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How Japan Bankrupted Itself - Lessons For Europe

Tyler Durden's picture




 

Submitted by Daniel Stelter via The Globalist blog,

Following the start of Abenomics in 2012, Japan moved back to the center of attention of global financial markets. After two and a half decades of economic stagnation, hopes were high that Japan would escape its long stagnation and deflation.

Plenty of economists around the globe hoped that, in so doing, Japan would show the western world, mainly the Eurozone, the way to do the same and avoid a similar long period of low growth and stagnating incomes.

Conversely, the failure of Abe’s plan for Japan’s recovery would not only be a disaster for the country of the rising sun.

It would also be very bad news for central bankers and politicians in the west as well. It would prove that Keynesian policies don’t work in a world of too much debt and shrinking populations.

To assess the probabilities of these scenarios, it is worthwhile to have a deeper look on how Japan ended up in the current economic malaise.

The erstwhile poster child

Japan served globally as a role model for economic development in the 1980s. After an economic miracle following the Second World War, Japanese companies started to dominate in leading industries like machinery and equipment, automotive and consumer electronics.

Similar to today’s views on China, back then books explaining the Japanese miracle and describing the unstoppable rise of the nation to the leading economic powerhouse of the world were highly popular around the globe.

Japanese corporations also began to invest in prestigious artwork and trophy real estate assets around the world. When the Japanese bubble – like all bubbles – deflated from 1990 onwards, asset prices collapsed. However, credit levels in Japan remained high.

Japan acted just as the Keynesian textbook prescribes. It compensated a deep drop in domestic demand with higher government expenditures. As a result, many companies, which in reality were insolvent, were not restructured – but kept alive with low interest rates and bridge financing.

What happened over the past 25 years is simple: Japan’s corporate sector was a net saver and reduced its leverage. Private households also reduced their savings significantly, from levels of 20% to 3% today. Finally, the Japanese government built up a huge debt load, rising from about 50% of GDP at the end of the 1980s to close to 250% today.

Shrinking workforce and debt service

Despite all of this, the efforts to reignite growth in Japan failed. The only results were a significant increase in the overall debt burden of the country and a change of the principal debtor. That debtor is now the Japanese government — instead of Japanese corporations as before.

At the same time, the workforce in Japan started to shrink. Actually, Japan reached the peak in its workforce at the same time as its financial bubble peaked. That suggests that the peak in the workforce became an additional driver for the build-up of the bubble.

If so, this would be another disquieting parallel to Europe, where the labor force also peaked in parallel to the credit bubble in 2007.

One fact is often overlooked. Precisely because of the Japanese population’s shrinking, on a GDP per capita basis the Japanese economy has been outgrowing the U.S. economy in the quarter century since 1990.

That seems to be good news. Why then worry? Unfortunately, GDP and debt are nominal quantities. Debt can only be served out of nominal income. It thus does not help a country if its GDP per capita grows and at the same time the population shrinks.

Here again, Europe has reason to worry. Europe is in the beginning of a similar demographic development – albeit one that is not as severe in all European countries as it is in Japan, thanks to the European Union’s more open immigration policies.

A bankrupt nation

Japan can therefore be described as a country that has the following features:

1. Above average per capita productivity growth.

 

2. Shrinking population (from currently 127 million to 87 million inhabitants by 2060).

 

3. Low real economic growth for decades to come (as demographics continue to deteriorate).

 

4. Shrinking savings rate, due to an older population which will start dissaving soon and therefore will not continue to fund the deficits of the government as in the past.

 

5. Corporate sector with a strong balance sheet after 25 years of deleveraging, but with low investments and no inclination to invest in Japan (given demographics). Corporations are thus a net saver.

 

6. A government with record high debt of nearly 250% of GDP.

 

7. Debt service already consumes 43% of the Japanese government’s revenues, just to cover interest on the outstanding government debt – and in spite of interest rates being close to zero.

 

8. A central bank, which adapted quantitative easing already in 2001 and is willing to do everything that is necessary to support its economy.

 

9. A country that has failed to generate inflation until now, but has rather seen a long period of stable consumer prices and slightly falling overall price level as measured by the GDP deflator.

Simply put, such a country is bankrupt. No economy can sustain a total debt level (for the government, households and non-financial corporations) of more than 400% per cent of GDP without having a nominal growth rate that is significantly higher than the level of interest rates.

 

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Mon, 12/22/2014 - 20:01 | 5582960 MisterX
MisterX's picture

it is all in the propaganda
http://www.philiacband.com/propaganda.html

Mon, 12/22/2014 - 20:14 | 5583017 booboo
booboo's picture

mmm, yeah I don't think proggresive financial wizards would ever agree that they failed even in the face of a mountain of empirical evidence. That's their MO.

