Japan Is Dying And We Still Don't Get It?!

Tyler Durden's picture

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

Dorothea Lange Miserable poverty, Hooverville, Elm Grove, Oklahoma County, OK Aug 1936

What is it with us? Don’t we WANT to understand? Japan announced on Monday that its economy is in hopeless trouble and back in recession (as if it was ever out). And what do we see? ‘Experts’ and reporters clamoring for more stimulus. But if Japan has shown us anything over the past years, and you’re free to pick any number between 2 and 20 years, it’s that the QE-based kind of stimulus doesn’t work. Not for the real economy, that is.

The land of the setting sun has during that time thrown so much stimulus into its financial system that Krugman-esque calls for even more of the same look even more ludicrous today than they did all along. Abenomics is a depressing failure, just as we knew it would be since it started almost two years ago. It’s not complicated, and it never was.

Japan’s stimulus has achieved the following: banks get to pretend they’re healthy and stocks rise to heights that are fundamentally disconnected from underlying real values. On the flipside of that, citizens are being increasingly squeezed and ‘decide’ not to spend (not much of a decision if you have nothing to spend). Since Japan’s ‘consumer’ spending makes up about 60% of GDP, things can only possibly get worse as time passes. If ‘consumers’ don’t spend, deflation is the inevitable result – and that has nothing to do with the much discussed sales tax, it’s been going on for decades -.

Therefore, the sole thing QE stimulus has achieved is a wealth transfer from poorer to rich. And that’s not only the case in Japan. Mario Draghi yesterday hinted – again – at all the stuff he could start buying next year, including sovereign bonds, even though that would violate EU law. And whether or not Germany will let him in the end, the fact that he keeps the option alive even if only in theory, tells us plenty about the mindset at the ECB.

That is, it’s the same as in Japan. And doing the same can only lead to the same results. A poorer population, a richer toplayer and an economy that continues to shrink, which will and must lead to the same deflationary trend. The idea that an economy can be rescued by pushing public funds into its finance system and stock markets has been forever thrown out by Japan’s experiences.

Draghi said yesterday that ‘monetary policy has done a lot’, and while that may be correct, it says nothing about WHAT it has done. From where I’m sitting, Germany’s recent drift into negative territory and the ongoing record unemployment rates around the Mediterranean certainly tell us a lot about what it has NOT done. QE, no matter how big and how crazy, doesn’t heal real economies, it makes them sicker.

If consumer spending makes up 60% of GDP, as in Japan, or even 70%, as in the US, then you need to boost that spending. And you don’t do that by handing over what financial wiggle room you have left, to banks so they can pile it on to the reserves they hold at central banks.

It is accepted as gospel that it’s a good thing to give banks free money, but it would be the devil’s work to give it to consumers. Instead, the latter must be squeezed from all sides, through austerity, the loss of services, benefits, wages and jobs, in order to prop up the financial system. How and where is it not clear what that will result in? There’s only one possible outcome.

The reason why all governments and central banks keep following the failed QE stimulus path regardless lies in the relative political powers that different parts of a society have. In today’s world, saving the banks, which equals saving the rich, is not only the priority, it’s the only deliberation.

And if you might be under the impression that what is true in Japan and Europe does not hold in the US, why not start with this graph from Doug Short, and take it from there.

If and when an economy is as deep in the doldrums as all major economies today are, you can’t rescue it by taking from the poor to save the rich. It’s fundamentally impossible. You need the bottom 90%’s spending in order to generate enough GDP to stay out of deflation. Money must move through an economy for it to stay sufficiently ‘lubricated’. And the only people who can keep that money moving are the bottom 90%. It’s Catch-22.

Any stimulus must be directed at the bottom, or it must of necessity fail. Nothing commie or socialist about it, but simply the way economies work. And it’s not just some difference of ideal or insight or something, it’s very simply that an economy cannot function without its poorer 90% of citizens spending.

Anything else is simply Grand Theft Auto. Both Japan and Europe are preparing for more of it.

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stant's picture

Now we know why they build cars here now

Divided States of America's picture

Honestly if the Japanese citizens themselves dont give a shit, why should we?

