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Do We Have What It Takes To Get From Here To There? Part 1: Japan

Tyler Durden's picture





 

Authored by Charles Hugh-Smith of OfTwoMinds blog,

The Japanese model of incrementally perfecting consumer technologies may well have have reached marginal returns.

 

Do we have what it takes to get from here to there?
 
This apparently simple question offers profound insights into the dynamics of individuals, households, enterprises and nation-states. If we answer this question honestly, it establishes a "road map" of what must be in place before a progression from here to a more sustainable future ("there") can take place.
 
Individuals, households, enterprises and nations can have goals--where they want to be in the future--but to get there, they need to construct the necessary foundation of values, processes, skillsets, networks, practical experience and capital.
 
Since my partner and I built about 100 houses back in the mid-1980s, I see building a house as a useful analogy for getting from here to there: each step requires different tools, skills, experience and sufficient capital invested to get to the next phase. If you don't have all of these in hand for each step, the goal of completing the house will remain a fantasy.
 
As correspondent Mark G. recently observed in an email, "hyper-centralized entities are institutionally incapable of adopting decentralized solutions." I immediately thought of the Federal Reserve, which has responded to a crisis of centralized "too big to fail" banks holding phantom collateral to support massive leverage and debt with increasingly centralized actions to recapitalize those same centralized banks.
 
The Federal Reserve is incapable of overseeing a decentralized economy; it has responded to the insolvency of our centralized banking sector by increasing counterproductive central planning (zero interest rate policy, money-laundering dodgy mortgages, monetizing Federal debt, etc.).
There is no way the Fed's policies are going to get the nation from here (centralized stagnation) to there (sustainable prosperity).
 
It's a profound question when answered honestly: Do we have what it takes to get from here to there? For most of the world's economies and societies, the answer is a resounding "no."
 
The U.S. Status Quo is as intellectually bankrupt as it is financially bankrupt. Our "leadership" cluelessly clings to the only model they know: incentivize "consumers" into borrowing more money to buy more "stuff" from China, in the magical-thinking belief this churn will somehow lead to sustainable "growth." This is akin to handing a parched alcoholic a fresh bottle of whiskey to wean him of his addiction.
 
That model isn't going to get us from here to there.
 
Since Gordon T. Long and I were recently discussing Lessons From Japan (video), let's ask: does Japan have what it takes to get from here (fiscal-cliff stagnation) to there (sustainable growth)?
 
I recently presented a multi-part look at Japan's economy and society:
 
 
The short answer is no, Japan does not have what it takes to exit stagnation. After 20+ years of extend-and-pretend Keynesian Cargo-Cult "stimulus" borrowing and QE, Japan has managed to construct:
 
1. Bridges to nowhere (make-work projects for the powerful construction lobby)
 
2. An unprecedented fiscal cliff (interest on the debt and Social Security are 114% of tax revenues--oh yeah, that's sustainable)
 
3. A demographic cliff as having children is increasingly burdensome and the "long hours prove you're worthy" work culture deprive children of their fathers
 
4. An export-based economy that is now running structural deficits
 
5. A sclerotic, ruled-by-vested-interests Central State in the grip of intrinsically corrupt political parties
 
6. A revolving-door prime ministry with a new prime minister every year or so
 
7. Global corporations that have lost their edge (when was the last time you saw Sony or Toshiba on a hot new electronics device? It's all Apple, Samsung and Google)
 
8. An undeclared but very real trade war with China (Japanese brand auto sales have plummeted by 20+% in China, global auto makers' last best market) China, Japan and the Senkaku Islands: The Roots of Conflict Go Back to 1274 (September 25, 2012)
 
9. An immigration policy that restricts the very workforce Japan needs to offset its rapidly aging population.
 
(During my last visit, we stayed for a few days in an apartment owned by a friend's parents. The Japanese Police knocked on the door to check on the whereabouts and status of the previous residents, workers from Korea. Imagine the police in the U.S. keeping close tabs on every "foreign born worker." Maybe this is a make-work project in low-crime Japan, but it does suggest that immigrants are viewed as "other" their entire time in Japan. How appealing is that to immigrants?)
 