Mon, 12/22/2014 - 20:19 | 5583039 Newsboy
Newsboy's picture

Keyenes would laugh at 2 dimensional "Keynsians", and his prescription now would be very different, since these are different times, and was very sharp.

Mon, 12/22/2014 - 20:42 | 5583149 maskone909
maskone909's picture

The countries that make up the EU constantly change. To diverse for harmony. Was a novel idea but realistically will never work.

Mon, 12/22/2014 - 21:02 | 5583234 KnuckleDragger-X
KnuckleDragger-X's picture

They wanted a United States of Europe while completely disregarding their history. A confederation with limited powers might have worked but would have gone against their socialist worldview.

Mon, 12/22/2014 - 23:09 | 5583675 MalteseFalcon
MalteseFalcon's picture

Europe is nothing like Japan. Europe, being far more enlightened, is engaging in virtually unlimited immigration from the 3rd world.  This assures the success of Europe's financial plan.

As we all know in the US, diversity is strength.  Europe is strengthening itself by leaps and bounds.

Lack of diversity also plagues Russia and China.  This is why they will never lead the world.

h/t BillionDollarBonusBaby

Mon, 12/22/2014 - 20:30 | 5583095 zerozulu
zerozulu's picture

How Japan bankrupted itself??? because they thought they are smart.

Mon, 12/22/2014 - 20:05 | 5582979 Freddie
Freddie's picture

How Amerika Bankrupted Itself?  Because Obama.

Mon, 12/22/2014 - 20:27 | 5583080 BurningFuld
BurningFuld's picture

Because hubris. Same as it ever was.

Mon, 12/22/2014 - 20:38 | 5583135 Uranus Hertz
Uranus Hertz's picture

Rand Paul = Chelsea Clinton

Tue, 12/23/2014 - 00:45 | 5583939 noben
noben's picture

I always thought that Ron Paul = Ron Paul.

Mon, 12/22/2014 - 20:09 | 5582991 Eeyores Enigma
Eeyores Enigma's picture

How Japan Bankrupted itself...

Japan imports over 3/4s of what it consumes... how could it not bankrupt itself?

Only through the magic of finance ... or so they thought.

Extrapolate this throughout the entire World and you just might begin to understand whats going on.

Mon, 12/22/2014 - 20:13 | 5583009 weburke
weburke's picture

their way out is equities ! 

Mon, 12/22/2014 - 20:17 | 5583038 kaiserhoff
kaiserhoff's picture

Good point, Eeyores, but I suspect many places have the same dilemma, Switzerland, Denmark, Singapore, Iceland, certainly Hong Kong for a hundred years under the Brits.

A high level of imports makes you vulnerable.  You had better have lots of high value added exports to match.

Mon, 12/22/2014 - 20:11 | 5583001 apberusdisvet
apberusdisvet's picture

Sayonara, Japan.  I expect to see the whole archipeligo evacuated within 10 years, thanks to the unrelenting and unstoppable radiation from Fukushima.  Too many do not understand the danger which, btw also is there for all of the Pacific Island nations and the Pacific Ocean itself.

Mon, 12/22/2014 - 20:48 | 5583173 The Blank Stare
The Blank Stare's picture

Unless the things blowup, only the northern half is in danger right now as the most of the surface and jet winds flow west to east. Plus the southern islands dog leg west under Osaka which helps. more like a mass emigration to the south.

Mon, 12/22/2014 - 20:12 | 5583015 Carpenter1
Carpenter1's picture

Japans's most valuable asset is a culture of servitude to corrupt leaders. If not for this, Japan would be a failed state long ago.

 

Hmmm, only Japan? 

Mon, 12/22/2014 - 20:37 | 5583133 OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

Something like 80% of debt is held locally, the Emperor can get on the radio (!) and say "Sorry, sorry, the country needs your sacrifice, 75% haircut". Yes I know the remaining 20% will cause a total global meltdown...but the trains will probably keep running on time in Japan

Mon, 12/22/2014 - 21:44 | 5583399 suteibu
suteibu's picture

The poor emperor.  His primary responsibility is to be trotted out to deliver the bad news and offer hope.  It has been this way since a 14 year old boy was made emperor 1868.

Mon, 12/22/2014 - 20:15 | 5583024 Ahoy Polloi
Ahoy Polloi's picture

 "...Lessons for Europe"

 

 

Umm ~ I'm pretty sure that neither Europe, nor anyone else will require a playbook or instruction manual on how to bankrupt themselves.

