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How Japan Blew Its Savings Surplus: What A Keynesian Dystopia Looks Like

Tyler Durden's picture


Submitted by David Stockman of Contra Corner blog,

Financially speaking, Japan is fast becoming a Keynesian dystopia. Its entire economy is now hostage to a fiscal time bomb. Namely, government debt which already exceeds 240% of GDP and which is growing rapidly because even the recent traumatic increase in the sales tax from 5% to 8% does not come close to filling the fiscal gap. Moreover, even at today’s absurdly low and BOJ rigged bond rate of 0.6% nearly 25% of government revenue is absorbed by interest payments.

Now comes the coup de grace. Japan’s savings rate has collapsed (see below) and its vaunted current account surplus is about ready to disappear. This means Japan’s accounts with the rest of the world will cross-over into a “financial no man’s land”; it will be forced to steadily liquidate its overseas investments to pay its current bills—an investment surplus built up over the course of 50 years. But this will also reduce foreign earnings and thereby expand Japan’s growing deficit on current account.

Accordingly, to finance its  “twin deficits” it will have to attract massive amounts of foreign capital for decades to come—an imperative which will require a devastating rise in interest rates, perhaps as high as 4% according to one expert :

The yield on Japan’s benchmark 10-year government bond, now around 0.6 percent, could rise to 4 percent – a level unseen since March 1995 — should the current-account balance drop into deficit as public debt eclipses the nation’s savings, said Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute.

Needless to say, were the carry-cost of Japan’s towering fiscal debts to rise by even half that much it would be game over. Interest expense would absorb virtually 100% of current policy revenue, forcing the government to raise taxes over and over.  One expert quoted in the Bloomberg article below says that a sales tax of 20%—-nearly tripple the recently enacted level—-would be required to wrestle down the fiscal monster that would result from interest rate normalization.

Unless the government raises the sales tax to 20 percent or makes drastic reform on social welfare spending, this scenario is highly likely,” said Ogawa. “Higher interest rates will discourage domestic capital investment and spur the shift of production abroad, increasing the number of people unemployed.”

The above quote strongly hints why Keynesian dystopia is an apt description of what is emerging in Japan; and why that descriptor is also reflective of the financial horror show that is coming to our own financial neighborhood a decade or two down the road.

As indicated above, the alternative to an economy killing 20 sales tax is “drastic reform of social welfare spending”. But the latter is not even a remote possibility. Japan’s population is both shrinking and also aging so rapidly that its fast on its way to become an archipelago of old age homes.

Japan savings rate as shown below has dropped from in excess of 20% during its 1970s and 1980s heyday as a mercantilist export power to only 3% today. When Japan’s retired population reaches nearly 40% of the total in the years ahead, this rate will obviously go negative as households liquidate savings in order to survive.

What happened to Japan’s huge savings surplus?  The government borrowed it! And wasted it on massive Keynesian stimulus projects that kept the LDP in power for decades but produced bridges and highways to nowhere that will be of no use to Japan’s retirement colony as it ages.

And the adverse demographic tide is indeed powerful as shown by the curve below on Japan’s working age population. In a few short years what was a working age population that peaked at 88 million has dropped to 79 million; and it will plunge to below 50 million persons in the next two decades.

What the Keynesian witch-doctors who advised Japan to bury itself in fiscal stimulation after its financial crisis of 1989-1990 did not explain was how this inexorably shrinking working population could possibly shoulder the tax burden needed to carry Japan’s massive public debt.

Yet there is no other way out of the Keynesian debt trap in which Japan is now impaled. As the current account, also shown below, continues to worsen, the need to import capital to fund the gap will drive interest rates sharply higher. The burden on Japan’s remaining taxpayers will become crushing.

So the graph below should be pasted on every US Congressman’s forehead.  When the debt spiral goes too far—it becomes a devastating financial trap.  And it cannot ultimately be solved with money printing because if carried to an extreme—even for the so-called reserve currency—it will destroy the monetary system entirely.

