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Japan Falls into Recession

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Re: Japan Falls into Recession

#131

Post by hudibras »

MLR wrote: post #126
mc32 wrote: post #4

Quantitative easing, Yen depreciation... What they need to do is figure out a way to grow the population locally or through large-scale immigration. I'm afraid this is the fate that awaits the developed world (or countries with low population growth). Japan is like a canary in the mine of post-industrialism. It'll be interesting to see what they figure out for their society and the lessons they might have for us.

They have 5% unemployment, and, after a quick check, it seems like a similar labour force to population ratio to the UK and US. I'm not an economist, but in their position, what would mass immigration solve?

(Twenty-five minutes too late...)

No discussion of Japan's economy (whether it's government debt, inflation rates, recession, etc.) is complete without mentioning that the unemployment rate is 3.6%, the 2nd-lowest (behind South Korea) in the OECD.[0]

So all the doom-and-gloom about Japan's future prospects and what they're doing and should be doing has to be balanced by the continued commitment by the successive Japanese governments to maintaining full employment.

[0]http://stats.oecd.org/index.aspx?queryid=36324

Re: Japan Falls into Recession

#132

Post by adventured »

ekianjo wrote: post #98
vilhelm_s wrote: post #62

Earlier quoted context omitted.

Japan did have deflation, some years in the 90s and most years in the 00s. See e.g. the curve for 1995-2013: http://www.tradingeconomics.com/japan/consumer-price-index-c... or the "index of all items" here http://www.e-stat.go.jp/SG1/estat/ListE.do?bid=000001033700&...

Inflation/deflation indexes are massively skewed if you don't incorporate the right things into it. How sure are you that these indexes are factually correct?

Keynesian economists think that Japan's real estate implosion was deflation.

Back in reality, Japan hasn't suffered any real deflation in 25 years. Which is why their prices are among the highest for pretty much everything.

The deflation argument is a fraud cover for the failed Keynesian experiment. It's meant to give them the ability to endlessly print to debase the debt that the failed experiment took on. That's why the US Fed pretends to worry non-stop about deflation, while they massively expand the monetary base and hold rates at zero; it's a lie to provide cover for the massive inflation programs.

Re: Japan Falls into Recession

#133

Post by adventured »

cynicalkane wrote: post #74
ekianjo wrote: post #57

Earlier quoted context omitted.

> Additionally Increased GDP will bring more revenue The thing is with the current policy you won't get much increased GDP. Prices are going up in Japan now, which will lead to decreased consumption, decreased savings (or maybe actually an increase in savings vs spending if Japanese feel the worst is yet to come) and negatively impact GDP. Wherever it's going, it's not good anyway.

This is incorrect. GDP growth in Japan jumped when it became clear Abenomics was going forward, and un-jumped when the recent tax increase went in. The annualized growth[1] in between these two periods has been greater than 2%, with falling unemployment, despite a declining workforce. The growth right before Abenomics was negative and falling. [1] For this comparison, make sure to use annualized QoQ figures. Data-ill…

Real GDP did not jump. Japan massively debased their currency, that provided a fake spike to both GDP and the stock market.

In real terms, their stock market has gone down, and their GDP has contracted even more than the nominal terms show.

Re: Japan Falls into Recession

#134

Post by adventured »

Thimothy wrote: post #125
ekianjo wrote: post #53

Earlier quoted context omitted.

> Yet they go into this with a massive amount of debt already so are raising consumption taxes at the very time they need consumption The Japanese government needs to cut deep in spending, and that's what they have NOT been doing for the past 20 years. As long as they don't try to fix the debt problem, nothing else is going to work in the long term.

Becouse that is working quite nicely for Europe.

Show me the countries in Europe that have substantially reduced government spending over the last six years.

In fact, spending as a % of GDP has increased.

http://www.cato.org/blog/where-are-european-spending-cuts

There has been almost zero spending reduction in Europe. They're calling a slow-down in spending expansion, austerity, when in fact there has been no austerity.

Re: Japan Falls into Recession

#135

Post by hudibras »

adventured wrote: post #130
hudibras wrote: post #127

Earlier quoted context omitted.

A country defaults when it can no longer service the interest on its debt. Japan's interest on the public debt is around $250B/year, or around 5% of GDP. 5% is a higher percentage than most countries (U.S. is around 2.5%) but less than, say, Greece at the height of their crisis. And Greece ended up not defaulting and not devaluing their currency (obviously, being in the Eurozone). $250B is around 25% of the annual go…

A country defaults when it either can no longer make the payments, or when it can't pay back the real value rather than just the nominal value. eg If I devalue my currency by 99%, and then attempt to pay off debts in that currency, that is a default, regardless of if a country were to try to pretend otherwise. The alternative to that context, would be that any nation can just freely debase their currency, pay back de…

> Japan has to debase the Yen to pay its bills. Their government is insolvent due to the extreme debt. They have already defaulted.

Back in the real world: When I said earlier that Japan has to pay $250B this year to service their debt, that means there is an actual no-kidding line item in their fiscal year 2015 budget for the Ministry of Finance to pay that money to bondholders. They've budgeted the money already and it will be paid out starting in April just like it was in 2014, 2013, 2012, and so on.

Re: Japan Falls into Recession

#136

Post by visarga »

bpodgursky wrote: post #27
mc32 wrote: post #4

Quantitative easing, Yen depreciation... What they need to do is figure out a way to grow the population locally or through large-scale immigration. I'm afraid this is the fate that awaits the developed world (or countries with low population growth). Japan is like a canary in the mine of post-industrialism. It'll be interesting to see what they figure out for their society and the lessons they might have for us.

