Japan Is Leading the Global System to Collapse

[senheiser]

Japan Is Leading the Global System to Collapse
-- Posted Monday, 3 November 2014 |

By Graham Summers


The Keynesian economists managing or advising the world’s Central Banks have always averred that they could pull us out of the weakest recovery in the post-WWII era if they were allowed to have their way.


Their “way” involves rampant debt monetization, also called Quantitative Easing or QE. Indeed, the primary argument from the Keynesians as to why QE has thus far failed to generate a rip-roaring recovery is that none of the QE programs in place were large enough.


Japan is where the Keynesian economic model rubber hit the road. In April 2013, the Bank of Japan announced a staggering $1.4 trillion QE program.


In today’s world of Central Banking madness, $1.4 trillion no longer sounds like an insane amount. So let me put this number into perspective…


$1.4 trillion is…


1)The equivalent of 24% of Japan’s total annual economic output.

2)Enough to fly every human being in Japan to California for a 2-week vacation.

3)The equivalent of writing a check for $11,200 to every man, woman, and child in Japan.


Moreover, with $1.4 trillion, you could…


1)Buy Australia’s entire economy for a year.

2)Fund NASA for the next 82 years.

3)Treat every person on the planet to a $200 five star-dinner at one of New York’s top restaurants.


The program has been a complete failure. Japan’s GDP growth accelerated for only two quarters before turning down again. The misery index in Japan has hit a 33-year high as households were crushed by riding prices.


Even exports, which were supposed to be the primary beneficiaries of a weakening Yen, have tanked. According to CLSA, real exports remain 16% below the 2008 peak in real terms. Sony, the once great electronics giant of Japan slashed its profit outlook by 70% and canceled its dividend for the first time in 50 years.


In simple terms, Abenomics has failed to revitalize Japan. In very specific terms a single QE program equal to over 24% of Japan’s GDP FAILED to generate sustainable growth in GDP, jobs, or even exports.


So what did the Bank of Japan do?


It increased its QE efforts.


It is now clear that Central Banks will do absolutely anything but admit failure. Japan has proven point blank than QE does not create growth. Instead of admitting this, the Bank of Japan has chosen to increase QE.


This is only going to usher in the next round of the Great Crisis that much faster. Only this time around, entire countries will go bust, NOT just banks.

 

[Speeder 2]

Low IQ Abe's engineered 10% drop of Yen in the last several weeks has made a complete fool out of the Japanese masses.

 

[powastick]

Sometimes its better to do nothing. But as a politician, you must do something or lose support.
Zugzwang - Wikipedia, the free encyclopedia

 

[bolo]

Low IQ Abe's engineered 10% drop of Yen in the last several weeks has made a complete fool out of the Japanese masses.

Abe or Ape has not choice. japan is no longer a manufacturing powerhouse, lack resources and the island is going to sink in the future.
Best bet for jap is printing infinite amount of useless money and buy mansions in other countries. option two is to invade korea and turn it into Japan. Japan can move half its people there. Than they can take on NK next. There is no option 3.

War is the only option for japs.

 

[Aepsilons]

Japan Is Leading the Global System to Collapse
-- Posted Monday, 3 November 2014 |

By Graham Summers


The Keynesian economists managing or advising the world’s Central Banks have always averred that they could pull us out of the weakest recovery in the post-WWII era if they were allowed to have their way.


Their “way” involves rampant debt monetization, also called Quantitative Easing or QE. Indeed, the primary argument from the Keynesians as to why QE has thus far failed to generate a rip-roaring recovery is that none of the QE programs in place were large enough.


Japan is where the Keynesian economic model rubber hit the road. In April 2013, the Bank of Japan announced a staggering $1.4 trillion QE program.


In today’s world of Central Banking madness, $1.4 trillion no longer sounds like an insane amount. So let me put this number into perspective…


$1.4 trillion is…


1)The equivalent of 24% of Japan’s total annual economic output.

2)Enough to fly every human being in Japan to California for a 2-week vacation.

3)The equivalent of writing a check for $11,200 to every man, woman, and child in Japan.


Moreover, with $1.4 trillion, you could…


1)Buy Australia’s entire economy for a year.

2)Fund NASA for the next 82 years.

3)Treat every person on the planet to a $200 five star-dinner at one of New York’s top restaurants.


The program has been a complete failure. Japan’s GDP growth accelerated for only two quarters before turning down again. The misery index in Japan has hit a 33-year high as households were crushed by riding prices.


Even exports, which were supposed to be the primary beneficiaries of a weakening Yen, have tanked. According to CLSA, real exports remain 16% below the 2008 peak in real terms. Sony, the once great electronics giant of Japan slashed its profit outlook by 70% and canceled its dividend for the first time in 50 years.


In simple terms, Abenomics has failed to revitalize Japan. In very specific terms a single QE program equal to over 24% of Japan’s GDP FAILED to generate sustainable growth in GDP, jobs, or even exports.


So what did the Bank of Japan do?


It increased its QE efforts.


It is now clear that Central Banks will do absolutely anything but admit failure. Japan has proven point blank than QE does not create growth. Instead of admitting this, the Bank of Japan has chosen to increase QE.


This is only going to usher in the next round of the Great Crisis that much faster. Only this time around, entire countries will go bust, NOT just banks.

A piece from Goldseek.com ? Oh Vey! I'm aiming for something more positive, okay?

Yoish!

 

[Keel]

 

[ChineseTiger1986]

They are not the US, so they cannot print their currency infinitely, since nobody in the world is going to digest a non-reserve currency in its hyperinflation form.

 

[TheTruth]

If Japan had properly atoned for its crimes or better yet never invaded China in the first place it would be a superpower today

 

[Aepsilons]

If Japan had properly atoned for its crimes or better yet never invaded China in the first place it would be a superpower today

Japan never had any intentions of being a superpower or the like.