It should also never be forgotten that the drastic degeneration of Japan’s public finances happened in real time—–within less than two decades after its leadership was bludgeoned into one fiscal spasm after the next by Keynesian officialdom in the US Treasury, the IMF, the OECD and elsewhere.  And this is clearly a case of bad ideas imported from abroad. The generation of officials who lead Japan’s post-war miracle may have been hopelessly addicted to unsustainable models of mercantilist export promotion and currency pegging, but they were not believers in Keynesian borrow and spend.

I know that from personal experience of dealing with Japanese financial officialdom during the early days of the Reagan administration. Quite simply, they were shocked that America was about to take such an immense fiscal gamble by drastically cutting taxes before the inherited domestic spending had been curtailed and the huge defense build-up had been funded.

That was then—at a time when Japan’s debt was under 50% of GDP notwithstanding two decades of government directed internal economic development. Yet just a decade latter— after being bludgeoned to drastically appreciate the yen after the Plaza Accord of 1985—their export mercantilism model broke-down in a vast financial bubble and bust engineered by the BOJ.

Thus, left completely at sea, they were sitting ducks for visiting Keynesian fireman like Professors Bernanke and Summers. Japan then launched upon the greatest experiment in Keynesian fiscal stimulus ever imagined. The catastrophic results speak for themselves and are a potent remainder that bad ideas can wreak immense  damage once they are embraced by the machinery of the state.


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Tue, 06/10/2014 - 21:40 | 4842907 Seize Mars
Seize Mars's picture

Every topia is a dystopia.

I was blown away by hearing the 20-yr JGB didn't trade at all yesterday in the am. session.

Tue, 06/10/2014 - 21:43 | 4842925 So Close
So Close's picture

Let's screw the kids.. by the time they realize what has happened we will be dead or at least have Alzhiemers.

Tue, 06/10/2014 - 22:01 | 4843008 pauhana
pauhana's picture

Haven't most of ZH's been waiting for this for years?  I'm almost thinking it will never happen.  How many more rabbits are there in the hat?

Wed, 06/11/2014 - 02:44 | 4843577 thisisjustarand...
thisisjustarandomusernameicreatedforzerohedge's picture

It's a lot more likely than any similar sort of point-of-no-return in the US or China...

the kicker is simple the 'fixed' bond rate. if they lose control of that, their interest will drown them.


why do you think Abe is slowly stirring nationalism and painting China like an enemy?

nothing like a good war to solve your econimic hardship


to be sure, China is playing the same card but it's as a sleight of hand distraction than an endgame solution.

Thu, 06/12/2014 - 06:38 | 4847758 BigJim
BigJim's picture

 nothing like a good war to solve your econimic hardship

War doesn't solve economic hardship... unless you're selling weapons to the combatants, or bombing them back into the stone age and then lending them the money to rebuild afterwards.

WWII was good for the US but a catastrophe for everyone else - Japan, the UK, Germany, France and Russia had vast amounts of their stock of real wealth destroyed. Yes, they rebuilt, but if the capital that went towards rebuilding had  been spent on new stuff we all would have been commensurately richer.

'War is good for the economy' is the broken window fallacy written in blood.

Thu, 06/12/2014 - 18:12 | 4850447 Seeing Red
Seeing Red's picture

Unless you win scarce resources.  NAH -- who am I kidding, the elite wouldn't stoop to that ....

Fri, 06/13/2014 - 04:25 | 4851822 thisisjustarand...
thisisjustarandomusernameicreatedforzerohedge's picture

sorry i misphrase that a bit.... what i meant was it can "solve" the "economic" problem for the policymakers, and by solve the problem i mean make it not threaten their control of power... i didn't mean it would bring economic prosperity to Japan but I meant that Abe could use it to distract the people and get them to continue to support him and keep him in power

Wed, 06/11/2014 - 11:21 | 4844741 headhunt
headhunt's picture

The problem is they are printing rabbits

Wed, 06/11/2014 - 00:29 | 4843425 ThroxxOfVron
ThroxxOfVron's picture

"Let's screw the kids.. by the time they realize what has happened we will be dead or at least have Alzhiemers."

