage hikes preserve the young. Hmm. Buy gold and housing for the long run I guess.

NotApplicable's picture

Yay, yet another post with a Max Keiser video. Won't anyone ever learn?

Keiser exposed himself as a tool by smearing Mises, Austrian Economics, and everyone else associated with them, by making an argument that anyone who spent five minutes Googling could instantly debunk.

Thing is, he knows his audience won't do that. So he lays on the lies (or are they "truths" if he's so stupid to believe them?) resorting to pure character assassination to Tom Woods (who did the Googling for him).

Tyler, why is this phony's blog page still on your roll? Until he acts like an adult with respect to Tom Woods, he is nothing but yet another agent provocateur, twisting logic (if he ever uses it) while relying on ad hominem attacks for the entire substance of his argument (go to if you don't believe me).

His name appearing anywhere on this site is an absolute disgrace.

derek_vineyard's picture


when the dow first hit 10K in 1999 i had already been preaching to anyone who would listen that the USA was on same course as japan

my mantra was 'the USA is going to pull a Japan'  

im very satisfied with the way have I invested since 2000 using the japan ongoing fiasco as a guide comes lost decades ad infinitum until a war or reset

equites through 2000, treasuries and commodities/precious metals throught 2010, this decade is all pm's and any other commodity you can store yourself and safegaurd

THX 1178's picture

Probably so. In the end, demographics are not the most important thing. Debt levels worldwide are... and they will be paid off.

Redhotfill's picture

Why housing just move into the dead peoples housing.

prains's picture

what did Bass say again about the "social fabric" after the impending "event", hmmmmmm

and japan won't be the example of what will really happen as it's a controlled society

Bluntly Put's picture

I'm not sure of the numbers, but I'm pretty sure that the Japanese had far greater savings rates 20 years ago and that on net savings have been depleted as large numbers of Japanese people purchased government debt to support the cult suffering under the incrementally lowering of savings interest rates. Their mentality is far different in Japan than in the States where the people are more willing to support the collective ideals of the state out of loyalty, and on average are more productive per capita than in the States.

Getting down to brass tax, we aren't Japanese, it ain't gonna work here as it did there.

Jason T's picture

Thats right, they allowed gains in productivity to offset their heavy workload so rather than the average jap worker working 2100 hours a year, now they work just as much as US worker.. 1750.

Unemployment went from 1% to 5% .. GDP growth was solely driven by productivity gains.


The only problem is, TIME, due to the debt based money system.  Hell in on the way becaues having the ability to print money (Goethe) is a deal with the Father of Lies.  

giovanni_f's picture

bank guy in Brussels, you are spot on. I know Japan, I have been there on many occasions. So many assholes opinining on Japan just repeating the raving msm bullshit prejudices. The US is already worse than Greece, and much much worse than Japan. America will never be in the position to manage an economic downturn the way the Japanese do and did. As I said before: You won't find rotten hellhole places such as Detroit in Japan or in Europe for that matter . Japan is a controlled society but the US is rapidly catching up. Don' think even for one fucking second that he US is a free country any more. Ordinary people pose no danger to the system - they are either obese or being held captive in their daily struggle for what they believe is needed for a decent life. It is the veterans - the only group that poses a REAL DANGER to the power that be. Why do you think BRANDON RAUB  had to be detained?

bigwavedave's picture

Bollocks. If the Emperor asks all domestic debt be forgiven. It will be. Mrs Watanabe will gladly sacrifice whatever is owed for the flag. End of crap argument. Obviously you don't know Japan 

realtick's picture

Is The Data Better Off Than It Was Five Years Ago: Corporate Profits

Inthemix96's picture

Another 20 years of ZH predicting the impending collapse?

Fuck no, bring it down now, and bring it down hard.

Lets find out if bernankstien can pay for his life with the value of his labour.  My guess is he wont even know what the fuck you are talking about.

Pull this shit down, the sooner the better.

dick cheneys ghost's picture

Do it for the KIDS...............

MFLTucson's picture


Mercury's picture

...but with a totally different population dynamics.

Lopsided demographics, a bloated public sector plus immigration that favors people by their likely voting habits makes the US situation that much worse.

Black Markets's picture

" If you want a look at the fiscal future of the U.S., look west to Japan, a nation that sits precariously on a fiscal cliff a thousand feet high. "


Japanese living standards still very good even 25 years after the 1987 crash?


Q: When will they all need to use the guns and gold they should have stockpiled?

A: Never. People don't need guns and gold post demographic peak. They need to keep calm and carry on.