 

[TheTruth]

Japan never had any intentions of being a superpower or the like.

You mean Showa Japan or today's Japan? That status would come naturally with the hard work of the Japanese people had their leaders not led them into a disastrous and unwinnable war. Japan could have easily kicked the Europeans out of Southeast Asia and then taken parts of Russia for natural resources if they weren't too busy trying to dominate China.

 

[Aepsilons]

You mean Showa Japan or today's Japan? That status would come naturally with the hard work of the Japanese people had their leaders not led them into a disastrous and unwinnable war. Japan could have easily kicked the Europeans out of Southeast Asia and then taken parts of Russia for natural resources if they weren't too busy trying to dominate China.

I'm referring to the Liberal Democratic Japan of today. Our society is affixed on the market economy and has embraced capitalism with some Japanese characteristics. National development and meeting the needs and demands of global economics has been the pillar of Japanese foreign and domestic policy. Japan doesn't have an interventionist policy.

 

[TheTruth]

Japan doesn't seem to be able to get out from under the U.S. in terms of foreign policy. No nation can survive without a "normal" foreign policy posture and Japan was stripped of this capability because Showa military leaders made so many poor decisions after the Great Depression.

Isn't a shame? Japan could have been a "normal" post-colonial country, a superpower with territory in Siberia and all of Karafuto and Chishima at least, and would have none of the bad blood with China and Korea if Japanese leaders had the wisdom to adopt the policies you mentioned above instead of constantly fighting with her East Asian neighbors for "psychological gains".

As someone from Taiwan most of my family wasn't brutalized by the Japanese occupation but Japan's actions in World War 2 brought all of Asia down and benefited only the West in the end.

So what I'm saying is that for Japan to have a neutralist, commerce-oriented foreign policy under American supervision is not enough. Japan needs to side decisively with China in broader strategic objectives if Asia is to prosper and come into its own. It's the best choice for Japan and for all of Asia.

I would ask Japan not to repeat the same grand historical mistake of benefiting the West at Asia's expense.

 

[Aepsilons]

Japan doesn't seem to be able to get out from under the U.S. in terms of foreign policy. No nation can survive without a "normal" foreign policy posture and Japan was stripped of this capability because Showa military leaders made so many poor decisions after the Great Depression.

Isn't a shame? Japan could have been a "normal" post-colonial country, a superpower with territory in Siberia and all of Karafuto and Chishima at least, and would have none of the bad blood with China and Korea if Japanese leaders had the wisdom to adopt the policies you mentioned above instead of constantly fighting with her East Asian neighbors for "psychological gains".

As someone from Taiwan most of my family wasn't brutalized by the Japanese occupation but Japan's actions in World War 2 brought all of Asia down and benefited only the West in the end.

So what I'm saying is that for Japan to have a neutralist, commerce-oriented foreign policy under American supervision is not enough. Japan needs to side decisively with China in broader strategic objectives if Asia is to prosper and come into its own. It's the best choice for Japan and for all of Asia.

I would ask Japan not to repeat the same grand historical mistake of benefiting the West at Asia's expense.

Very wise words. Thanks for them.

 

[asquare]

Very poor analysis.

First, Japan needs more inflation not less- they have been trying to get out of a deflationary trap- all this QE has barely achieved 3% inflation.

Second, a currency depreciation in Japan is a good thing, I would argue that a 10% depreciation is not enough, it will take a much larger depreciation to recover competitiveness- a low inflation environment is the perfect time to achieve this.

Third, some of the momentum of the QE has been lost by fiscal consolidation which is unrequired at this time, that is what Abe government needs to change.

Fourth, there is absolutely no evidence of an asset price bubble in Japan, another reason why the QE is benign.

Fifth, there is absolutely no reason why QE should cause uncontrolled inflation in a modern economy. Once, the economy recovers, aggregate liquidity can be controlled very easily, for instance by paying interest on banks' reserves.

Sixth, he makes no attempt to analyse the counterfactual, i.e. what would have happened in the absence of QE.

This guy is obviously not an economist.

 

[Cat Shannon]

If Japan had properly atoned for its crimes or better yet never invaded China in the first place it would be a superpower today

nah...japan had the bad luck of running into the US navy, is all. China was not important enough.

 

[Aepsilons]

Very poor analysis.

First, Japan needs more inflation not less- they have been trying to get out of a deflationary trap- all this QE has barely achieved 3% inflation.

Second, a currency depreciation in Japan is a good thing, I would argue that a 10% depreciation is not enough, it will take a much larger depreciation to recover competitiveness- a low inflation environment is the perfect time to achieve this.

Third, some of the momentum of the QE has been lost by fiscal consolidation which is unrequited at this time, that is what Abe government needs to change.

Fourth, there is absolutely no evidence of an asset price bubble in Japan, another reason why the QE is benign.

Fifth, there is absolutely no reason why QE should cause uncontrolled inflation in a modern economy. Once, the economy recovers, aggregate liquidity can be controlled very easily, for instance by paying interest on banks' reserves.

Sixth, he makes no attempt to analyse the counterfactual, i.e. what would have happened in the absence of QE.

This guy is obviously not an economist.

Depreciation gives our products the affordability edge. This effectively removes the edge Chinese, or Korean brands have over Japanese brands. I mean, to cite one example, one brand that is panicking is Korea's own Hyundai and Samsung.

Back in the mid 1980s, 1 USD was worth 235 Japanese Yen. It was during this time that Japan's economy was unprecedented, our industrial power was unmatched, our services affordable and hurting the American / Western counterpart.

Long term effects of the devaluation of the Yen will benefit Japan. Tremendously. And I remain optimistic.