The US Dollar is Dropping Like Dead Flies All Over the Place

This from Zerohedge is about how many nations, including staunch ally Japan, are quietly concluding business deals and trade that do not involve the US dollar - the world's supposed reserve currency. This needs no comment from me excepting that I'm wondering when gold and silver are going to go ballistic.

Zerohedge reports: 


For anyone wondering how the abandonment of the dollar reserve status would look like we have a Hollow Men reference: not with a bang, but a whimper... Or in this case a whole series of bilateral agreements that quietly seeks to remove the US currency as an intermediate. Such as these:

"World's Second (China) And Third Largest (Japan) Economies To Bypass Dollar, Engage In Direct Currency Trade",

"India and Japan sign new $15bn currency swap agreement",  

"China, Russia Drop Dollar In Bilateral Trade", 


"China And Iran To Bypass Dollar, Plan Oil Barter System", 


and now this: "Iran, Russia Replace Dollar With Rial, Ruble in Trade, Fars Says." And ironically, the proposal to dump the greenback did not come from Iran. Per Bloomberg: "Iran and Russia replaced the U.S. dollar with their national currencies in bilateral trade, Iran’s state-run Fars news agency reported, citing Seyed Reza Sajjadi, the Iranian ambassador in Moscow. The proposal to switch to the ruble and the rial was raised by Russian President Dmitry Medvedev at a meeting with his Iranian counterpart, Mahmoud Ahmadinejad, in Astana, Kazakhstan, of the Shanghai Cooperation Organization, the ambassador said." Is Iran gradually becoming the poster child of an energy rich country that just says no to the dollar: "Iran has replaced the dollar in its oil trade with India, China and Japan, Fars reported."... Read more




It won't be too long until Japan, China and Russia will complete bilateral trade agreements with the Eurozone nations in exchange for purchasing European Bonds or European Financial Stability Facilities (FSF).  Oh, but don't worry, Only China, Japan, Russia, India, Brazil and the EU will make these transactions in other currencies besides dollars... Everyone else will still use good old US made paper! Who will that be, you ask? Well, there's the USA, and er... Ummmm...

The Japanese Titanic: Japan's Public Debt Will Surpass ¥1 Quadrillion Yen Any Day Now

How much is a quadrillion? That's a thousand trillion....


Recently, I've been getting my daily money market news fix from the usual suspects: Mish Shedlock, Karl Denninger and Mad Max Keiser but there's another blog that I've found that hits the mark consistently and updates more than several times a day. It's called Zerohedge. I highly recommend it because the guy that runs it seems to get the scoops on what's going on days and even weeks faster than all the rest.

The latest one rings the alarm bells for Japan once again. Japan's Public Debt is about to surpass ¥1 Quadrillion any day now. Jeez! How many zeroes are there in a quadrillion? I didn't even know without having to look it up.


Let's see that's a one with fifteen zeroes after it. Like this: 1,000,000,000,000,000.


Zero hedge reports in Japan Will Raise More Cash From Debt Issuance Than Taxes For Forth Year in a Row


Japan's marketable public debt, already the largest in the world at $11.2 trillion compared to America's $10 trillion (of course this assumes the whole SSN sleight of hand is funded, which it isn't), is due to surpass ¥1 quadrillion any month now (aka the exponential phase). And that's just the beginning. As Bloomberg reports, "Bond sales to the market will climb to a record 149.7 trillion yen ($1.9 trillion), while the national budget’s reliance on debt for funding will rise to an unprecedented 49 percent in the year starting April 1, Japan’s government said Dec. 24.


The article goes on to stomp on these Keynesian "economists" (read: clowns) who claim that the government should increase spending to pick up on falling consumer spending and loosen monetary restraints (read: print like hell) in order to pump up the economy before a recovery starts:


In other news, and to all the neo-Keynesians out there, we post the following thought experiment: according to the head priest economic growth derives from debt issuance. And since apparently every country (yes, yes, that has its own currency) can issue infinite amounts of debt, why doesn't the US and Japan (and the EU post Eurobonds), simply announce it will monetize, aka print, an infinite amount of debt tomorrow? Shouldn't that lead to global GDP promptly rising by infinity %? Or is there an actual problem with this hypothetical scenario which takes current debt trends to their ludicrous extreme.