Mon, 12/22/2014 - 20:20 | 5583043 kaiserhoff
kaiserhoff's picture

Yup.

  A few bankers and politicians should be able to git her done.

Mon, 12/22/2014 - 20:15 | 5583028 Hohum
Hohum's picture

At this point, less debt and growing populations wouldn't change much.

Mon, 12/22/2014 - 20:15 | 5583032 chistletoe
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We are staring, once again, at the principle weakness, the main vulnerability, the underbelly of capitalism.  Very simply, it can only succeed in an environment where there is growth, and growth potential, and the expectation of further growth.  Capitalism cannot survive in a situation of stasis, a situation of status quo.

 

In a world with peak population, not to mention peack resources (from oil to coal to steel to fish to farmland), capitalism must fail.

Its too bloody obvious.  Is there really nothing to do but to sit around wringing our hands and wait for the disaster, before anybody starts trying to come up with a little more viable solution?

Mon, 12/22/2014 - 20:34 | 5583114 Tasty Sandwich
Tasty Sandwich's picture

A pure free-market form of Capitalism, where central banks and governments didn't intervene, could actually be somewhat sustainable.

There would be periods of expansion and periods of contraction.  A sort of balance could be achieved.  But, with government and central bank intervention, the periods of contraction are not allowed to occur.

Of course, this would never jive with human nature.  Most people want central bank and government intervention - they like to think someone is in control.

Mon, 12/22/2014 - 20:56 | 5583205 The Blank Stare
The Blank Stare's picture
I agree chistletoe, where is Japan's "new export miracle" gonna come from to save it? All the while the costly modern lifestyles they/ we are used to will get more expensive. My guess its back to horse and buggy time.
Mon, 12/22/2014 - 21:09 | 5583248 Tasty Sandwich
Mon, 12/22/2014 - 20:34 | 5583105 Barnaby
Barnaby's picture

I don't understand how any farticle about Japan fails to include Fukushima. This is a syndrome of man, an island microcosm of what we'll eventually do to ourselves, a virtual Gojira of payback –

PS4 2-game combo pack now $399 on Amazon!! Another unit for my splendid family!

Mon, 12/22/2014 - 20:35 | 5583118 max2205
max2205's picture

How Japan became a slut crack whore.

 

Fixed it

Mon, 12/22/2014 - 20:58 | 5583134 TeethVillage88s
TeethVillage88s's picture

Maybe some statistics are needed:

-

- Labor Force Participation Rate in Japan 59.7% in 2014
- Labor Force Participation Rate in Germany 53% in 2013
- Labor Force Participation Rate in USA 62.8% in 2014
- Labor Force Participation Rate in UK 46.4% in 2013
- Labor Force Participation Rate in France 41.1% in 2013
Labor Force Participation Rate in China 56.6% in in 2013

most of those numbers used 2013 population with 2014 employed...

Hard to compare wages. CIA Fact book is probably better than OECD Numbers.

But we know US Wages, median wages, weekly, indexed to 1984 Dollars are the same today as in 1979 in the USA.

And

http://research.stlouisfed.org/fred2/series/ROWFDNQ027S ($3.29 Foreign Investment USA)
http://research.stlouisfed.org/fred2/series/GPDI ($2.89 Private Domestic Investment)
http://www.bea.gov/newsreleases/international/intinv/iip_glance.htm
http://www.bea.gov/newsreleases/international/intinv/iip_glance.htm ($28 Trillion foreign Ownership of US Property compared to $24 Trillion in US Ownership of Foreign Property) (This is very interesting as Big Banks are growing strongly, but the number of total us banks is dramatically decreasing, like someone is gaming the system, Commercial Banks in the U.S. - FRED - St. Louis Fed)
http://research.stlouisfed.org/fred2/series/USNUM

Foreign Investors are stronger than our Domestic or Wall Street Banks. We Decalitalize Industry, and our Banks don't Invest in the USA, not in a depression, a recession, and not when we return to normal markets.