10. Innovation in Japan has atrophied to specialized techno-gimmicks, materials and biomedical research with unknown commercial applications. Yes, it remains a high-tech research dynamo, but without commercial applications, thousands of patents come to naught.
 
The Japanese model of incrementally perfecting consumer technologies may well have have reached marginal returns. Japan's reliance on the auto and machine tools industries is also creating a drag, as these once fast-growing sectors have reached the stagnation phase as China's growth matures. The notion that everyone wants a car is also on an S-curve as miles driven and auto ownership decline across the developed world.
 
There is a subdued but worried debate in Japan over many of these issues. Clearly, what worked in the postwar boom era from 1949 to 1989--forty years--no longer works, and indeed is now counterproductive.
 
The MITI model of deeply interconnected government agencies, banks and corporations that got Japan from "postwar ruins" to "advanced, wealthy democracy" is not enough to get Japan from here (stagnation and social recession) to there (a rejuvenated society that encourages and enables parenthood and sustainable growth).
 

NEW VIDEO: CHS and Gordon Long discuss Lessons From Japan: "How has Japan avoided an economic death spiral?". (24 minutes, 35 slides)

 


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Thu, 11/08/2012 - 14:27 | Link to Comment Mercury
Mercury's picture

We'll be very lucky if we turn out like Japan:

http://senseofevents.blogspot.com/2012/11/the-permanent-sunset-of-republican.html?m=1

"Before Democrat voters rejoice, they should soberly consider what this means:

A permanent decline in your standard of living and especially that of your children,
A permanently-growing federal government, consuming growing proportions of America's wealth,
And expanding government control or outright ownership of the country's financial activity,
Per-capita shrinkage of economic activity,
An expansive federal bureaucracy, with exponentially exploding regulatory authority over the way you live your daily lives in ways you cannot even imagine yet,...."

 

Thu, 11/08/2012 - 14:28 | Link to Comment no taste
no taste's picture

One of the few happy outcomes of this election.... Karl Rove, you lose!

http://howstupidare.blogspot.com/2012/11/how-stupid-are-karl-rove-and-friends.html

Fri, 11/09/2012 - 01:41 | Link to Comment monad
monad's picture

Not really. By not fielding a serious contender the Republicans managed to stick Obituary with the ticking time bomb they helped him make out of the mess they dumped on him last time. Its just a question of how far they are willing to go to force a reset. It would be easier on everyone if they just fight to the death, but thats not allowed.

Fri, 11/09/2012 - 05:17 | Link to Comment Enslavethechild...
EnslavethechildrenforBen's picture

Simple equation:

If newly printed paper is re-injected into the very bottom of the economic pyramid, eventually you will abolish wealth inequity.

If newly printed paper is re-injected into the very top of the economic pyramid, eventually all the wealth will be in the hands of the rich.

Physics bitchez...

Thu, 11/08/2012 - 14:51 | Link to Comment El Viejo
El Viejo's picture

#3 "Demographic cliff" is the driving force behind it all.

In the seventies the boomers were smart and eager to work and make more money. We had the computer industry then.  Now the Boomers are retiring and soon dying, but now we have the Obama care industry.

Thu, 11/08/2012 - 14:22 | Link to Comment mrktwtch2
mrktwtch2's picture

who cares about the nips or gooks for that matter anymore..lol

Thu, 11/08/2012 - 14:31 | Link to Comment malikai
malikai's picture

That's #2 in the dumbest shit I've heard all day.

Thu, 11/08/2012 - 14:43 | Link to Comment Thecomingcollapse
Thecomingcollapse's picture

What was #1....?  You've got me curious

Thu, 11/08/2012 - 14:48 | Link to Comment malikai
malikai's picture

Today, I found out about 'bronies'.

I'm still struggling to comprehend that.

Thu, 11/08/2012 - 14:51 | Link to Comment Thecomingcollapse
Thecomingcollapse's picture

OMG... just looked that up.... sweet Lord who comes up with this shit!

Thu, 11/08/2012 - 14:58 | Link to Comment malikai
malikai's picture

I don't know, but I'm pretty sure that's one of the signs of the apocalypse.

