by Jack Lee
Major economies are the brink of doom thanks to unsustainable govenment safety nets and unfunded mandates. The most vulnerable is Japan, then the rest shall follow…
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Ironically we have a Japanese politician to thank for the United States deficit spending that lifted us out of the great recession. During the depression era the Japanese economy only shrank by 8% between 1929 and 1931. By 1933 Japan was out of the depression, credit one Takahashi Korekiyo, Japan’s Finance Minister who was the first to employ what we now call Keynesian economic policies. The first part of the Keynesian plan is fiscal stimulus involving deficit spending; the second part was devaluing the currency. (Sound familiar?)
Takahashi used the Bank of Japan to manipulate deficit spending in such a way he could also minimize inflation. The devaluation of Japan’s currency had an immediate effect on their textile exports and this displaced some of their major competitors. Japan was on the road to recovery.
On the other side of the Pacific a democrat controlled Congress and White House rebuffed the Japanese plan and instead embarked on socialist programs like the WPA and Social Security. They also passed “Smoot-Hawley” which added a protective tariff to imports. This heavy tariff exacerbated the depression and added years to time we would finally begin a recovery from the depression.
Fast forward to the Great Recession and Democrats were again in control. They implemented stimulus spending as a response to the economic crisis. It was implemented with less sophistication and rather clumsily compared to that plan that saved Japan, but it worked. Arguably, it could have worked better, but at least the economy is now pointed in the right direction.
The juxtaposition between Japan and America of the depression era and today is quite ironic. The Japanese have been living in recession for over two decades and it is now in serious economic trouble because they failed to pass much needed economic reforms such as limiting their socialism and protectionists policies that are not unlike USA’s Smoot-Hawley act from the 1930’s. But, there is another even great problem looming and this shall surely bring them down into economic collapse. The Japanese have engineered an aging population with no replacement; their quality of life is not sustainable given the Japanese birth rate. Mark Steyn’s book, America Alone, goes to great lengths to explain how low birth rates among developed nations is about to wreak havoc in the next few decades.
Plainly said, Japan and then many other nations are headed for collapse and along with it their entire economy. For Japan the window of opportunity has closed over a decade ago and the only thing that has kept their government from panic is denial.
According to Ambrose Evans-Pritchard, one of the worlds leading economic writers, Japan is quickly turning into the developed world’s sickest economy and “could soon tip into an uncontrolled downward spiral. Japan is reaching the point of no return where it won’t be able to meet its obligations and could enter a debt death spiral with major reforms they have heretofore been unable to accept.”
Evans-Pritchard suggests that too much government spending resulting in too much debt is the root cause of Japan’s problems. He’s right about Japan’s debt habit being unsustainable, but he didn’t take note of its imploding population. Japan is literally a demographic time bomb. For too long the Japanese have discouraged immigration and encouraged low birth rates. For the last 50 years the Japanese have slowly been committing demographic suicide and now the inevitable is taking place, i.e., Japan’s population is crossed the tipping point so that its work force is both relatively old and shrinking and as a nation Japan can’t sustain its standard of living and keep the promises of the many safety nets for retirees.
This time I hope the American government takes note in time, because we are right behind Japan and denial of this fact will only get us a quick ride to the poor house.