Commercial Banks in the U.S.
2014:Q3: 5,636 Number Quarterly, End of Period, Not Seasonally Adjusted, USNUM, Updated: 2014-11-14
-----

Weekly and hourly earnings data from the Current Population Survey

Series Id: LEU0252881600

Series title: (unadj)- Constant (1982-84) dollar adjusted to CPI-U- Median usual weekly earnings, Employed full time, Wage and salary workers

Year Qtr1 Qtr2 Qtr3 Qtr4 Annual
1979 339 334 325 328 332
1980 324 314 315 317 318
1981 317 311 304 314 312
2012 337 335 329 336 335
2013 334 333 330 337 333
2014 339 328 332

Constant Dollars, Weekly Earning same in 1979 as 2014.
----

Series Id: LEU0252882800
Not Seasonally Adjusted
Series title: (unadj)- Constant (1982-84) dollar adjusted to CPI-U- Median usual weekly earnings, Employed full time, Wage and salary workers, Women

Year Qtr1 Qtr2 Qtr3 Qtr4 Annual
1979 256 249 248 249 251
1980 248 242 241 242 244
1981 245 239 237 240 241
1990 270 267 259 265 265
1991 271 271 266 269 269
2003 301 298 298 304 300
2004 305 303 301 303 303
2012 306 300 298 300 301
2013 304 303 299 306 303
2014 307 301 300

All Industries, All Occupations, Women, 16 years and older.

Mon, 12/22/2014 - 20:46 | 5583163 NoDebt
NoDebt's picture

"Europe is in the beginning of a similar demographic development – albeit one that is not as severe in all European countries as it is in Japan, thanks to the European Union’s more open immigration policies."

No, dammit, NO!  Look who sounds like a poulation Keynesian now.  All population is good population for GDP and productivity?  Absolutely fucking not.  Most people know nothing of Europe so let's put this in US-centric terms.  Do you like our current "open Borders + Welfare State" policies?  No?  Why?  Because you know it's doomed to failure.

Mon, 12/22/2014 - 21:11 | 5583256 TeethVillage88s
TeethVillage88s's picture

Because we know there are fewer good jobs with good compensation, Open Borders drives down Wages, Open Borders creates a huge Black Market Labor Force, we know Capital is moving off shore and we have Decalitalized US Industries, we know that Free Trade isn't Free, isn't auditable, uses Slave Labor, and is part of what is ripping apart US Labor and making US into Debt Slaves.

- Capital Flight
- Brain Drain from US Industries
- Decapitalization
- Open Borders
- Off Shoring Corporate HQ, Off Shoring Production, Outsourcing, Free Trade Agreements that supersede US Laws
- CAFTA-DR, NAFTA

The Model is from Great Britain, Trade Model, this was used by Lords & Kings to get Rich from Cheap Overseas Goods from all around the Globe through Sea Trade Routes. So it is a Model of the Elites... and probably lead to lots of Crime in London where people were very poor.

Mon, 12/22/2014 - 21:00 | 5583217 SKY85hawk
SKY85hawk's picture

We've been swirling down the rabbit hole for so long that I wonder if we remember where we started?

1- Keynes rule book has a 2nd step.  During the good times, PAY BACK THE DEBT!

      The closest american politicians ever came to this was when Clinton's tax increases caused "A SURPLUS AS FAR AS THE EYE CAN SEE".  Who remembers that?

2- The world had a similar problem with large population groups retiring and Spending Less after age 55.  Kids were grown, looking for a smaller house, etc. 

               The Parents of the Baby Boom!

Who remembers the 1970's? It was a time of Stagflation.
The 'Bob Hope" generation entered their 'spend less-save more' life stage. OUR Parents!
It should be clear that the baby-boom is now in the same life-stage.  Just a whole lot more people.

3- Now, our illustrious LEADERS are trying to cover  up their mistakes by:

          a- repealing Mark-to-Market rules;

          b- changing Bankruptcy rules to put the banksters first, and;

          c-  guaranteeing many TRILLIONS of Derivative Losses through FDIC.

          d-  Actually, there's much more.  I'm just glad you read this far.

Conclusion -

 Not one Politician will admit they are helpless to restart Economic Growth.
They will wait this thing out, just like before.
Even if it takes 11 to 15 years!

The effectiveness of monetary policy was FIRST discredited in the late 1970's.

The persistent attempts to revive growth with easy money continue to lead to stagflation and financial ruin!

 

I hope you have a Roth-Ira and are learning about inverse ETFs such as ERY, FAZ and SMDD.



 

Mon, 12/22/2014 - 21:58 | 5583358 TeethVillage88s
TeethVillage88s's picture

Well, Looks like Status Quo Politics. Both the Ds & the Rs... like the way things are going. They never talk about Sweeping Reforms. They protect their own money and sources of political funds.

Congress never looks at the Big Issues. Just look what they did in 2008 after the Financial Crash. Collectively they decided there was no Moral Hazard and that the People that got us into trouble paid big donations to keep the party going just like it was designed.

Looks like 2005 is when the Budget went totally out of Control.

We, The people, are making this thing run. Monthly Treasury Report, 30 September 2014.