Demographics turn like a tanker, and there is absolutely no need for any rash decisions. No need to liquidate your assets, no need to move out the city and into the woods.


When 1% growth replaces 2% growth it’s a big problem for the banks, but for 85% of people it’s irrelevant. It’s the deadwood that suffers.


writingsonthewall's picture

Sadly your analysis has missed the most important part of the comparison between the US and Japan.

The Japanese had SAVINGS and they PRODUCED goods and services. Devaluing their currency merely makes the more competitive and the Japanese culture means they are more interested in sdaving their Government than shooting holes in it with their second amendment rights.

America on the other hand has this going against it.

MOST americans were in debt at the start of the crisis

America builds little - companies like Bain Capital and other Private equity shits farmed all that work out elsewhere.

American banks are less inward looking than Japanese banks - meaning the consequences of them failing are far, far greater.

American consumers consume 33% of the worlds production - with 5% of the worlds population. When the Japanese purchasing power fell - the world hardly noticed. If the American consumer leaves the market - there is nobody to replace them. Even their best buddies (Europe) are losing their purchasing power - not gaining it.(and as above - asians are savers - not going to become consumers overnight)

The japanese kept going through increasing efficiency and branching out into productive activities - promoting companies like SONY and TOYOTA to world beaters.

America has JP Morgan and is heavily reliant on banking for GDP.

When Japan started to fail - the world was quite srtong - America is failing when the world is already weakened by the global crisis.

The comparison is the same in currency debasement terms - but the situation the Japanese faced compared to the US are very, very different.

OneTinSoldier66's picture

"Devaluing their currency merely makes them more competitive..."


Let's say I have a Million Dollars. How much should I devalue it before I'll finally be considered competitive?


Let's say I have a thousand ounces of Silver. I can debase it by filling it with copper. I might end up with four thousand ounces, but it's not pure silver. I still only have one thousand ounces of silver contained within my four thousand ounces of debased metal. Am I more competitive now?


Something only a Central Planner could claim to know, falsely claim that is.

writingsonthewall's picture

What makes me laugh is the gormless mouthpieces of the right who picked up on 'inflation' and now run with it like it's the Olympic torch!

The situation is bad - but what choice do you have??

Find me both of the following and I will happily sign up to your simple ways.

1) A first world politicians who is prepeared to tell his people that "your living standards will have to rapidly decline because we weren't quite truthful about the downsides of capitalism"


2) A first world population which is prepard to accept this without burning the place to the ground.

These are the reasons why inflation is the ONLY solution to this crisis. Even the people who talk of a 'return to teh Gold standard' - have NO IDEA what that would do to their wages and prospects. They think because they have a few gold bars at home that they will be millionaires (in what - they havne't asked the question yet)

It makes me laugh as people argue over the solution - but there is only 1 solution - as there always was.

Inflation to the point of currency collapse - at which point the destruction of living standards will be FORCED upon people.

The problem with giving people the choice is they will always opt for the easy one - this is why the presidential debate is pontless as no matter who wins - the economic result will be unmoved.

You could elect a pig to the whitehouse (with or withouth lipstick) and it wouldn't make any difference.


...but please - don't let stop you voting and feeling like you have made a difference.

writingsonthewall's picture

I see from my -ve there is at least one mealy nouthed right winger who is getting all cross because he doesn't like to hear that there are no choices left.

The time to choose was in the boom - and almost nobody took the choice because they were all greedy.

Inflation is the 'least worst' solution and of course it can be blamed on 'external factors' by desperate politicians (i.e. look at those nasty iranians and their price upping - not our currency debasing policy at all)

mayhem_korner's picture



It's curious that someone who's moniker is a Bible reference labels other people "right wingers."

blu's picture

+1 for use of the word "gormless"

ziggy59's picture

Who would say this? I can see Japan from California

Ham-bone's picture

So many reasons this can't last, can't go any further.  And only one reason it can.  Because it does.

thx111's picture

No Way!   Japan is in much better shape than the US.  Japan is sitll the biggest creditor nation in the world.

Only the issue is they hold so much worthless US treasuries. 

mayhem_korner's picture



Why is this entitled the Future of America?  There aren't runaway deficits and debts now?

JustObserving's picture

The Future was yesterday.  Now US debts and unfunded liabilities grow at $8.37 trillion a year.   

Medicare averages $35,000 per senior citizen a year.  Since no politician dare touch social security, the US is bankrupt.