I'm glad that You won't be able to recognize your progeny when they come to dispense with You.

Easier for You and for Them that You believe it is a stranger putting You down like the dog You are...

Wed, 06/11/2014 - 03:18 | 4843616 LostandFound
LostandFound's picture


As a father, what exactly is our legacy to our generations of children? that we stole your future to experiment and better our lives now?

I fear for our childrens future, unless the biggest debt forgiveness / reset is implemented.

Tue, 06/10/2014 - 23:06 | 4843261 NoDebt
NoDebt's picture

Seize Mars- I agree.  The non-trading of JGB in either the futures or cash market for HOURS (article on ZH, where I first heard about it) was creepy in the extreme.  NOBODY wants to play ball with them any more.  They are, quite literally "on an island" now.  Their own central bank being the only buyer of their bonds.  

They are NOT FAR from a muti-generational "event".  Deflation, inflation... I have no idea the manner of their destruction, but it ends in a RADICAL reduction in living standards.

The REALLY creepy part?  We're no different than them, except in magnitude (larger in absolute terms, smaller in percentage terms) and how far down the cruve we are currently.

Tue, 06/10/2014 - 23:44 | 4843347 Luckhasit
Luckhasit's picture

Seriously no one? Then wtf are they using to prop up the Yen? Dolphins?

Wed, 06/11/2014 - 00:37 | 4843442 newbie vampire
newbie vampire's picture

"Then wtf are they using to prop up the Yen?"


Income from Whale sushi, originally caught for scientific research. And the export of energy from Fukushima./sarc

Wed, 06/11/2014 - 01:51 | 4843526 BringOnTheAsteroid
BringOnTheAsteroid's picture

Unfortunately the question isn't about inflation or deflation, it's about war. Never thought I'd ever entertain the idea of the nuclear WWIII but I'm afraid we are inching closer to this inevitable outcome.

I am convinced one day very soon we are going to wake to news that will leave us immobilized with disbelief and fear.  

Wed, 06/11/2014 - 12:14 | 4845013 matrix2012
matrix2012's picture

I predict the dolphin slaughter at the annual festive of Taiji Cove will increase dramatically to help alleviate the inflation aggression on meat and other food.

Wed, 06/11/2014 - 00:41 | 4843448 ThroxxOfVron
ThroxxOfVron's picture

The US isn't a bunch of islands.  

There is more than a century of wood and coal to burn if We have to go back to stoves and steam; not that there aren't good reasons to continue developing solar and led lighting, etc...

Every shitty little yard in suburbia will yield some kind of crop once the lawns are ripped up; -I have more strawberries than I can possibly eat today and I'm giving them away...

Let's stop funding wars, dissolve worthless public bureaucracies, let less-than worthless corporate pollution complexes fail, give up the hummers and mcmansions, default on the medical and educational complexes, charge the foreign nations for their security, etc...


Wed, 06/11/2014 - 01:54 | 4843528 BringOnTheAsteroid
BringOnTheAsteroid's picture

The sad thing is the world would probably be better off with a couple of billion less people and just go back to burning fossil fuels than maintaining the current population and wringing our hands trying to find alternative and green energy resources.

I suppose when we cover the earth like unthinking bacteria until either the resources are consumed or we rot in our own festering waste, what do we expect.

It ain't gunna be pretty.  

Tue, 06/10/2014 - 21:42 | 4842915 Izznogood
Izznogood's picture

This is just a recap of what Kyle Bass has been saying for years ...

Tue, 06/10/2014 - 21:49 | 4842952 max2205
max2205's picture

It's all Chinese to me....

Wed, 06/11/2014 - 03:11 | 4843609 _ConanTheLibert...
_ConanTheLibertarian_'s picture

You mean Japanese?

