Guest post by Azizonomics.
Japan’s population has gotten so old that diaper manufacturers are selling more adult diapers for incontinent seniors than they are baby diapers. According to Bloomberg:
This is because Japan’s population is getting older and older:
People are obsessed with the Euromess and the Fiscal Cliff. What about Japan? A few reflections via Caixin Online.
Every time I come to Japan to attend a conference, I am reminded of what a depression looks like in the 21st century. This time is no different: shops are not busy, restaurant owners wait anxiously outside for customers and are usually disappointed, empty taxi cabs roam the streets. Two decades after its property bubble began to deflate, Japan remains mired in deflation and contraction.
The economic statistics tell the horror story best. Japan’s nominal GDP in 2011 was 9 percent lower than in 2007 and 2.5 percent lower than in 1992! In 1992, the national debt was only 20 percent of GDP. It is now 230 percent. Essentially, 200 percent of GDP in fiscal stimulus hasn’t turned the economy around.
The depression dynamic begins with declining incomes. People then spend less to cope. Shops and restaurants become emptier. The weak demand depresses business profitability and investment. The former depresses the stock market, and the latter labor income. Both pressure people to spend even less.
Few people pay attention to Japan’s problems nowadays. Financial markets pay a lot of attention to the United States’ economic problems. But its nominal GDP rose 7 percent between 2007 and 2011 and is likely to rise another 4 percent in 2012. Japan could at best achieve zero growth in nominal GDP in 2012. The performance gap between the United States and Japan is 20 percent in nominal GDP since 2007. America’s national debt has doubled since 2007 and reached 100 percent of GDP in 2012. Its trend isn’t sustainable either. But Japan’s debt problem is more advanced in depth. Its debt crisis should occur before the United States’.
Guest post by Doug Short.
In last weekend’s update, I characterized the collective trend for my featured world markets as a roller-coaster ride moving wildly between weekly losses and gains. Over the past week the roller coaster headed up, with the average of the gang of eight at an even 1.50%. China was the big winner with the Hang Seng edging out the Shanghai Composite for the top spot, up 2.63% and 2.60%. Germany’s DAXK and France’s CAC 40 finished third and fourth at 1.83% and 1.67% respectively. The S&P 500, shut down by Sandy for two days, finished last with a fractional gain of 0.16%.
The four-week table below documents the roller-coaster pattern I mentioned at the outset. Let’s add two weeks to the front end for a snapshot of the weekly average for the past six weeks: -1.31%, 1.36%, -1.42%, 2.02%, -1.38% and 1.50%. Quite a ride!
Guest post by Azizonomics.
The modern “debt jubilee” is characterised as “quantitative easing for the public”. It has been boiled down to a procedure where the central bank does not create new money by buying the sovereign debt of the government. Instead, it takes an arbitrary number, writes a check for that number, and deposits it in the bank account of every individual in the nation. Debtors must use the newly-created money to pay down or pay off debt. Those who are not in debt can use it as a free windfall to spend or “invest” as they see fit.
The major selling feature of this “method” is that it provides the only sure means out of what is called the global “deleveraging trap”. This is the trap which is said to have ensnared Japan more than two decades ago and which has now snapped shut on the whole world. And what is a “deleveraging trap”? It is simply the obligation assumed when one becomes a debtor. This is the necessity to repay the debt. There are only three ways in which a debt can be honestly repaid. It can be repaid with new wealth which the proceeds of the debt made it possible to create. It can be repaid by an excess of production over consumption on the part of the debtor. Or it can be repaid from already existing savings. If none of those methods are feasible, the debt cannot be repaid. It can be defaulted upon or the means of “payment” can be created out of thin air, but that does not “solve” the problem, it merely makes it worse.
Another must read piece by Grant Williams.
The change in the structure of Japan’s population over the past 50 years is starkly reflected in the country’s population pyramid which looks ever more shaky with each passing year while the forecasts for 2050 are, frankly, frightening (chart, above).
By 2050, Japan’s population is projected to fall to 90m. Incredibly, as recently as 1990, the number of working Japanese was three times that of both children AND the elderly.
In 2011, Japan’s budget for social welfare was ¥90 trillion but that was at least ¥1 trillion short of where it needed to be, precipitating further issuance of government bonds and that, on top of the increased strain caused by the Kansai tsunami has Japan’s bond market teetering on the edge of implosion—still.
A 2011 report from the National Institute of Population and Social Security Research (could that BE any more Japanese?) shed some light on just how fast things could deteriorate from here:
In case you missed it over the US long holidays, here is the FT Wolf’s interview with Krugman.
So, I ask, will the argument of the column be that “it’s all over” for the eurozone?
“No. I don’t think they can save Greece but they can still save the rest if they’re willing to offer open-ended financing and macroeconomic expansion.” But this would mean persuading the Germans to change their philosophy of economic life. “Well, the prospect of hanging concentrates the mind; the prospect of a collapse of the euro might concentrate their minds.”
I change the subject to ask how he has coped with the shift from being predominently an academic economist to being the leading spokesman for the liberal cause. How did this happen? “Well, it was funny,” he responds. “I was doing a column for Slate and then a bit for Fortune, towards the end, and then the [New York] Times came along with this offer. It was 1999. We thought I’d be writing about the follies of dotcoms and stuff like that and then it turns out that it’s a much more awesome and ominous responsibility. It was nothing I ever planned.
“Really, the rough period was the first [George W] Bush term when it seemed like the whole world was mad, save me, or vice-versa, and it’s gotten easier.
“I have to say, though, that the economic crisis has played into the things that I was worrying about 15 years ago. It’s been almost alarmingly easy to figure out what to say. But it’s a very strange thing: it’s not at all what I was imagining I was going to be doing with my life.” (Full link here).