Thu, 11/08/2012 - 15:18 | Link to Comment Dr. Richard Head
Dr. Richard Head's picture

After looking that up, I would put it on par with goatsie.

Thu, 11/08/2012 - 15:19 | Link to Comment El Viejo
El Viejo's picture

"In the end times knowledge will increase."

Somehow they missed it.

Thu, 11/08/2012 - 17:51 | Link to Comment Panafrican Funk...
Panafrican Funktron Robot's picture

Jesus tapdancing Christ.  That is welll and truly fucked.  UP.

http://www.wired.com/underwire/2011/06/bronies-my-little-ponys/

Thu, 11/08/2012 - 18:46 | Link to Comment quadratic_equation
quadratic_equation's picture

The post by "no taste" is #1 dumbest because he cares more about Karl Rove losing face than the country going down the drain.

Thu, 11/08/2012 - 14:26 | Link to Comment LiesAreTheOnlyTruth
LiesAreTheOnlyTruth's picture

HEY ... where the hell is the Fed to buy up stocks today?  This is not right, they promised to fix everything!

OR ... is it that Wall Street is just flat and waiting to buy back when all the sheep have been properly trimmed to the bone?

Thu, 11/08/2012 - 15:02 | Link to Comment mkhs
mkhs's picture

Wow, you were only three minutes early.

Thu, 11/08/2012 - 14:27 | Link to Comment Ness.
Ness.'s picture

Where's Kevin?

 

 

Thu, 11/08/2012 - 14:29 | Link to Comment silverserfer
silverserfer's picture

there will be a big fire and lots of paper will be burned.  Dont get burned trying to hold on to your paper.

Thu, 11/08/2012 - 14:29 | Link to Comment A Lunatic
Thu, 11/08/2012 - 14:30 | Link to Comment Tidewater
Tidewater's picture

If by "there" we mean a sustainable future, then no. But if we mean the total systemic failure of cultural, political, economic, and market systems and institutions, then yes -- we most certainly have what it takes to get from here to there. We're fast approaching the crapularity.

Thu, 11/08/2012 - 17:03 | Link to Comment Ghordius
Ghordius's picture

+1 for the "crapularity" - LOL - nice avatar, by the way. monochrome, minimalistic, visible

Thu, 11/08/2012 - 14:37 | Link to Comment SheepDog-One
SheepDog-One's picture

Well shit if their best idea STILL is from the 80's 'Hey lets excite 'consumers' to borrow money and buy Chinese shit'... its truly over.

Thu, 11/08/2012 - 14:39 | Link to Comment q99x2
q99x2's picture

When I got into this situation I knew there was no going back and no going forward.

But maybe I was wrong. Where's Dave?

Thu, 11/08/2012 - 14:39 | Link to Comment Count de Money
Count de Money's picture

Too depressing. Time for a little eye-candy palatte cleanser.

http://www.youtube.com/watch?v=h6GJ4AH-SI4

Thu, 11/08/2012 - 15:21 | Link to Comment Dr. Richard Head
Dr. Richard Head's picture

Was that the group that was used to encourage more Japanese bonds?

Thu, 11/08/2012 - 15:33 | Link to Comment Count de Money
Thu, 11/08/2012 - 14:41 | Link to Comment NEOSERF
NEOSERF's picture

And like Japan we also spend 133% of our income and fill the hole with printed IOUs.  However, the US is able to sell our IOUs to unsuspecting foreigners whereas Japan is running out of elderly jingo-nationalists to sell too...Japan is Greece for young people so expect an influx of college students in the next 10 years.

Thu, 11/08/2012 - 15:47 | Link to Comment suteibu
suteibu's picture

"6. A revolving-door prime ministry with a new prime minister every year or so"

This is a laugher and doesn't belong in this analysis.  The politicians do not run the country.  That is the purview of the unaccountable bureaucracy whence most of the corruption exists.  Politicians are merely the public face of the government and the revolving door of blame and shame is a set up highly valued among the bureaucratic elite. 

Perhaps the US has a more top-down leadership structure where politicians actually have power.  If so, then Japan and the US cannot be compared equally in that regard, although Obama (and previous presidents) seems to have little difficulty shifting legislative power to his growing bureaucracy via regulations.