Tue, 06/10/2014 - 21:43 | 4842926 Jason T
Jason T's picture

2015.75  Sovereign Debt Crisis Big Bang

- Martin Armstrong's Computer

Wed, 06/11/2014 - 10:17 | 4844372 Bendromeda Strain
Bendromeda Strain's picture

2001.75  World Trade Center

2008.75  TARP Crisis

2015.75  ?? Buckle up, It's going to be a bumpy ride

Tue, 06/10/2014 - 21:44 | 4842928 becky quick and...
becky quick and her beautiful mouth's picture

remember when Japan bought Marty mcfly's company and fired him?

Wed, 06/11/2014 - 00:43 | 4843452 newbie vampire
newbie vampire's picture

"remember when Japan bought Marty mcfly's company and fired him?"

That was during "the Japan that could say NO" period when they expounded their Japanese superiority over America theory. 

Obviously, they don't say that when they want the US to provide cannon fodder for their rocks.

Tue, 06/10/2014 - 21:45 | 4842932 Spungo
Spungo's picture

Lowering the cost of exports by 20% then raising the cost of imports by 25-50% improves the trade balance. Paul Krugman said so.

Tue, 06/10/2014 - 21:47 | 4842942 ted41776
ted41776's picture

"this time it'll be different"

Tue, 06/10/2014 - 21:52 | 4842965 Spungo
Spungo's picture

Don't worry guys, Mike Norman says Japan doesn't have any problems because they can always print money like Argentina or Venezuela.

The internet seems to think Mike is fucking retarded. About 20% of the votes are up, 80% of votes are down. 

Tue, 06/10/2014 - 22:02 | 4842991 Number 156
Number 156's picture

That third chart looks like an outline of Godzilla's back.

Wed, 06/11/2014 - 05:58 | 4843706 intric8
intric8's picture

Down is the new good!

Tue, 06/10/2014 - 22:02 | 4842992 Uber Vandal
Uber Vandal's picture

Four percent of one quadrillion is a very large number. Even if it is in Yen.

If my math is correct, 1,000,000,000,000,000 @ 4% = 40,000,000,000,000

Only 40 TRILLION yen in interest.

Tue, 06/10/2014 - 22:00 | 4843006 MrTouchdown
MrTouchdown's picture

There is great honor in destroying Japan from within.

Tue, 06/10/2014 - 22:02 | 4843012 BovespaBroker
BovespaBroker's picture

japan is broken !

fukushima will send japan to third world.

i sorry for these whale fishers.


Wed, 06/11/2014 - 00:48 | 4843459 newbie vampire
newbie vampire's picture

"i sorry for these whale fishers."

i not sorry for these whale and dolphin fishers. They don't need to kill them because they can't afford to buy food.  So fuck 'em for their sense of entitlement.


Wed, 06/11/2014 - 05:12 | 4843665 RafterManFMJ
RafterManFMJ's picture

One wonders how you feel about deer hunters? Duck hunters?

Wed, 06/11/2014 - 01:57 | 4843539 BringOnTheAsteroid
BringOnTheAsteroid's picture

In Japan we are witnessing in real time another Mayan or Easter Island civilisation. With the interconnectedness of the global financial system though there aren't going to be any spectators in Japans collapse. 

Tue, 06/10/2014 - 22:05 | 4843022 BovespaBroker
BovespaBroker's picture

piece of crap island,

surrounded by radiation.

gonna have to import water in a little while.

Tue, 06/10/2014 - 22:09 | 4843039 TeethVillage88s
TeethVillage88s's picture

Japanese could be spending Yen (what would be savings) on everyday items OR

1) Electronic Games
2) American Fast Food
3) Hello Kitty Merchandise
4) Gold
5) Bitcoin
6) American Stocks
7) House Hunting outside of radiation cloud area and sea coast
8) Expensive Traditional Japanese Restaurant Food.


Tue, 06/10/2014 - 22:10 | 4843043 Seasmoke
Seasmoke's picture

The seed rice, is all gone. 

Tue, 06/10/2014 - 22:22 | 4843088 Wild Theories
Wild Theories's picture

Yes they were bludgeoned into the Plaza accord, and it was the most direct evidence that Japan always was a US colony, overtaking your master was simply not allowed.