Want to see what a quadrillion pennies look like? Here ya go!

Here we have buildings (in front) used for scale at a trillion. They're now dwarfed by the large cube of pennies in back (quadrillion). The large cube is a quadrillion, or a thousand times one trillion. This cube is roughly a half-mile wide and would weigh an astonishing three billion tons.

Translation: Japan is doomed. 2012 and beyond are going to be rough ones.


Happy New Year! If you are in Japan, may I suggest drinking as much as you can, while you can. 

Japan and Europe Imminent Default - Kyle Bass Letter to LPs

Kyle Bass has written his latest letter for Hayman Capital Management. It is not good. Read it... This one sentence sets the tone for the poor outlook for the economy of Land of the Rising, er, Setting Sun....Er, Japan.


"... We believe the debts of the following nations, among others, are not sustainable in the current economic environment: Greece, JAPAN, Portugal, France, and, have we mentioned Japan?"


Notice, on page 9, that Japanese government debt is at "229% of GDP."

Click the box circled in red below the letter to view in full screen

Below:

Or click here to go to full screen.
Hayman_Nov2011Thanks to Zerohedge

People With Jobs Doing the Minimum... Lots of Them!

With unemployment numbers rising all over the world and talk of the Greatest Depression, many in the Banker and Wealthy class and even in the mass media say that the unemployed are lazy. I think the notion that the unemployed are lazy might be a lie. From what I've seen, in my own experience, it's the employed salary workers who are lazy.


I don't know about the unemployed. I do know that, in my experience, there are far too many employed people who are lazy and are skating by on doing the absolute minimum. I know several of them.


A few of them are about to be out of jobs.


Intelligent people know what is going on with the economy and how things are going to get really rough very soon. There are many people who are oblivious to what's going on and think they can keep doing things the way they've been doing them all their lives.


Perhaps they can. Perhaps sitting at an office and doing the minimum required can save their job. I don't think it can. 


I think the current malaise in the economy is going to get much worse than it is now and people who think they can, say, work for 40 hours a week (and leave immediately when the clock strikes 6 pm) and keep their job are kidding themselves. Jobs are getting scarce. The Governor of the Bank of England says that we are soon to be into the worst economic crisis in history. That's not all, the BBC says we are two or three weeks away from full blown global financial meltdown...


There are plenty of people who are willing, nay desperate, to do far and above the call of duty, to do more than is required to get quickly disappearing jobs...


This goes for good jobs with good pay and also the so called "slave wages" jobs like flipping hamburgers at Macs. Even at Macs, working the 40 hour shift, who do you think will keep their job? The worker who does the minimum required or the worker who, when business is slow, will mop the floors and clean the windows without first being told to do it?


In the eighties vacations and benefits were perks of jobs. In the year 2012 and beyond, merely having a job will be a perk. I think many people today, who have a poor understanding of the economy, think that the conditions and events of the last twenty years (especially the last 3 years) are normal. What they don't understand is that we have been living on borrowed time created by a government policy of artificially low interest rates and massive money printing. 


These government policies have created an artificial economy but these quick fix solutions to our problems can't work forever and they are unraveling quickly in front of our eyes - regardless if people recognize it for what it is or not. Japan will not escape the problems - and, in fact, is a huge part of the problem. And the piper must be paid someday and that day is soon coming upon us.


A few days ago I met a woman whose father was 56 years old and she told me that he hadn't a job for over two years! At 56, it should be his highest earning potential in his entire life, but here he is, out of work.


People under 30 ~ 35 years old today are fooling themselves if they think that they will be able to get along over the next 10 ~ 20 years doing the minimum amount of effort for the minimum amount of working hours a week: 40.


Like I said, there are many people who will gladly take those forty hour a week jobs and invest 72+ hours a week of their time and sweat to make sure they get and keep those jobs. It's not a question of desire or want, it is a question of survival. 


Survival of the fittest.


For a short view of just how bad things have gotten in the USA over these last 3 years watch this video. (And don't think I am blaming it all on Obama, the Republicans haven't done any better).  

