Monday, March 14, 2011

Mainstream economics is about to bury Japan

The mainstream economic neo-liberal fascists are at it again, about to impose even more (needless) hardship on Japan when the country faces the most dire situation probably in its history.

They didn't even wait for the devastating tsunami waters to crest before making their ill-informed comments about how Japan was already so loaded up on debt that it was going to have a hard time "borrowing" the money necessary to rebuild.

Leave it to these deficit terrorists to do once again do what they have done so many times in the past, that is, impose unwarranted suffering on people because of their misinformed religious "fiscal fanaticism." It will end up causing more death and destruction than 100 Fuskishima quakes.

Japan is a sovereign nation with its own currency. It spends in that currency. It doesn't "borrow yen from somewhere." It can make any reparations and take any steps necessary to fix its economy given sufficient real resources and labor to do the job.

Whereas the rebuilding of the nation could have been an economic shot in the arm, it's about to potentially become a shot through the very heart of Japan's economy as the government has apparently bought into the admonitions of the debt terrorists lock stock and barrel.

In an article today I read that the government of Japan is considering a tax increase to PAY FOR the cost of rebuilding.

"The government is reportedly considering a temporary tax increase to pay for recovery efforts. It's a natural response -- -- when you have a great disaster, you need to fix the problem. The faster you do so, the better off everyone is -- so-called V-shaped economic recoveries are common after destructive events like earthquakes."


As if the destruction to the economy were not enough of a tax on Japan's citizens, the government will impose taxes, to raise yen--the very currency that it issues by power of monopoly--because the debt terrorists say that is the only way they will give their blessing???

Are they kidding???

Well, another country has just lost its sovereignty to this neo-liberal fascist cancer. My heart goes out to the people of Japan.

We're next.


Seething said...

I saw on Fox today that they will have to "cash out" their US Treasuries in order to help pay for this, and so one of our biggest creditors will no longer be willing to "loan us money".

I think it was Glenn Beck's show where I heard this.

bubbleRefuge said...

I think it was Glenn Beck's show where I heard this. Now that is one clueless person.

mike norman said...

I don't know why it doesn't occur to them that if Japan sold Treasuries the proceeds would be in dollars, and those dollars would then have to be converted to yen in order to pay workers and companies in Japan for the cost of rebuilding. So why go through all that cost and trouble since the Japanese government is the monopoly issuer of yen? Buying yen from themselves?? I mean, even a dummy should understand that.

mike norman said...

The "loan us money" line is the same error in logic. What are they loaning us? Dollars? Why does the United States--the monopoly issuer of the dollar--need to "get back" money that it can issue freely and without constraint?

That would be like Ford having to "get back" all the cars it sold in order to meet demand for new cars.


Seething said...

Don't you occasionally go on Fox, Mike?

Scream it out at the top of your voice, because the meme they're trying to spread is that the Japanese will have to stop 'loaning us money' because of the disaster problems, and so we have to shrink our deficit now because we are 'losing an important creditor'.

mike norman said...


I'm on Fox a couple of times per week and I have been saying it for years, but it's drowned out by the Fox propaganda.

Matt Franko said...


What you would have to say about this is really what people deserve to hear.

It would not be a disturbing message, but a message of calm, a message of hope. A very reassuring message and plan of approach that people would feel good about, would be encouraged and energized by (if they understood it).

Instead we get fear mongering and chaotic analysis. Regular people don't deserve this.

If you think about it, you are the only person on the planet who regularly appears on a national cable business channel that has the knowledge you possess to be able to bring this message of fiscal and monetary sanity.

You 'gotta hang in there 'bro.


mike norman said...

Thanks, Matt. Well, I'm hanging in there for another year as I just signed a new contract with Fox.

Reverend Moon said...

" It will end up causing more death and destruction than 100 Fuskishima quakes."

Are you serious? Hyperbole much?
Where's your "mathematical" maturity now?

Matt Franko said...


I have FoxNews on the XM here this afternoon and Neil has Donald Trump on and Trump is just excoriating Obama for going golfing for 2 days during the height of this Japanese disaster crisis.

It's pretty bad when The Donald can make you look like a db!

Congrats on the new Fox contract!


welfarewarfare state said...

Maybe we should worry about the spending terrorists? The money printing terrorists? It looks like we might have a terrorist sleeper cell on this site.

Has Japan employed one Keynesian stimulus after another over the last 20 years with the result being a two decade depression?

Japan has helped the EU zone and America finance their massive debt-load over the last few years. It will not be able to buy our debt now. It will be issuing bonds a plenty. What happens when the world won't buy what they need? Debt monetization will be their way out. The Japanese citizen is in for a bad time.

What happens when the Japanese need hundreds of billions of dollars to rebuild, and they start selling U.S. treasuries to do it. Won't that cause interest rates to spike suddenly on U.S. debt? (BTW, bubbleRefuge, I wouldn't make fun of people who have seen this coming while you have been asleep at the switch.)

Pimco announced last week that they were going to divest themselves of U.S. government bonds. What happens when others wake up and folow suit?

Lastly, Mr. Norman, remember that bet you made with me about treasuries of at least a 10 year maturity being at 10% yields by November, 2012? I believe we bet a penny. Do make sure it is polished would you.

welfarewarfare state said...


Almost forgot to ask. Isn't seignoriage a tax increase by stealth? Isn't that what you are advocating?