But now, unfortunately, it really is their own doing this time.

Wed, 06/11/2014 - 09:49 | 4844233 intric8
intric8's picture

Its chartalism run amok there in japan, which is worse than mere keynesianism. They also have the keys to the printing press.

Tue, 06/10/2014 - 22:45 | 4843194 cape_royds
cape_royds's picture

A drop in Japan's national savings rate was natural and to be expected.

When the population was mostly in the workforce, they saved a lot.

Now when the population is aging, they draw down their savings. Why not? That was one of the reasons they saved in the first place. It was deferred consumption.

The stupidity was in not simply rolling with the natural rhythym. Their government should have simply accepted the fact that topline GDP was going to decline somewhat.

Wed, 06/11/2014 - 04:55 | 4843659 Bazza McKenzie
Bazza McKenzie's picture

The problem is that most of their saving went into government bonds, even more than in most countries.  Like all governments, the Japanese one did not spend that money on income-producing assets that would eventually repay the loans.  It spent it on a myriad of wasteful activities and handouts, all meant to buy votes at the time.

Now when that natural dis-saving state arrives, there is no capacity to repay the bonds from genuine income production, just from money printing which is not attached to real assets.  The fall back for governments in this situation is to increase taxes on the workforce.  But since the workforce is shrinking rapidly, this will never generate enough to keep the older generations, who loaned their money to the Japanese government, in anything like the standard of living they had expected and that they might have attained had their savings gone into private sector assets overseas rather than the maw of the Japanese government.

Thu, 06/12/2014 - 06:46 | 4847763 BigJim
BigJim's picture

Well expressed, sir. +++

Tue, 06/10/2014 - 22:55 | 4843227 Billy Shears
Billy Shears's picture

This means war! 

Tue, 06/10/2014 - 23:00 | 4843239 Central Ohio
Central Ohio's picture

We have a similar but smaller population problem.  That is why I support tight borders with LEGAL immigration.  We need the poplulation growth.

Tue, 06/10/2014 - 23:01 | 4843242 Seize Mars
Seize Mars's picture

The numbers just don't add up.

Listen, people squawk all the time how a government's debt service will be inadequate if interest rates rise. It's inadequate right now! Look at Japan.

If you think - for a fucking Roppongi minute - that they wouldn't simply selectively welch on certain coupons, so as to keep the shit show going, or to make room for new auctions where they can skim a leetle bitty more, then I've got a Rainbow Bridge I'd like to sell you.

Nothing is as it seems. Nothing.

Tue, 06/10/2014 - 23:28 | 4843258 scuttlebutt
scuttlebutt's picture

Don't the interest payments to the BOJ just make there way back to the Government? As long as central banks are able to buy government debt, does any of this really matter?

Wed, 06/11/2014 - 00:00 | 4843381 Seize Mars
Seize Mars's picture

That's what I'm saying. It's a circus jerkus.

Wed, 06/11/2014 - 00:51 | 4843458 ThroxxOfVron
ThroxxOfVron's picture

Sorry to break this to You, Bro; -but, every ragin' hard cock goes limp eventually.

You can do coke, you can gulp viagra, you can rub your anus with ice cubes made outta hot chilies, you can stuff poppers in your snoot, you can pound that meat on the nightstand in front of fuckin' Marilyn Monroe and her freaky nympho friend...but the night is longer than You are...

Every ragin' hard cock goes limp eventually.

-You can quote Me on that.

Wed, 06/11/2014 - 06:00 | 4843710 darteaus
darteaus's picture

Finally, an analogy I can understand!

And, to continue, no president wants to be standing there holding the "bag" when that happens. So, they try increasingly bizarre magic tricks that simply guarantees an eventual collapse with the only thing extended being an inordinate down time.

Tue, 06/10/2014 - 23:08 | 4843267 ken
ken's picture

Would you say that this repatriation is likely to strengthen the yen at some point? "it will be forced to steadily liquidate its overseas investments to pay its current bills—an investment surplus built up over the course of 50 years. But this will also reduce foreign earnings and thereby expand Japan’s growing deficit on current account."

