Monday, January 14, 2013
A Lesson On How It Could End
Japan's balance of trade is no longer the source of great stability that it used to be, and in part that will not be redressed but worsened by a cheaper yen. Since shutting down the reactors, Japan is locked into importing more energy, and the more the yen drops, the more expensive the energy component will be.
It is true that all the foreign money that is repatriated will gain, but that makes it even more profitable to shut down Japanese manufacturing ops and move them elsewhere.
As soon as any real trickle of money out begins, this gets potentially unstable. It's all about money flows now.
MeThinks 2013 is the year everything gets REALLY interesting.
It's like a mud slide. The ground gets saturated with water and then all of a sudden. ...
We have just begun the cascade.
One structural point for the Japanese economy was when the retirements reached the level where people had to pull money out to live.
The reason why Abe's policies may precipitate the end is that they would tend to make it very profitable for Japanese to save elsewhere in other currencies.
“I prefer to see a crash of Japan’s debt sooner than later because there’s no other way to revive Japan’s economy,” said Fujimaki. “The biggest merit for that is we won’t have to repay debt that we can never repay. Otherwise, young people will have to work like coach horses just to pay tax.”
The poor pathetic youth and the unborn in the U.S. will have to default because the blood sucking boomers are not going to cut back on their lifestyle. Then those youth and unborn can start borrowing all over again.
And just for the record, the people with the sweet deal are the parents of the boomers. They bought houses very cheaply. They had pensions. My husband's father got to double dip a pension and government benefits from being in the military. You're not going to see much of that with boomers, since most of us did not get pensions.
And frankly, since young people voted another 4 years of Obama, I don't feel bad at all about letting them pay for it.
It is so difficult these days to get our elected representatives to do what we want. And everyone seems to have a special program that they just can't live without. We have states that are basically run by one party, which means that they have no opposition. And when we try and talk about limiting government spending on a national level, the name calling starts. I can think of several Departments that I would love to get rid of and many state bureaucrats that I would like to see unemployed. But I do not yet see a way to do that in the very blue state I live in.
I'll be taking home 3K LESS this year due to tax increases/ reinstatements. This does not include the increase in health insurance premium (annually not all that much) nor the expected increase in property taxes.
Anyone expecting a "recovery" in real terms is either stupid, delusional, or a government employee. But I repeat myself.
I imaging anyone not in the top 35% of earners is probably going to be dipping into their savings/retirement funds to survive. The only relatively good news I can find is all the other economies in the world in worse shape than ours. But I suspect at the micro level this won't mean a thing.
That means that just stopping borrowing (which they cannot do) is not enough to avoid an ever-greater per capita debt burden on the young.
There is no out for Japan, but they unfortunately were hammered with bad luck by 3/11 and the consequent closing of the reactors.
Our situation is quite different, but we have to come to some workable compromise. The key to any workable compromise is a lot more jobs, which means that we should be thinking "production, production, production".
You cannot increase production without cheap energy. We're trying to shoot our own feet off.
What people fail to recognize is that "real" discretionary income is a small fraction of total earnings for the vast majority.
A person earning $40,000 is going to have $800 less to spend, and may well have true discretionary income of less than $2,000 a year.
Yeah, it's going to bite.
That doesn't mean we can avoid it - obviously we can't raise payroll taxes on the young to 20%!
But it really isn't the boomers who want more than they put in. Previous generations got that. Boomers cannot.
But boomers also bear the responsibility for the government recklessness which led to our pass. By which I mean spending. The money was paid in and not saved, so the boomers are going to take a massive licking. Medicare will cover much less, SS benefits aren't going to be paid in full, and in general this generation will be poorer in retirement than the two prior generations. Also they will die earlier.
The younger people will be poorer as well, and living in a democracy means that you cannot avoid the common fate.
The sooner we all face up to that common fate the better the outcome will be. We might run it right to Greek levels. At this point, there's no floor.
The rich don't want to pay more taxes because there is no serious attempt to balance the books and avoid disaster.
The young of this generation are also pulling massive government benefits compared to most older generations. The unrepaid student loans alone are very big burden upon the public purse.
Let's hope Congress doesn't act on his "suggestions". Obviously he didn't want to stick his own neck out when it comes to infringing the Constitution.