Medicare's unfunded liabilities are about $157 trillion (about $500,000 per citizen times 314 million citizens)

LMAOLORI's picture



Just wait until the bills start rolling in for obamacare. At least Social Security didn't take a dime in government money since it was funded by the people and the employers. In the end it would appear that having the World's Reserve Currency dependent upon ones viewpoint could be seen as either a blessing or a curse since having it really means we can't default unless they do so willfully and the politicians love debt slaves so they won't do that. 

It Is Impossible For The US To Default

Obamacare Costs Much Higher Than Promised

The Congressional Budget Office (CBO) has raised its initial 10 year costs estimates from $940 billion to $1.76 trillion. Since the government has no money of its own, it must take close to a trillion dollars more from tax payers in order to afford the first 10 years of Obamacare. Every year after 2021, Obamacare will cost more than a quarter trillion dollars based on today's estimates. These numbers will only get worse in time because moral hazard will necessarily cause the amount of claims to rise relative to the cost. For example, how much music do you download on bitTorrent (free) vs. iTunes ($1.00/song)?

Monedas's picture

We have a unique racial signature .... so does Japan !  Duh ?

Bastiat009's picture

"Guest Post: The Future of America Is Japan: Runaway Deficits, Runaway Debts" ... and a very very strong US$ then. I'd like to see that.

Life is so crazy expensive in Japan.

Atlantis Consigliore's picture

Print 16 trillion? do it again Weimar, USA,....

mayhem_korner's picture



According to, the unfunded liabilities are currently at $121 Trillion, give or take a few hundred billion.  So the printing presses need to gin up that kind of paper to get the country back to level.  (And the next day, the country will be a fresh $3.5B underwater again).

koncaswatch's picture

A Yogi Berra-esque thought; The Japan - USA paradigm, it's the same but different. Japan muddles along reaching this point having used 20 years of their exports and savings. 20 years of what does the USA have?

thomasincincy's picture

The USofA is more like Greece or Spain except that our Government has a printing press with reserve currency status

blu's picture

Riding my bike around town all weekend and seeing the parents waddle around the parking lots with their fat kids, I can tell you this we have a lot of lard we can export.

I hear they make a nice soap from ass fat.

Michigan's picture

The fed probably sees the obesity rate and thinks "You know, once people have to work harder for their food and have less to eat they'll be healthier - driving down the costs for Obamacare. Inflation is a win-win!"

Monk's picture

Borrowing and spending are not just Keynesian but part of free market capitalism.


OneTinSoldier66's picture

This is true. +1


But it does depend upon who is doing the borrowing. Government borrowing not a part of the free market.



Nick Jihad's picture

There is nothing free market about spending borrowed money that our grandchildren will be forced to repay.

blu's picture

"just look west (from California) to Japan."

All the way to Japan? No really, don't bother. Just look at California, period. We're like what -- the world's 8th largest economy or something? Home of Facebook and Farm Ville and goat cheese samplers. And 400 pound people on disability living in subsidized housing sitting in front of 64" TVs with 64 oz BigGulps watching "dancing with the stars" 64 hours a day. Yeah we have problems Japan cannot even dream of, including being 164% bankrupt.

Now get this:

My wife got a call last night from a telemarketer trying to get her to vote "yes" on some random proposition on the upcoming ballot. "It will bring tax dollars to the city and not one dime goes to Sacramento" the spokes drone tells us. Wife had to ask what exactly the proposition did to raise money. The lady on the phone tells my wife the proposition aims to create more card rooms at the local casino.

What the actual fuck.

So who is promoting this aborted piece of corrupt political trash? Calling taxpayers in their homes at dinner time to get them to vote on something they are actually too ashamed to name as a gambling bill? Guess who. Oh you will never guess who. The city is promoting this! City managers want the casino to have more card rooms to raise revenues for their stinking pension fund that is totally fucking under water right now.

She (the wife) was really angry. We're not even sure this is legal. Using taxpayer dollars to lobby voters to encourage people with gambling addictions to gamble more so as to raise revenues.

What. The. Actual. Fuck.

Hotel California. You can check in any time you like but you can never leave.

overdrive's picture

Hey here is a serious question. What was a good performing investment in Japan in the first lost decade of the late 80's to late 90's? I have been researching this with no definitive results.

My research shows:

Rental Income declined as property value declined

PM's/Yen declined also

Has anyone found anything?

Monedas's picture

Disclaimer:  If you amuse me .... that I might shine my comedy spotlight on you .... considered it your "big show biz break" .... ungrateful ones !