Wed, 06/11/2014 - 01:55 | 4843534 ThroxxOfVron
ThroxxOfVron's picture

"Would you say that this repatriation is likely to strengthen the yen at some point?"

At some point??  Huh???

Eventually the Yen will collapse.

-It will only be viable domestically within Japan if at all.

Strong in carry trade.  Weak in mass repatriation.

Carry was productive/extractive and thus deflationary.  Repatriation is non-productive/aggregative and thus inflationary.

When the rush home to Japan to pay for the aged to eat noodles in bed gains force prices will soar to soak up the flood...

Grandma is gonna want to sell everything to eat and stay warm and there is no one to buy all she has accrued.

Tue, 06/10/2014 - 23:25 | 4843318 starman
starman's picture

harakiri! or kamikaze!

Wed, 06/11/2014 - 00:52 | 4843466 newbie vampire
newbie vampire's picture

"harakiri! or kamikaze!"

Seppuku by easy money.

Tue, 06/10/2014 - 23:33 | 4843332 Peter Pan
Peter Pan's picture

Normal people faced with such figures would he heading for the hills. So either there is an incredible faith in the printiing machine to solve the coming tsunami or the market participants are totally clueless about even basic economics.

Unless Japan literally disappears under the waves, it will be interesting to see how the world will cope with Japan stumbling badly.

How on earth a nation allowed itself to grow population wise to such a level in the absence of resources, is beyond me.

It would not surprise me if all Japanese over the age of 75 committed suicide to save the other generations.

Wed, 06/11/2014 - 00:03 | 4843383 Wild Theories
Wild Theories's picture

Blame their natural longevity, and the postwar babyboom.

It seems to be an instinctive human condition to make many babies immediately after war.

Wed, 06/11/2014 - 05:54 | 4843702 darteaus
darteaus's picture

Hmmm. You just survived years in the jungle eating rats with a bunch of other guys, not to mention people trying to kill you the entire time. You get home, and everything is destroyed-including a lot of people. Except, there are a lot of women, and they haven't seen many young men for a long time.

What to do...

Wed, 06/11/2014 - 06:15 | 4843725 cossack55
cossack55's picture


Wed, 06/11/2014 - 05:19 | 4843667 RafterManFMJ
RafterManFMJ's picture

Renew!! Renew! RENEW!!

Tue, 06/10/2014 - 23:43 | 4843345 Luckhasit
Luckhasit's picture

You know you've been on ZH to long when you like to look at chart porn.

However this is just sad.

Tue, 06/10/2014 - 23:47 | 4843349 The Most Intere...
The Most Interesting Frog in the World's picture

This may not be popular and I am no big government type but the government needs to wrestle the money out of the bastards that ran up all the fucking debt. Yes primarily cronies from the baby boomer generation. Yes the ones from the 1960's who were supposedly against state tyranny but when $'s waved under their noses turned in favor of statism.

Tue, 06/10/2014 - 23:46 | 4843351 AdvancingTime
AdvancingTime's picture

Japan continues to slide towards an economic abyss with each passing day. The writing is on the wall. Japan is facing a wall of debt that can only be addressed by printing more money and debasing their currency. This means paying off their debt with worthless yen where possible and in many cases defaulting on promises made. Japan's public debt, which stands at around 230% of its GDP and is the highest in the industrialized world.

 The moment the Japaneses stock market fails to rise enough to offset inflation this will turn into a tsunami of  money fleeing Japan and constitute the end of the line for those left holding both JGBs and the yen. This has been a long time coming and I contend the cross-border flow of money leaving Japan is why some stock markets have remained so resilient . When Japan crumbles it will be felt across the world. More on this subject in the article below.

Tue, 06/10/2014 - 23:47 | 4843352 dojufitz
dojufitz's picture

Google the Black Forest of Japan......where everyone goes to end it on their own terms......

Tue, 06/10/2014 - 23:50 | 4843362 Peter Pan
Peter Pan's picture

The only bright spot on the map is Greece.