And if you think that the coming collapse of the US economy isn't going to affect you in Japan, or anywhere else in the world, you are out of your mind... 


I meet young people today who tell me that they want to work "only" a full 40 hour week - no more than that. I think they are living in a fantasy world. I even had a guy (who works part time) tell me the other day that he "even worked until 1 am the other night."


I am not impressed in the least.


When I was the GM of a broadcasting station in Tokyo, I worked from 5 am until 9:30 pm every night at least 6 days a week.. Often 7. So I am not impressed a bit by someone working until late.


Big surprise for many: People do that all the time. It used to be considered a strong work ethic. It used to be considered normal if someone wanted to "get ahead". 


I am not rich but I have always been a person who was hired and then soon became a management staff. Even when I got my first job in 1975. I was only 17 but soon was given the right to clear personal checks and credit transactions. A right many employees did not have and those employees were often in their thirties.


When I graduated from college, my former boss called me out of the blue and tried to hire me back. He said, "We will hire you part-time but pay you more than full time wages." Sounds pretty good, eh? 


I refused and said, "No!" 


I told him that I didn't go to college to graduate and earn full-time wages. I told him, "I want to work twice full-time and earn five to ten times full-time pay - at least!"


Now, I meet young people who tell me that they want to work "only 40 hours a week" if that much? Dreamers. Good luck with that.


How in the world will you get any jobs when there's a flood of out of work professionals with tons of experience who will work well over and above the call of duty for their wages?


The days of doing the minimum at work are over...


For most people the days of doing the minimum ended when they go out of high school... For too many, they still think that they can continue to do the same.


Well, I've got news for you folks... Life is full of rude awakenings. You can get with the program now, and get off your asses or you can wait until you are forced off your ass.


Like Keith Richards said, "I'm going to walk before they make me run."


Too many people are sitting there waiting... They won't have to wait long.

Always Question Motives of What People Say: Arnie Gunderson

There is a video that might be set to go viral on the Internet from a guy named Arnie Gundersen. It is about Fukushima. There are some glaring mistakes in his testimony. The media hasn't picked up on Gundersen heavily yet, but they might. I think now is a good time to show you why we should be very skeptical of yet another media creation and what s/he says. 

The video in question, as far as I am aware of, was first put up on a site named Chris Martenson. Martenson sells information to investors and recommends stocks and equities. He also has a plethora of online information and seminars that he sells to visitors. There's also a book or two. He is definitely selling an agenda. His site's sub title is: "Information on the global economy, environment, and our energy challenges." 


I went to that site and began to read the article in question interviewing Gundersen that links to the video. I stopped reading half way through the first paragraph. It's obvious that Gundersen doesn't know what he is talking about. The first paragraph reads: 


"I have said it's worse than Chernobyl and I’ll stand by that. There was an enormous amount of radiation given out in the first two to three weeks of the event. And add the wind blowing in-land. It could very well have brought the nation of Japan to its knees. I mean, there is so much contamination that luckily wound up in the Pacific Ocean as compared to across the nation of Japan - it could have cut Japan in half. But now the winds have turned, so they are heading to the south toward Tokyo..."


Right there, I can't stand to read anymore. Besides the sensationalist nonsense that, "It could have very well brought the nation of Japan to its knees." (Sure, and I could win the lottery tomorrow). It is absolutely and definitively false that the winds have turned, "...so they are heading to the south toward Tokyo." That's either an out-and-out lie or Gundersen hasn't a clue as to Japan's weather and wind patterns.


Either way, he's out. If he's a liar, then I don't need to read anymore. If he is clueless then ditto.


From March to December, Japan's prevailing winds blow from the south or east. That means, no matter how you slice it, Tokyo is upwind from Fukushima. It's been that way for millions of years, I can't imagine it changing anytime soon. And, no, it's not a question of today's weather versus yesterday's. Spring and summer bring rainy season and monsoons from the south pacific. These weather systems bring massive rains to the Japanese archipelago. They always begin in the Philippines and move north to Okinawa upwards to Kansai, then Tokyo and then northward where they peter out over the Pacific. 


We just had a typhoon last week. It came from the south. Can someone alert Gundersen that, under normal conditions, and in the real world, typhoons move in the direction the wind takes them and not against the wind .. I don't know about the books Gundersen reads. Maybe he's been hanging out with Michio Kaku and reading his books, I suppose?