FreeShitter's picture

We don't. We have a game on Sunday though.

FreeShitter's picture

We don't. We have a game on Sunday though.

Statetheist's picture

Thanks for that complete non-sequiter.

SeattleBruce's picture

The point is that the average person is not yet paying attention, and is distracted with things like NFL and reality TV.

max2205's picture

Fuck this shit, lets go to Costa Rica. 


This place is like Children of the Corn

Divided States of America's picture

Or in Japanese's case, they are distracted by pachinko booths, JAV, video games and sumo wrestling.

knukles's picture

That's fucked up.

The famous Shakespearean actor, Danny Bonaduce, got his start there.
And to think I used to get off on Shirley Jones

Where the fuck did you remember that from?
Hooked up to a black hole of odd deeply disturbing memories ....
Holy Kashmolie!

KnuckleDragger-X's picture

I'm a sick person too, I also had a woody for Shirley Jones....

Al Huxley's picture

No way man, Susan Dey, all the way.

The Navigator's picture

If there was wood for Shirely Jones, there wasa forest for Susan Dey - born in 1952, don't go looking for her picts now, it'll destory your old dreams.

What a babe in the old days.

SafelyGraze's picture

coincidentally, we are doing a Unit on japan at my school this week!

we have been folding paper into shapes like a frog or a box and that is why it is called origami. origami is a word with the accent on the third syllable

also, we will be going to a japan restaurant on friday if everybody has finished their paper on time about the people of japan and their culture. we passed around a copy of their menu. did you know that in japan they eat "water chestnuts"?!!!!

and get this -- we had class today while sitting On The Floor! that's also a japan thing to do.

there are alot of interesting things about japan!

next week: bolivia!

oh, and we also had a "lock down drill", which allows us to get a better idea of the dangers that the school resource officers have to face in their daily lifes!


Hapte's picture

Hi Lorddudewhatever. Still wondering what an "Anasazi Jew" is... I goolged the term but the oracle gave me no insight.


knukles's picture

Why can't any of you cold hearted people care about yachting important?

Today is the 39th anniversary of the Jonestown Massacre and you're all pushing for us to bail out Japan....
Let's take care of our own, for a change.
Like the impending riots

Like the banner hung when our campus was occupied by the National Guard after Kent State

"Welcome National Guard.  Hope you have a blast"


Optimusprime's picture

Speak Espanol?  Have a truly marketable skill or trade?  If not, only  if you are already rich.

Uchtdorf's picture

Right, otherwise they would be buying precious metals like crazy.

logicalman's picture

Humans mostly behave as herd animals.

There are 2 other types - both are awake to what's going on.

The psychopaths exploit the herd instinct out of greed, the outliers (a fair few in here, methinks) try to wake up the herd, so the psychopaths try to demonize/destroy them.

I guess a farmer with a cow that wouldn't cooperate would send it to the abbatoir before the rest.


Motorhead's picture

C'mon, man, get with the program (read:  sarcasm).  And, if you are going to try and be cool, spell non-sequitur correctly.

Bangalore Equity Trader's picture


No really. Because USSA is Japan!

TradingTroll's picture

Bangalore Equity Trader:


Listen. No, really. Listen.


Now Listen and take a deep breath.




I fart in your general direction. h/t John Cleese

chubbyjjfong's picture

And that is the key point here.  No one gives a shit! And even more disturbing is that no one WANTS to give a shit. People simply do not understand what is happening to them; the parameters of the system within which they live. The alternative is plain and simple too much for their Ishit filled brains to even contemplate. Ever tried discussing anything macro-economic to any Joe sixpack? They end up wanting to punch you in the face after the first sentence. It is absolute pure evil genius from TPTB. The fucking scum maggot banks and central planners are taking from the people at will, and the people do not even know, want to know, admit, discuss or acknowledge in any way that it is happening. Pure evil genius crimes of humanity of the highest order.  Fucked!