It used to be that 100% of people thought things were bad. But now.....


Wed, 06/11/2014 - 00:10 | 4843387 Captain Queeg
Captain Queeg's picture

Oh, just include ambient radiation, koi ponds and 10x10 garden plots in GDP. Fixed it.

Wed, 06/11/2014 - 00:24 | 4843413 yogibear
yogibear's picture

Bernanke (helped architect Japan's economic plan of self-destruction) , Yellen, Evans, Dudley and the rest of the Federal Reserve banksters, Japan is your Keynesian baby. Print until it dies.

The US isn't far behind. 

Wed, 06/11/2014 - 00:27 | 4843419 kchrisc
kchrisc's picture

All that is left is the "crack-up boom."

Wed, 06/11/2014 - 01:11 | 4843493 Cthonic
Cthonic's picture


Wed, 06/11/2014 - 05:46 | 4843692 darteaus
darteaus's picture


Wed, 06/11/2014 - 01:30 | 4843515 Nue
Nue's picture

Japan has the unique problem of a generation of kids who have no interest in sex much less children. In truth its not all that suprising Slave populations though history have tended to have notoriously low birth rates.

Wed, 06/11/2014 - 09:37 | 4844186 AynRandFan
AynRandFan's picture

I was thinking while reading the article that I wouldn't want to bring children into the world if I lived in Japan.

Wed, 06/11/2014 - 01:50 | 4843524 mcgoverntm
mcgoverntm's picture

I remember, back in the 1990s, when the "Mrs. Watanabe's" refused to spend their savings to give a Keynesian goosing to the economy.  Keynesian maniac Krugman suggested that the Japanese government impose a tax on "excess savings."  The idea was that a saver be required to spend a certain percentage of their savings. The government would then confiscate whatever required spendings were not spent thereby giving the saver a compelling incentive to spend.  Maybe it's time to recycle this Keynesian Frankenstein before it's too late for Keynesians to save Japan.  

When I read Krugman's suggestion, I realized that the American "progressive" left was truly fascistic.  

Wed, 06/11/2014 - 02:32 | 4843563 q99x2
q99x2's picture

Maybe they can sell plutonium

Wed, 06/11/2014 - 05:47 | 4843695 darteaus
darteaus's picture

It's tough to sell what you're already giving the rest of the world for free.

Wed, 06/11/2014 - 04:24 | 4843648 enloe creek
enloe creek's picture

I think if we make bill clinton the ambassador to japan it would help with the population problem or did he get a vasectomy
another thing maybe all the deficit run ing countries could put tariffs on so production comes home from freaking china . oh the corporations will cry so thats a plus just lower the corporate tax rate. we would get jobs tax revenue and less so ial spending while cutting the deficit.

Wed, 06/11/2014 - 05:41 | 4843687 Doom and Dust
Doom and Dust's picture

The debt may be unsustainable, but deflation and a shrinking population has meant in Japan, real median wages haven't shrunk like in the West, the middle class at least retains some spending power and outside Tokyo housing is still affordable.


Wed, 06/11/2014 - 05:50 | 4843697 Debugas
Debugas's picture

public debt can be easily paid back by printing more yen. Can they print yen without obligations attached ?

Wed, 06/11/2014 - 05:52 | 4843700 macroeconomist
macroeconomist's picture

It's 2014 and some economically illiterate still think savings are invested and governments can "waste" savings...

Truth: Loans (investment) and government deficits create  the subsequent savings, not vice versa. That savings finance investment and government borrowing crowds out private investment is WRONG causality. 

It's ironic that those who are obsessed about how the fiat money system works still don't get the basic mechanism in a fiat money world. 

Wed, 06/11/2014 - 07:12 | 4843784 SeventhCereal
SeventhCereal's picture

Don't care, but if Japan militarizes, squash em like a bug very hard and very fast.