Large scale immigration is just passing the buck down onto a currently-poorer country. But poor countries aren't going to stay human-meat factories forever, and sooner rather than later someone is going to have to figure out a way to maintain an industrialized society with a stable population.

> Large scale immigration is just passing the buck down onto a currently-poorer country

This can also create a return of experience, business investments and money from the rich country to the poor one. Some poor countries are so backwards that what they need most is not more people, but people who have seen a better way of doing things and can apply at home.

Re: Japan Falls into Recession

#137

Post by adventured »

yarou wrote: post #117
brc wrote: post #63

Earlier quoted context omitted.

You're right that QE erodes the savings and income of not-rich people - the middle class and the poor. You're wrong in your theory that accumulated wealth does nothing. In a QE world, the very rich don't sit on cash - that would mean losing money through currency decreases. There is no such thing as 'wasted capital' - rich people store their wealth in a variety of vehicles - whether in banks (where it is re-lent out…

>You're wrong in your theory that accumulated wealth does nothing. In a QE world, the very rich don't sit on cash - that would mean losing money through currency decreases. Correct, but they still don't spend money. The very wealthy are known to hoard money, it doesn't matter in which "vehicle" they store their money in. >There is no such thing as 'wasted capital' - rich people store their wealth in a variety of vehi…

It absolutely does matter what vehicle the rich store their wealth in.

If they store it in a bank, it boosts the lending capabilities of that bank.

If they buy stocks, it provides financing for public companies.

Even if the rich hide their cash under a mattress for a long time, they provide a purchasing power boost to other consumers by reducing the freely available supply of currency.

Saying that the parent is wrong about Apple's cash, does not actually prove they're wrong. "Wrong." is not an argument.

There's practically nothing a rich person can do with their hoard to harm the economy, other than to take that capital out of the domestic economy or invest into a ponzi scheme or asset bubble.

Re: Japan Falls into Recession

#138

Post by adventured »

MLR wrote: post #126
mc32 wrote: post #4

Quantitative easing, Yen depreciation... What they need to do is figure out a way to grow the population locally or through large-scale immigration. I'm afraid this is the fate that awaits the developed world (or countries with low population growth). Japan is like a canary in the mine of post-industrialism. It'll be interesting to see what they figure out for their society and the lessons they might have for us.

They have 5% unemployment, and, after a quick check, it seems like a similar labour force to population ratio to the UK and US. I'm not an economist, but in their position, what would mass immigration solve?

Japan's biggest problems are extreme debt, and poor allocation of capital via government spending (Japan's famed public works programs, which have net resulted in zero real GDP growth for 20 years).

Japan is the poster-child for what's happening to the US and Europe: Keynesian economics has failed. QE, inflation, central bank stimulus, debt accumulation - none of it actually grows an economy or increases productivity. It's all fake, all of these measures are meant to keep the fraud going a bit longer, and now the clock has run out and the consequences are being paid.

Re: Japan Falls into Recession

#139

Post by dllthomas »

jernfrost wrote: post #121
ekianjo wrote: post #107

Earlier quoted context omitted.

Have you heard of Argentina, or Germany in the 30s ? Both of them did not like Inflation too much.

What I've read is that inflation in Germany in the 1930s was actually very usefull. They had an enormous amount of debt they were incapable of servicing. The huge inflation cut the debt to pieces very efficiently. The inflation was not the cause of German problems, it was a symptom of problem of having a too large debt. It is sort of like blaming the flu on the fever. The fever might feel bad but it is actually your…

My understanding is that German debt was not denominated in paper, but that they had to print money to buy gold at whatever rapidly falling rate people would give. Presuming my understanding is correct, the debt was certainly the root problem, but the inflation wasn't helping - it made it harder to buy the next payment's gold.

Re: Japan Falls into Recession

#140

Post by adventured »

hudibras wrote: post #135
adventured wrote: post #130

Earlier quoted context omitted.

A country defaults when it either can no longer make the payments, or when it can't pay back the real value rather than just the nominal value. eg If I devalue my currency by 99%, and then attempt to pay off debts in that currency, that is a default, regardless of if a country were to try to pretend otherwise. The alternative to that context, would be that any nation can just freely debase their currency, pay back de…

> Japan has to debase the Yen to pay its bills. Their government is insolvent due to the extreme debt. They have already defaulted. Back in the real world: When I said earlier that Japan has to pay $250B this year to service their debt, that means there is an actual no-kidding line item in their fiscal year 2015 budget for the Ministry of Finance to pay that money to bondholders. They've budgeted the money already an…

Japan can only fund their government through debasing the Yen, because 50% of tax revenues are being consumed by interest payments, and that's rising by the year. That's a death spiral that is only going to get worse.

The government of Japan is plainly bankrupt. People that own Japanese government debt are already being paid back in devalued Yen. The only options left for Japan are to either openly default, or dramatically increase the debasement of the Yen - the last option is exactly what they will choose. So rather than an open default, they will default by destroying their currency.

Abenomics will be followed by a call for Abenomics 2, and a more dramatic destruction of the Yen. Japan has been living on borrowed time for 15+ years, maintaining a fake standard of living that was dependent on perpetually greater amounts of debt; the bill has come due. The exact same process is occurring in several of the biggest economies of Europe.

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