2014 Federal Outlays = 3,504,199
2013 Federal Outlays = 3,535,881
2012 Federal Outlays = 3,538,286
2011 Federal Outlays = 3,630,146
2010 Federal Outlays = 3,455,931
2009 Federal Outlays = 3,653,290
2008 Federal Outlays = 2,978,440
2007 Federal Outlays = 2,778,632
2006 Federal Outlays = 2,654,873
2005 Federal Outlays = 2,472,310
2004 Federal Outlays = 2,292,628
2003 Federal Outlays = 2,211,712
2002 Federal Outlays = 2,011,016
2001 Federal Outlays = 1,854,945
2000 Federal Outlays = 1,788,143

So, figure - $1 T for Military (and Black Budget), $1 T for MEDICARE/MEDICAID, $1 T for Social Security.

---

People can take on the power to control Government if they see a deeper truth.

Paid up to end of Fiscal year, 30 September 2014
2014 Individual Income Tax Revenue: $1.394 Trillion
2014 Corporate Income Tax Revenue: $320 Billion

IRS, Total Outlays—Internal Revenue Service, under Treasury, 2013 = $103.3 Billion (Boom)
IRS, Total Outlays—Internal Revenue Service, under Treasury, 2000 = $38 Billion
IRS, Total Outlays—Internal Revenue Service, under Treasury, 1998 = $33.2 Billion (??? What? For what??)
----
IRS, Payment where earned income credit exceeds liability for tax Outlays 2013 = $57.5 Billion (?What?)
IRS, Payment where earned income credit exceeds liability for tax Outlays 2000 = $26 Billion
IRS, Payment where earned income credit exceeds liability for tax Outlays 1998 = $23.2 Billion
----
IRS, Payment Where Child Tax Credit Exceeds Liability for Tax Outlays 2013 = $21.6 Billion (?What?)
IRS, Payment Where Child Tax Credit Exceeds Liability for Tax Outlays 2000 = $806 Million (Million)
IRS, Payment Where Child Tax Credit Exceeds Liability for Tax Outlays 1998 = Zero.....
----

Economy Slow enough for you, President Obama, John McCain, John Boner, Nancy Pelosi, Janet Yellen, Stanley Fischer...

http://research.stlouisfed.org/fred2/series/M1V (M1 seems to increase with Mortgages)
http://research.stlouisfed.org/fred2/series/M2V (M2 seems to show different bubble perhaps)
http://research.stlouisfed.org/fred2/series/MZMV (MZM seems to show peak in Economy 1981)
http://research.stlouisfed.org/fred2/series/A14187USA163NNBR
http://research.stlouisfed.org/fred2/series/MULT

---

Deregulation leads to misery? Many industries in the United States became regulated by the federal government in the late 19th and early 20th century. Entry to some markets was restricted to stimulate and protect the initial investment of private companies into infrastructure to provide public services, such as water, electric and communications utilities.

Transportation, Energy, Communication, Finance, Free Trade, Campaign Finance
1978 - Bankruptcy Reform Act of 1978,
1980 - Depository Institutions (J. Carter, followed by S&L Crisis, 5000 convictions, RTC)
1981 - Executive Order 12287, (R. Reagan, removed price controls on Petrol)
1992 - Energy Policy Act (H.W. Bush)
1994 - NAFTA, Deregulation of Trade, 3 Nations (W. Clinton)
1996 - Energy (W. Clinton, followed by ENRON Scandal)
1996 - Telecommunications Act (W. Clinton, cross ownership)
1999 - Gramm–Leach–Bliley Act (Phil Gramm, W. Clinton, followed by 2008 Financial Crisis)
1999 - bombing campaign in Kosovo (W. Clinton, over 60 days)
2000 - Commodity Futures Modernization Act of 2000 (P. Gramm, W. Clinton, derivatives)
2002 - McCain–Feingold Act (G.W. Bush, Campaign Finance, soft money unlimited)
2005 - Energy Policy Act (G.W. Bush, subsidies, excluded clean air Water acts)
2005 - Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).
2009 - 2014 Continuing Resolutions in which Congress gives up Budget Powers
2010 - Citizens United v. Federal Election Commission (money is free speech for corps)
2011 - US combat in Libya (B Obama, over 60 days)
- (Laissez-faire economic policies)

Tue, 12/23/2014 - 09:18 | 5584508 Al Tinfoil
Al Tinfoil's picture

CRomnibus 2014

Tue, 12/23/2014 - 09:59 | 5584625 breadonwaters
breadonwaters's picture

FINALLY!  During the good times, PAY BACK THE DEBT!  i VE BEEN FOLLOWING ZH'ers  DISPARAGE THE kEYNESIANS .....AND NO ONE MENTIONS THAT SECOND STEP.  ....is it because politicians never take the second step.....i think so.

