"Authored by Andrew McKillop,
The Sickly
Giant
Japan has the the world's third-biggest economy
and was only recently pushed into this third place by China - but it remains
world No 1, and by far, as measured by its sovereign debt-to-GNP ratio. Its new
Liberal Democratic Party-LDP government, no different from LDP governments which
have almost exclusively ruled since 1955, is setting out with a proud (in fact
desperate) task: to end deflation by pushing down the world value of the
JPY (yen) to a theoretical point where "inflation of 2% or 3% a year" will be
possible.
The return of inflation, in official Japanese liberal newspeak, will
make the economy less sickly even if the strategy "has risks". One of
these is war with China, if only as a (Japanese) crowd pleaser, and another is
selling off Japan's over-one-trillion dollar holding of US Federal debt at
exactly the right psychological moment to implode the US economy, already
teetering on the brink of its fiscal cliff.
The sickly Japanese economy can look quite healthy on cursory first
glance. Probing deeper shows it is much, much worse than most Japanese
either know or non-Japanese want to know. One reason that "nobody wants
to know" is because Japan is the world leader in Neoliberal economic
decline, having run the gamut of New Economy fads and foibles over more
than 20 years. It has blown them up one by one, and slumped ever further into
permanent and probably terminal decline. To be sure, firebrand Free Marketeers
will contest this picture, saying that Japan is an entitlement strangled,
over-developed monoculture with indelible cultural barriers to "the open
economy" that however in no way prevent the country technologically innovating
at a rapid pace, and having much more than a random selection of thriving
world-class multinationals.
Debt And
Deficit
25% of Japan's annual state and local
government budgets go to servicing debt. Interestingly enough, the very
first stock market scams - France's Mississippi Company scam of 1719-1721 and
its 'sister scam" in England, the South Sea Bubble - were driven by greedy and
incompetent monarchs (the 18th century equivalent of Big Brother government)
running up massive debts. Scraping around for a quick fix, the "finance sector
professionals" advising the greedy monarchs soon hit on cranking up an asset
scam, Facebook or Apple-style, and siphoning quick and fraudulent profits from
this to the monarchs. After a short while, of course, the scam went 'Madoff the
wall'. The asset mountain imploded leaving nothing but paper promises,
popular rage, and more debt.
Japan can in no way be criticized for being ahead of the Neoliberal pack in
running up its sovereign debt to delirious extremes and, much later on,
panicking about it. This is what Neoliberal Freedom is all about - called
"laisser faire"!
The incoming, recycled LDP stalwart Shinzo Abe – once again destined to be
Japan’s prime minister by Japan's No Alternative political machine – lost no
time in undertaking to flood the economy with money until inflation reaches at
least 2%. The critical point is that Japan is the country where deflation has
been a "permanent" fixture, a spinoff from its permanent decline and despite its
incredible debt and now impressively huge trade deficits, and a list of other
no-no things for the trader fraternity hunched over their playstation consoles.
Apparently, Abe and his LDP Old Guard imagine that "gaijin", including
the Chinese, are awed by the risks this sets for the world economy and will not
react.
Foreigners will not show disrespect to Japanese bonds, but will obediently
hold them. They will also, in very orderly fashion, only moderately sell off the
JPY, by exactly the amount needed to get the magic 2.5%-a-year inflation rate
that Japan's new (in fact old) bosses pine for. Japan is by definition
“too big to fail” – but unfortunately Japan's liberal and neoliberal Apprentice
Sorcerors are dreaming.
Nationalism
Rising
For outsiders, whether we call them
gaijin, Martians or Wall Street Journal editorialists, Japan seems to be struck
by a strange curse. It’s population is shrinking rather fast, surviving
Japanese are therefore rapidly ageing, consumer attitudes and behaviour go from
bad to worse - Japanese will not consume - Japanese savings are "ridiculously"
high with bank deposits bringing 0% per year interest, taxes are high, the
country makes only the faintest attempt to attract talent, ideas or products and
services from the rest of the world. Its agriculture is a nightmare of low
productivity and high subsidies, its uncompetitive rural industries are cosseted
by the government to the point of absurdity. Its reaction to the Fukushima
disaster - abandoning nuclear power - appeared 'unrealistic' to some, and its
theatrical bellicosity in response to China's theatrical bellicosity over the
disputed South China Sea islands (Senkakus in Nippon-go, not in Chinese) seems
unrealistic to most and outright dangerous to most..."
at http://www.zerohedge.com/news/2013-01-01/guest-post-japans-patriotic-war-agenda
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