There was another thing that bothered me... The above and then when I looked at reader's comments, all of them were angry that Martenson was charging money for people to watch the second part of the video. Martenson loses all credibility right there. 


I severely criticized him on his blog comments section for that too.   


But this is not about Martenson's questionable "recommendations" it is about Gundersen.


If we, the public, are to believe these pundits that we see on TV, etc. Then proper and fair disclosure is necessary. That Gundersen doesn't disclose his financial interests and motivations of commenting on Fukushima makes his remarks to be taken with a healthy dose of skepticism from thinking people. 


Just like, for example, before the Iraq War, when US media put many retired US generals on TV (who were on the payroll of US weapons manufacturers) to promote support for that war, we need to question what possible monetary motivations people have for what they say. Gundersen is no exception. 


As my friend Andrew Woolner of "Wall of Shame", the online Wiki that lists and documents gross and negligent sensationalist reporting concerning the Fukushima disaster wrote: 


Gundersen is much harder to pin down than some of the other fake experts. Unlike Caldicott and Busby, I haven't seen anyone directly challenge him yet, and he's reasonably careful about what he says (although, as Mike pointed out in the comments on this video, he doesn't know jack shit about Japanese weather patterns).

My impression is that his science is reasonable, but he's working from data that he's extrapolated from odd sources  and he makes assumptions that challenge the info coming out of Japan based on flyover videos and his own interpretation of data (like calculating the power of a blast based on plutonium found in Fukushima pref. which is probably left over from the cold war bomb tests). Anyone want to start a google doc where we start listing the claims he makes and debunking them one by one?

Thanks Andrew. Yes, it is time to start debunking this guy. Just like we've blasted Michio Kaku out of the water. 

As far as Gundersen is concerned, here's just some of the story that he probably doesn't want too many people to know. He possibly may have a conflict of interest problem. It's sort of like Fox News. You know, "Fair and Balanced" reporting only goes as far as it doesn't affect their pocketbook. In this case, Gundersen is selling a product and a service. 

Gunderson owns a patent for some sort of protocol that he wants to sell that is used for measuring radiation along with a system for dealing with it and decommissioning those nuclear power plants. He performs these duties with the Fairewinds Association of consultants of which he is co-owner and founder with his wife. It is his company's product and service that he is pushing.

From the Fairewinds Association site:

Arnie is an energy advisor with 39-years of nuclear power engineering experience. A former nuclear industry senior vice president, he earned his Bachelor's and Master's Degrees in nuclear engineering, holds a nuclear safety patent, and was a licensed reactor operator. During his nuclear industry career, Arnie managed and coordinated projects at 70-nuclear power plants around the country. He currently speaks on television, radio, and at public meetings on the need for a new paradigm in energy production. An independent nuclear engineering and safety expert, Arnie provides testimony on nuclear operations, reliability, safety, and radiation issues to the NRC, Congressional and State Legislatures, and Government Agencies and Officials throughout the US, Canada, and internationally.

(snip)

As the former vice president in an engineering organization, Arnie led the team of engineers who developed the plans for decommissioning Shippingport, the first major nuclear power plant in the US to be fully dismantled. He was also an invited author on the first DOE Decommissioning Handbook. Source term reconstruction is a method of forensic engineering used to calculate radiation releases from various nuclear facilities after nuclear incidents or accidents.  (emphasis mine)

So, while it may be hard to see on the surface, Arnie Gundersen definitely has a monetary motivation for what he is saying. His company wants to contract for the decommission of Fukushima and other nuclear power plants. There are many old ones who do need discussions on decommissioning. Fair enough.

The above information is easily found on a Wiki search on Gundersen and then a search of Fairewinds Associates... (I also noticed on a Google search that there was one return that said, "Solar Energy: Fairewinds Associates"... Hmmm/ Another possible conflict of interest?) 

There, on the Fairewinds Associates web site, you can find the name of the product/service that he is selling. Another Wiki check can put anyone on the right track about other possible conflicts of interest concerning Gundersen.... I found this out in 4 minutes of checking.