 

 

Mon, 12/22/2014 - 21:02 | 5583230 MEFOBILLS
MEFOBILLS's picture

AAARGH Tylers.   

Japan got rich post WW2 due to Bank of Japan credit allocation through guidance windows.  This credit allocation was in turn politically directed through Ministry of Finance.  It is not taught in the textbooks.

Japan post WW2 economy used Cartelization to control industrial sectors, and hence desire was to win market share, not so much make money profits as in financial capitalism.  It was a different kind of capitalism with directed industrial credit.  MOF and BOJ control of the guidance window then controlled application of credit and who was chosen as winners and loser.

In the 80's BOJ changed the system by making a bubble.  The bubble was based on FIRE (housing, land, insurance) which drove up these sectors.  The extra credit money hypothecated into existence also flowed overseas buying up much of the world.  I think I'm turning Japanesa.  BOJ changed tack in the 80's to become more like other Western Central Banks.  The Why is unknown  - perhaps because of American pressure or BIS.  

Because of the trade imbalance, FX traders did not adjust the exchange rate.  FX traders considered Japan to be in good shape as they continued to export in abundance.  FX traders were confused about the excess volume of credit money being issued as BOJ was creating debt instruments against everything and anybody.  This made a lot of bad unproductive loans.

The bubble eventually popped and the after-affects are described in the movie below.   see link   Credit as money disappears into the ledger but the Debt Instrument remains, as it grows with its ururious demands.

Most economists don't understand bank balance sheet activity and the action of CREDIT as money.  Propagandized classical and Chicago School economists think money is a neutral veil.  

Hangover from the bubble left Debt Instruments in place, along with legacy of pushed assets such as land/housing.  The aftermath is that labor has to pay their extra energy into this debt overhang - and said debt wants to keep growing with usury.

Japan is hiding some of its public debt at the Postal Bank, where the usury fluxes back out to families that store their savings there.  So the story of Japan should also include Postal Bank and how public debt is owed to the people, not foreigners.

https://www.youtube.com/watch?v=p5Ac7ap_MAY

There are a couple of answers to today's problems, but the biggest answer is to move away from a money supply that is almost all bank credit.  We need some debt free money to cycle in and out of  debt instruments and then draw them down to zero.  We need to think about wealth money instead of money that is division of debt.   Some call this wealth money permacredit, which is a tool we used for transactions and is related to all goods and services production.  We cannot let the bankers grab this debt free money out of the supply, so rules need to be in place first.

We also need to think about channels of productivity and volume effects.   The movie makes it abundantly clear what are volume and channeling effects of money.  It also shows that BOJ bubble was ON PURPOSE as a policy device to create a crises and hence change society. 

So, Japan bankrupted itself in terms of debt instruments.  It is a simple matter of the law erasing them should they choose to go there.  Said instruments were created as fraud and hence the law should step and erase what should have been illegal.

 

Mon, 12/22/2014 - 21:19 | 5583294 MEFOBILLS
MEFOBILLS's picture

Watch the movie.  It will help overcome myths.  

 

https://www.youtube.com/watch?v=p5Ac7ap_MAY


Tue, 12/23/2014 - 02:03 | 5584079 The Blank Stare
The Blank Stare's picture

Watched it all. Thanks MEF.

 

So did Shinzo Abe & the MOF take back control of the BOJ, or is he a central banker too?

Tue, 12/23/2014 - 12:16 | 5585194 Eugend66
Eugend66's picture

I watched too. +1

Mon, 12/22/2014 - 22:05 | 5583394 TeethVillage88s
TeethVillage88s's picture

You mean like Zaibatsu, Keiretsu, Chaebol[South Korea]

Someone told me South Korea is like that too in that Samsung is a chosen Corporation and has it's own University as well. Money from the Government is handed out to the few chosen Corporations (monopolies or Oligopolies)

USA has moved to Conglomerate Transnationals as well it seems, but we have huge number of corporations that are chosen to "Win".

https://en.wikipedia.org/wiki/Keiretsu#Types_of_keiretsu

Some stuff on Wikipedia I didn't know.

Mon, 12/22/2014 - 21:15 | 5583286 kchrisc
kchrisc's picture

"How Japan Bankrupted Itself - Lessons For Europe"

Trust and faith in government and the banksters is how

The banksters need to repay us.

 

I tell my guillotine bankster bedtime stories.