Thu, 11/08/2012 - 15:55 | Link to Comment Stuck on Zero
Stuck on Zero's picture

To show your support for Japan and the economy everyone should go out now and buy the latest piece of shit from Sony.

http://www.theonion.com/video/sony-releases-new-stupid-piece-of-shit-tha...

 

Thu, 11/08/2012 - 16:15 | Link to Comment NidStyles
NidStyles's picture

That is all the state does is perpetuate it's own existence until it collapses. History Re-Dux...

Thu, 11/08/2012 - 17:08 | Link to Comment pulp1
pulp1's picture

last time I checked they had 4.6% unemployment??

They pay their debts and build things??

The koreans over there are the fuckers doing the crime - what little there is.

Compare the black and white crime stats in the US - Can you blame them? Wake the fuck up!

Thu, 11/08/2012 - 18:04 | Link to Comment suteibu
suteibu's picture

"last time I checked they had 4.6% unemployment??"

They count everybody who draws a paycheck despite the hours worked.  Over 40% of Japan's workforce is part time.  Incomes are falling and benefits are are declining with full time jobs.  The unemployment figure is a hoax, a deception, a political prank. 

Thu, 11/08/2012 - 17:36 | Link to Comment steve from virginia
steve from virginia's picture

 

Hmmm ... article on Japan and economics and no mention of Fukushima and Japan's reactor park of 54 (four done for) crumbling reactors.

 

If Japan misses on being annihilated in the next 20 years it will be the luckiest escape, ever.

 

Japan broke => companies in Japan broke => utilities can't earn a profit => reactor companies board up their plants with plywood and leave town => reactors melt down and blow up, "Who Cares?".

 

=> millions of Japanese die in nuclear horror. How 'sustainable' is that? Quite, apparently. (Coming to France, too ...)

 

Nicole Foss said it best: "Nuclear power is incompatible with hard times".

 

 

Thu, 11/08/2012 - 17:39 | Link to Comment earleflorida
earleflorida's picture

Note:   Japan hasn't spent a $yen$ of its budget on military infrastructure since WWII... just a note.

thankyou C H-S

Ps.   Once america loses it's military superiority, our world reserve [greenback] currency instantaneously changes into a 'Mao'$-yuan"... perhaps by 2016-17!

Ps2.  Fact:    You can't have a 1st Class Military with a 2nd class economy... ask the USSR and UK!

:-))

Fri, 11/09/2012 - 04:16 | Link to Comment Vlad Tepid
Vlad Tepid's picture

Note:  Japan currently ranks 6th in the world in terms of military expenditures and has ranked in the top 10 for at least the last 30 years.  

Get out much?

Sat, 11/10/2012 - 19:54 | Link to Comment earleflorida
earleflorida's picture

Fact: Japan was the world's 2nd largest economy behind the U.S.A... until, late 2010 when China tripp'd-em-up,...      http://www.huffingtonpost.com/2010/08/15/china-japan-economy_n_682747.ht...

Fact: Japan spends 1% of GNP on military! [if that?]     http://en.wikipedia.org/wiki/Defense_budget_of_Japan

Fact: Japan ranks #5  or maybe #6- BIg! Deal-- it's absolutely miniscule in proportion to the U.S. [65+/+ years is ~  four [4] generations-- certainly more than enough time to forget?]

http://en.wikipedia.org/wiki/Article_9_of_the_Japanese_Constitution

Fact! ;As a matter of  'Common Sense' Fact !! ;Pragmatically Factual, one astute observer would say... as in statistically correct!!!   *2011 & 2012 data facts!

 http://www.defense.aol.com/2012/03/16/the-military-imbalance-how-the-u-s...

yours

Fri, 11/09/2012 - 04:52 | Link to Comment Terp
Terp's picture

"Imagine the police keeping tabs on every "foreign worker""

 

Wow, what a totally novel concept. Wouldn´t that make them racist?

 

<,<

Fri, 11/09/2012 - 05:10 | Link to Comment Enslavethechild...
EnslavethechildrenforBen's picture

Bingo!

Cops are an extention of our military, 99% racist against anyone from the middle east or from the united states that would resist being a slave to the global banking cartel

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