Perhaps I am wrong to say, "Conflicts of interest". Heck, who am I to  complain when a guy wants to make a buck? No problem. But when that guy uses the mass media to sell sensationalism and to try to capitalize of the public's mood and feelings of insecurity or fear, to garner public support so that he can profit from it, then we have a problem.


That person becomes guilty of dishonesty and loses credibility and respect when they fail to give full and complete prior disclosure of their background to us before giving us important information. In this case, Gundersen doesn't do it... He has repeatedly failed to do so excepting in very small print.


We can't trust what these media pundits or politicians tell us and, now, because we know a bit more about who Arnie Gundersen, is and what he is selling, we most likely cannot trust him completely either.


What Arnold Gundersen, like 99.99% of everything else we see or are told on TV or the mass media is not to be trusted nor taken at face value.

Japanese Prime Minister vs. US President - It's nice to know that there's still someone who's worse off than you are!

Oh well.... That loser Naoto Kan survived his vote of confidence the other day. I was quite unhappy about that... But I was very happy with how he did it. He lied and tricked his fellow crooked politicians. In that way, it does make me chuckle. 

THREE STOOGES MOST VIOLENT SEQUENCE EVER!

Moe says, "Power company probably got their wires 
all tangled up. Go up there and straighten out the mess!" Indeed.

 It seems he made deals with other politicians to not vote against him in the vote of no confidence motion. He promised them, that if they'd cooperate, that he'd quit soon if he survived with their help. Then, after he survived the vote, he reneged, and went around telling a different story about leaving office much later (or that he hadn't yet decided) and now other idiot politicians are angry that he lied to them? Ha!Ha!Ha!Ha!Ha!Ha!Ha!

Talk about the kettle calling the pot black! What a comedy of morons.


Reuters reports:


Ruling and opposition lawmakers slammed Prime Minister Naoto Kan on Friday, as he hinted that he would remain in power until around January although he promised a day earlier to quit once the country's recovery from the March disaster takes hold. Former Prime Minister Yukio Hatoyama, who supported the premier and voted against the no-confidence motion against his Cabinet on Thursday on the condition that Kan would quit soon, denounced Kan for backpedaling on his word. 


Isn't that just hilarious? One liar, in a room full of liars, lies and the rest of the liars are angry?   Don't look now, but doesn't this sound like that place in the movie, "One Flew Over the Cuckoo's Nest"?

Jack Nicholson stars as leader of unspecified organized political group

Sure, it's humorous. But there's a part that is not humorous about all this. Sydney Morning Herald reports in Japan Faces Downgrade as Economic Turmoil Goes On:


Japan's hopes of bouncing back from the economic turmoil caused by the earthquake and tsunami in March have been knocked by the threat of a credit rating downgrade from Moody's, and a rise in unemployment. Moody's warned that the devastation that struck Japan nearly three months ago is making it even harder for the country to recover from the financial crisis. It put Japan's Aa2 rating - the agency's third-highest grade - on review for a possible downgrade, adding there was a "low chance" of a multi-notch downgrade.


OK. This isn't funny. I suppose people who own lots of golf and silver might find this comforting or funny.... Unfortunately, I'm one of these people who don't believe it is possible to ever have too much gold or silver.


Depressing news. Depressing news, indeed... But then, my good friend Mark, from Diamonds.co.jp (highly recommended) sent me this. 


Mark sent this about Obama (click on image for full size):

Our prime minister, Naoto Kan, is an incompetent clown. But could he possibly be worse than Bush or Obama? No way. Japan is messed up, but we have the luxury of booting out our prime ministers every year. ... Hopefully every six weeks. You guys in the USA get stuck with these clowns for 4 ~ 8 years.

It's always comforting to know that there's still someone who is worse off than you are....

Very Interesting Take on "Flyjin" & One More

The Flyjin phenomenon in Japan has many facets. Generally speaking, Flyjin is a term used as a play on words in Japan. Gaijin is the word for foreigner. "Gai" means "outside" and "jin" means "person." So Gaijin means outside person or foreigner.