KnuckleDragger-X's picture

The people who give a shit are quietly dropping out of the game....

knukles's picture

Ah, the fun and games at the peak of civilization

Anusocracy's picture

If you think of morality as behaviors that promote survival in a group, you can see, from their point of view, that those behaviors won't change until their survival is threatened by them. It isn't sufficient that to change would be arguably, or even demonstrably, better, the current behavior must fail in terms of survival.

That's why the belief better the devil you know than the one you don't is so prevalent.

LostandFound's picture

Indeed Sir, this whole thing can go on up to the point that a significant amount of the population cannot feed themselves. Thats when the revolution kicks in, at the minute, we are on a long burn where our purchasing power disappears gradually without the dumbshits noticing until they do. 

olenumbersix's picture

Both correct, But think EBT

GooseShtepping Moron's picture

But the Japanese citizens do give a shit. They keep trying to scrimp and save out of their increasingly scanty and worthless paychecks, trying to keep some powder dry in spite of the inflationary fire hose they're blasted with day after day. Their actions testify to the fact that they do care, it's just that the subject is taboo and no one ever talks about it.

It's kind of like how when somebody asks you "How are you doing," and you instinctively reply "Fine," even though that's very far from being the truth. For some reason we are in mortal dread of answering the question any other way. Just in the same manner do the Japanese not talk about how boneheaded their government is, even though everyone knows it.

mastersnark's picture

No, if they gave a shit, they'd run out of lampposts from which to hang politicians. They are just a thinner version of Americans: happy to go along with whatever the govt says, as long as the internet/TV/cell phone works.

KnuckleDragger-X's picture

You can't compare Japan to the USA, two completely different histories and mindsets.

Jstanley011's picture

"Can you direct me to the railway station?" asks the stranger.

"Certainly," says the local, pointing in the opposite direction, towards the post office. "And would you post this letter for me on your way?"

"Certainly," says the stranger, resolving to open it to see if it contains anything worth stealing.

-Amartya Sen

rbg81's picture

The Japanese economy is shrinking because both Korea and China copied their business model big time, and executed it even better than them.  Plus, they have weird technology and sexual fetishes that can't be healthy.  Lastly, lots of bad karma left over from World War II, especially from their more prosperous neighbors.  

Despite their current woes, the one thing that will save them in the coming century, however, is the fact that they allow almost NO Muslims into Japan.

ArkansasAngie's picture

If Japan goes ...

Well ... I guess we will all be able to see if the FED can walk on water.

hobopants's picture

Some of those tiny houses (trailers) go for 30k, that's pretty far from a johannesburg slum if you ask me.

More like a hipster playhouse, especially since most of them are located in their parent's backyard.

KnuckleDragger-X's picture

Yep, right now that's what the people they sell to looks like but I see the tar paper shack making a big comeback soon.....

knukles's picture

You Don't See the Hoovervilles Because They've Been Supplanted by Section 8 Housing
No Bread Lines as They've Been Supplanted by EBT Cards.

All the Evidence and Indica of the Second Great Depression have been Hidden by the Bread and Circuses of the Electronic Transfer Age.

People need to WAKE THE FUCK UP its all there. 
Just hidden in Plain Sight

Aeternus's picture

Try taking a shit in one of those, the compost toilet stinks the whole place up.

Try doing your laundry in one of those, oh wait, no room.






Aeternus's picture

What the author fails to realize/and or point out is that they do not WANT to FIX the eCONomy. This is Agenda 21 playing out in a full fashioned parade of slow kill. Do you hear that sucking sound? It's what's left in your wallet being sucked into the abyss of some dark central bank basement while you take your last breath on some cold polar vortex highway of doom as your cars gastank gauge hits..... EMPTY!


slotmouth's picture

Sell yen errday and use it to fund short term losses on convex JGB short bets, ride that baby to Valhalla.

DavidC's picture

"If and when an economy is as deep in the doldrums as all major economies today are, you can’t rescue it by taking from the poor to save the rich. It’s fundamentally impossible."

Shame that little nugget is lost on the bankers and governments.


knukles's picture

And there ain't enough rich to fund everything, anymore.
The Inconvenient Truth of Math