Mon, 12/22/2014 - 21:55 | 5583431 TeethVillage88s
TeethVillage88s's picture

Check out the Multiplier for M1... I may be wrong but 30 years ago the Multiplier for Manufacturing was cited as proof of where the engine of the Economy was.

http://research.stlouisfed.org/fred2/series/MULT

Nobody talks about it anymore. But what with all that has been deregulated to facilitate "gaming the System" by Elites... MULT just proves how the Elites have Hobbled the Economy for the poor so we have to work for one of the big corporate powers and have to kiss ass for jobs.

Eunuchs, I say. They want to cut off our balls.

Mon, 12/22/2014 - 21:40 | 5583390 Atomizer
Atomizer's picture

Another ZH poster linked this. Quite funny. Baltic index is in the shitter, someone decides to offer a TV in Yen, but it ships from California. This has to be a joke. If true, he/she will be behind bars.

Samsung UN105S9 Curved 105-Inch 4K Ultra HD 120Hz 3D Smart LED TV- $229,999.99

http://www.amazon.com/gp/offer-listing/B00L403O8U/ref=dp_olp_refurbished?ie=UTF8&condition=refurbished

Mon, 12/22/2014 - 21:47 | 5583391 suteibu
suteibu's picture

Fuck this micro-analysis.  Japan bankrupted itself (as will the EU and the US) because of the arrogance of believing that constant economic growth is a right or even a possibility. It is a political misadventure populated by a host of characters whose primary objective is to gain and hold power.

One might as well believe that the tide can be made to always ebb or flow or that the sun can be made to shine 24 hours a day.  Either of these would result in the extinction of humanity as will a global policy of constant economic growth. 

And Japan is not a test case or warning for anything or any other nation or union because every one is already doing the same thing and has been doing it for decades, some even longer than Japan.  Sitting outside of Japan and pointing a finger at them is a fruitless endeavor.  Who gives a shit about what happens in Japan when the same thing is happening in the US and EU?

The world has a political problem that neither micro- nor macro-economic analysis can solve.

The good news is that the situation is self-correcting in the long run.  Because you might not see it in your lifetime does not mean that the world will not eventually return to the mean.

Mon, 12/22/2014 - 21:56 | 5583439 Atomizer
Atomizer's picture

A Honda Civic Ad 1970

How do you think we were able to keep petrodollar recycling alive? They buy oil in dollars and we allowed new offshore businesses to create manufacturing bases within United States. When I worked for Kobe Steel in prior life, we received a ten year tax abatement. Not sure about the 2014 laws today. It's all about keeping the OPEC cartel wheel greased.

Mon, 12/22/2014 - 22:31 | 5583557 yogibear
yogibear's picture

"It would prove that Keynesian policies don’t work in a world of too much debt and shrinking populations."

That's right.

How Japan Bankrupted itself...
The US is trailing behind. It's insolvent.

"Japan imports over 3/4s of what it consumes... how could it not bankrupt itself?"
The US imports most and exports mainly debt.

Only through the magic of finance ... or so they thought.
Same for the US

Watch the US implode next.

Mon, 12/22/2014 - 23:59 | 5583831 honestann
honestann's picture

Guess what?  Any economy that operates without debt... doesn't much care what the future holds in terms of demographics or other trivia that currently (economists claim) make or break an economy.

Actually, if lenders were left to sink or swim on the basis of their loans, without unlimited fiat being available to kick the can or offer eternally expanding debt loads, even a debt economy can work, because ONLY stupid lenders become impoverished, not the entire society.

The unspoken premise of almost every article about economics and economies is... we must accept the clearly insane and unworkable presence of endless unlimited fiat, fake, fraud, fiction, fantasy, fractional-reserve debt-expansion and central planning.

Well, guess what?  Get rid of that premise and... economies will grow like gangbusters, and every human being who works and produces will have a vastly better quality of life.  But... we can't have that, can we?

Oh, no!  The officials in charge must make sure that quality of life falls as productive efficiency (due to technological advances) rises.

What a planet.  What chimps.

Tue, 12/23/2014 - 01:16 | 5584023 Hohum
Hohum's picture

Honestann,

I see no evidence of "productive efficiency" if measured as net energy of economic activity.  But one can dream.

Tue, 12/23/2014 - 20:13 | 5586668 honestann
honestann's picture

Oh, productive efficiency IS rising, due to technology.  However, simultaneously, the predators-that-be are destroying more and more, and misdirecting labor and investment more and more, which has the opposite effect.

I suppose the most extreme example of what I'm talking about is warfare.  The more advanced technology is, the more efficient productive humans CAN BE, but when that technology is applied to warfare (and other destructive actions), the destruction is also "more efficient" (meaning less effort and resources required to create a given quantity of destruction).

So while technology can be a "savior" of sorts, it can also be "doom" if applied to authoritarianism, police-states, warfare and other destructive applications.