Wed, 06/11/2014 - 07:58 | 4843838 FreeNewEnergy
FreeNewEnergy's picture

There's a way out for Japan, but, unfortunately, it involves hangings of people like Kuroda and Abe, a complete overthrow of the government, default on all debt, forgiveness of all public debt owed by citizens, and a complete restructuring based on a new yen backed by something tangible (like, um, I don't know, maybe gold) with taxes at rates last seen in the 1930s - figure 2% on income, sales, property.

Japan could actually show the rest of the world the path to the future. Smaller, miniscule government, and fewer layers of it. Here in America, and in Europe, we're taxed silly by federal, state, county, city (or town, village) and than special tax districts like schools, fire departments, water, etc.

All of these tax districts need to be scaled back by 80-90%, the political hacks operating them sacked and the power given back to the people. Of course, the Fed should need to be abolished, but only by overthrowing the government (start by a massive tax revolt) can this be accomplished. The bane of all the world is government, in every form, of every shape and size. We've gotten ourselves to a point at which only radical solutions can prevail, lest we succumb to complete totalitarianism, with income taxed at 60-80-100% - complete slavery.

Those who are holding out for a pension, social security or other government handout will no doubt be against this, but there is no other reasonable remedy. Your pension or government dole will be spent before it clears the bank in short time, though the proles cannot see this. A complete overthrow and overhaul of the government and financial system must occur in order to clear all debts and malinvestments, give the power of the purse back to the people and out of the hands of oppressive governments everywhere.

If that sounds radical and revolutionary, well, there it is. The Founders fought and died for much less. Many here at ZH know and understand that such actions are not taken lightly, and that the reset will be ugly, bloody and ferocious, but the other side offers comfort and the chance at a new life, without massive government intervention, taxation and control.

I know I sound like a typical internet loudmouth, but I've had enough of this shit. It's time to dismantle the government and the financial apparatus of Wall Street, if not peaceably, then well, by force. Just stop paying. I've done it. Haven't paid taxes since 1999, and haven't paid property taxes on a rental property in five years. Guess what? I still own the property. The local government (Rochester, NY) has so many delinquent properties they simply don't know what to do with them. They keep sending me notices that they can foreclose, but they never do, maybe for one or two reasons: because they know they'll be tied up in court for years, or, they don't want yet another abandoned house in a city full of them. (Just to note, the taxes are extreme. I had already paid more in taxes than I paid for the property in just 8 years. That's absurd!)

Government is THE problem. Get them out of the way. I hope I'm on some list somewhere, because I don't care. I don't want to live like this any more. I'll stand up and get hauled away if that's their solution. That I'm fomenting revolution or whatever. I want my country back. I want my freedom back. I want my life back.

So should you all, because the alternative is not very pretty.

Wed, 06/11/2014 - 09:14 | 4844106 yellowsub
yellowsub's picture

I'm turning Japanese, I think I'm turning Japanese, I really think so... 

Wed, 06/11/2014 - 11:13 | 4844697 taketheredpill
taketheredpill's picture



If Spain can borrow 10-yr at 1.25% then Japan can borrow 10-yr at 0.50%.  Crappier metrics equals lower rates, right?



Wed, 06/11/2014 - 17:53 | 4846311 honestann
honestann's picture

The only major mistake in this article is to assume interest rates will rise to 4%.  Why?  Because when something cannot happen, it does not happen.

Specifically, the partnership that is the predators-DBA-government and predators-DBA-central banks will hold interest rates to near-zero... or perhaps literally zero... or perhaps even negative interest rates.  Hey, do recall, they create FIAT out of thin air, so with no reality attached, they can literally create endless FIAT at zero interest.

And if that isn't enough to cause hyper-inflation, then they will just create endless FIAT that doesn't even need to be paid back.  That's right.  They won't loan the FIAT to the predators-DBA-government, they'll just GIVE it to them.

Why not?

The ENTIRE Keynesian fraud is nothing but...


There is ZERO difference between monopoly money and fiat.  ZERO.

The legacy of Keynesianism will likely be... [near] global hyperinflation.

Which means... stockpile that physical gold, silver, platinum and other real, physical goods before many others figure this out.

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