Unknown said...

"Has Japan employed one Keynesian stimulus after another over the last 20 years with the result being a two decade depression?"

WWS, So which is it? so your now saying spending causes deflation?

I guess you'll be right no matter what happens....

Eric Peterson said...

Japan has tried one Keynesian stimulus after another for more than 20 years, and has only 200 % of GDP in debt to show for it (and some bridges to nowhere, I'm sure). Monetary inflation on their part has been crushed by massive credit deflation, same as it has here. All of the hyperinflationists in the U.S. who do not consider credit contraction do it at their peril. Once QE ended last year the market started to tank and the 10 year went to 2.36 % (give or take). I suspect the end of QE2 will bring similar times. 600 billion of excess banking reserves may cause banks to chase up ag commodities and copper with "hot money", but it pales in comparison to the 60 trillion in dollar denominated debt that is currently being evaporated from our economy. Malinvestment needs to be liquidated and prices need to fall to a level on assets where they can be productively and profitably put to use. This is massively deflationary, and it will continue here for some time until all of the bubble garbage that has been blown up over the last 20 years returns to their proper levels. When this will happen is anyone's guess. More bubble blowing will not let us escape from the painful truth that we're going the way of Japan, with many years of painful deleveraging. And if we decide to continue to make decisions like the Japanese with endless stimulus, propping up of zombie companies (e.g. GM, AIG, FNM, FRE) then we will make it more painful, take longer, and have nothing but an insane bill to leave to our children.

welfarewarfare state said...


You are confusing depression with deflation. This is a common mistake and is due to those who link falling prices with a slowing economy.

The 19th century was a deflationary boom period. Prices were falling for most of this period while production soared. Living standards went from a subsistence level to the highest in the world during a period of falling prices.

The reason that prices were falling in the 19th century (outside of the fiat paper currency period of the Civil War) is that productivity gains were taking place. The medium of exchange was sound, so it stands to reason that prodcutivity gains would result in gently falling prices.

People are fearful of deflation because the rapid price declines that happen in the wake of a burst credit bubble are very painful for many, but they are necessary to cleanse the system of the imbalances created by artificially low interest rates. The bubble prices merely gave the illusion of prosperity. Falling prices were a CONSEQUENCE of the burst asset bubble, not the cause.

Look up the depression of 1921 if you get a chance. The GDP and stock market both declined by more in the first year of that depression than they did in 1929. Unemploment spiked higher in '21 than '29 in the first year as well. Many businesses went under, and others had to take a haircut.

The response of the government in 1921 was to cut spending and taxes. That was largely the extent of government measures. The '21depression that was more severe in the first year than the Great Depression was over within 18 months.

This episode in American history has been whitewashed because it is a very inconvenient history lesson--at least from the government's perspective. They would have us believe that the government saved us from the ravages of a depression brought about by the free market and "animal spirits." The government presents itself as the Great Saviour when it is really the Great Predator.

There is a great presentation on the Depression of 1921 by Thomas Woods over at YouTube

welfarewarfare state said...


Prices are rising at a 7-10% clip according to non-governmental sources (check out

The Fed has loaned money to businesses directly (McDonalds's G.E. and Federal Express being but three). This came out in the first week of December, 2010.

The money supply is not contracting. It has found its way into the economy. It is growing rapidly. Price inflation has already reared its head in commodities traded on world market and equities. It has shown up to a lesser degree in comsumer products, but that has accelerated of late as well.

Eric Peterson said...

I agree with you that over probably the past year that the money supply (meaning money and credit) are not currently contracting. But a lot of that has to do with Quantitative Easing and the government gumming up the foreclosure process. In the very near future (my guess is right around the time that QE 2 ends) we will see another round of contraction. You can already see it in the housing market (case shiller is down 5 or so months in a row, with no bottom in sight), and the Fed's balance sheet will start to contract in short order. This on top of massive defaults in things like school loans and credit card debt, commercial real estate, etc. will probably make the second half of the year look pretty scary. Believe me, I want it all to come to an end and to allow assets to be properly priced so we can begin real growth and a return to prosperity. But I do not think that I hyperinflationary model fits right now. I think that bonds and the dollar will rally later this year, and that the market will get smacked. All this will lead to QE 2 to however many they need and deficit spending Japanese style. Eventually this will all come back to bite us in the ass and large scale inflation (defined as an increase in money and credit) is likely. But in the short term I just can't buy into hyperinflation with housing having potentially another 10-20 % to the downside and colleges across the country looking at having to educate children without endless 2% federally back loans (you know, like they did in the 60's when you could wait tables and afford a college degree.) I certainly fall a lot closer to the Austrian's than the Monetarists or Keynesians in my thought, but I just think that Schiff and the hyperinflationitsts have gotten it way wrong b/c they fail to consider the entirety of the money supply. Monetary expansion has certainly chased up the price of cotton and corn, but I really think that you're going to badly lose your bet to Mike Norman on the 10 year. I'd guess we break 2.5% before we see 10%...

googleheim said...

If the Japanese stimulate with $700 billion worth of Yen to their banks, then they will be able "to buy more US Treasuries".

If they convert U$D to Yen they lose due to Yen strength.

If they print Yen, then they win because of strength of Yen to USD and all other currencies.

They can print and buy up your backyard.

The USD will not spike because Bernanke will not let our standard of living appreciate as per Mosler/Norman.