Tue, 12/23/2014 - 02:12 | 5584091 scatha
scatha's picture

Everybody remember Japanese economic miracle but no one remember what was before and it wasn’t pretty.

Let look at Japan circa 1948, complete collapse of economy and material supplies, huge heavy industry destroyed, cities in ruins, burned by, incendiary weapons, fields polluted by chemical agents, massive deaths from starvation, freezing and decease, including radiation sickness, rampant black market, the wave of suicide and murders, massive executions of Japanese soldiers or accused to belong to political/ military elites, often on a whim.

The exploitation of weak, poor, especially children, exploited, abused, mutilated or killed, who were particularly engaged in strait/gay sadomasochistic prostitution rings serving Yankee soldiers, who in turn were not shy applying almost the same torture methods they were subjected to during the WWII, to Japanese civilians. The politically driven rebirth of Japanese mafia (similarly to Italian mafia in US and Italy) added more to already explosive mix. Politically, in face of utter defeat, historic shift to left occurred, toward soviet style democracy, which was not far from fascism, among young Japanese.

In contrast to propaganda tales, there was almost uniform rejection of emperor authority among learned society from left (socialist) and right (nationalists) of the political spectrum. The utter horror and people desperation was at level similar to that in Germany in the late 1940-ies.

So what happened, that merely 10 years after defeat and collapse, aggressor nations were well on their way to economic stardom.

The answer is simple, it was detonation in 1949 soviet nuclear weapon, following, in 1953 by detonation of hydrogen bomb and in case of Japan, US shocked by creation of PRC by Mao and defeat of US friendly nationalists, that changed everything. At this moment countries such as Japan, occupied part of Korea and  Germany (later Austria) became so called BORDER STATES in global, existential war between US ruling elites and soviet ruling elites (Stalin & co), later called cold war, but back then it was potentially hot as it could be.

The status of border state changed everything. Not only on US side but on Soviet side as well. From mode of punishment and reparations US switched to mode of building up society, promoting economic justice, national solidarity, toning down japs rhetoric as well as building military facilities in the occupied countries, in preparation for the war. In the same mood of peace, occupied countries quickly regained facade of political independence, against previous agreements between WWII allies.

Such change of policies, created Japanese propaganda of emphasized friendship with their conquerors, peaceful, anti-nuclear intentions, made as false impression of Japanese independent politics, since they were nominally against whoever nuke them (US was not mentioned). Political decision was made to calm down outrage and discontent among society and as a result, massive investments went in with no string attached and no immediate profit demand.

In order to mitigate sudden political shift to the left in the population, massive welfare, pension, educational and job programs were initiated and deployed, ironically they mimicked exactly policies of Soviet Union, sometime even went further then that. The former disgraced politicians, elites and bureaucrats, including emperor himself, who was threatened by US to be deposed just few year earlier, all actively engaged in Japan imperial aggression, even those responsible for atrocities against US troops, were white washed and brought back as centrists, saviors, fathers of a new nation of Japan.  Their tasks was to block support by soviet style communist/socialist parties tremendous influence as well as diminish influence of loyal nationalists who rejected Japan’s peonage to US.

Industrial/financial capital speculation was outlaw under death penalty and Japan (as well as Germany and  S. Korea later) assumed economic system of command and control by central banks, puppets of US military establishment. Ironically, the system was almost identical to that run in US and Soviet Union during the war. No freedoms of any kind, was allowed, no free speech, no free markets, no free institutions, nothing unscripted. Later, illusions of democratic process were promoted and propagandized but reality remained the same until late 1980-ties. Soon leftist became targets not only by security establishment but also by newly revitalized Japanese mafia, thousands strong murderers released from prisons by US to do their dirty jobs, while avoiding news headlines of political persecutions.

US, guarantied safety of Japan international,maritime, trade, banned in the aftermath of the war, a lifeline to import starving Japan to keep it strong as unsinkable US aircraft carrier in the Pacific.

Every cleric and economist in the moment of truth will tell you that, there are no economic miracles nor other miracles and there were no miracles in Japan, or in other border states, which just resumed their pre-war, autocratic economic-industrial systems directed this time not toward the war directly but mostly toward sedating and corrupting their own societies through propaganda of rampant consumerism, which ultimately failed. Japanese people were just allowed to benefit from US imperial plans to contain Soviets. Interesting coincidence that US attitude to Japan drastically changed just about when Soviet Union was collapsing. Or did it?

More about the past and today’s Japan situation:

 

http://www.zerohedge.com/news/2014-12-21/forget-lost-decade-japan-has-be...

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