お江戸の火消し

SMOKE ON THE WATER

The Flyjin came in as an insult and joke deriding many of these foreigners who panicked and left places like Tokyo and Nagoya during the Fukushima accident. It is especially a dig at those who panicked and left co-workers, friends and neighbors (lovers too) holding the bag. It is not targeted at the foreigners who were in the disaster areas who left Japan. Only foreigners who were hundreds of miles away who panicked and fled - many even though their own embassies told them Tokyo was safe.


Nikkei Newspaper, though, has an article about foreigners who have left Japan that is looking at the problem from a totally different perspective. Even though many Flyjin get their feathers ruffled at the insinuation that they showed poor leadership and weak crisis assessment abilities, this article deals with a completely different segment of the foreigner in Japan market. It actually deals with a much larger workforce in Japan than the few westerners (who will most assuredly get angry about this article) that have been brought up in a society that makes people think they are entitled to everything.    
    
The title of the article asks Japanese people, "Do you think that only Japanese workers can protect your workplace?" From Nikkei:

消えた外国人労働力　日本人だけで職場は守れるか：NBonline(日経ビジネス オンライン)

business.nikkeibp.co.jp

震災と原発問題で日本を離れた外国人労働者たち。そこで突きつけられた問題がある。多くの職場で外国人が不可欠である現実と、彼らを身勝手に使ってきたという事実だ。外国人労働力を日本社会でどう位置づけるか。この問題に今こそ正対する時だ。...

Translation:

Many foreigners left their workplaces after the earthquake and due to (Fukushima) nuclear problems. This leaves us with many issues to consider. The reality of the situation in the workplace is that we (Japanese) have been using this (cheap) foreign labor selfishly. Perhaps it is time to consider how these foreign laborers are placed and viewed in Japanese society. Now could be a good time to consider this issue.

Japanese factories have a serious problem without cheap foreign labor

The article goes on to discuss how, due to a rapidly aging population and declining birth rate, Japan desperately needs these people to perform manual labor duties in order for the Japanese economy to run.

While many foreigners might cheer and raise their fists reading this and scream, "Right on! We are taken advantage of in the workplace!" This article is generally not about the highly paid westerners working in Japan. No. Not hardly. It is an article discussing a much larger and much more important labor force in Japan: cheap manual labor from China, Pakistan, Iran and many other southeast Asian nations.

It continues on talking about how Japan must open up more and take better care of these people who come to earn a living in Japan. They are not just cheap labor, they are a critical and important part of the labor equation for a healthy Japanese economy. They deserve to be treated better.

The other story I wanted to mention was about a president of a factory in the Fukushima area that hired many of these people as cheap labor from China.

Because of a bad past history and, in many cases, the Japanese management taking advantage of cheap foreign labor like mentioned above (but, then again, in what country don't they do that?) Japan and Japanese companies often have a bad reputation amongst Chinese workers. 

It is most likely deserved in many cases.

But there's a story about a Japanese president of a factory that risked his life to save some Chinese factory workers who were staying at the company dormitory near Miyagi or Fukushima when the earthquake and  tsunami hit. 

Anyway, this president heard about the tsunami warnings and realized that he had several Chinese workers staying at the company dormitory and that this dormitory was in the path of the tsunami. People were told to evacuate immediately and head for higher ground. But the president knew that these workers wouldn't understand the announcements and so he risked his life and drove full speed ahead to the dorm and got those workers out of there and saved their lives.

Soon after the Chinese workers left Japan (because of Fukushima) but, according to the article, they reported back in China that, "Not all Japanese company president's are bad guys" and that their company president risked his life to save theirs and they were grateful.

I looked for the article about this story, but am unable to find it. If I find it later, I will paste it into this post.

The moral of the story? Not all Japanese bosses are bad guys. Not all Flyjins are westerners and not all of them are bad guys either.

Japan Economy in BIG Trouble

Mish Shedlock from the Global Economic Trend Analysis Blog has sent me a link to his latest post showing a shocking one-two double punch whammy of extremely bad news for the Japanese economy. If you are interested in money and the economy, the Mish's blog is a daily must-read.

Yo Yo Hashi - Yo Yo's Pad

In his most recent posting: Japan Retail Sales Plunge Most in 13 Years; S&P Cuts Japan Debt Outlook to "Negatibe"; 30,000 Dead or Missing, How You Can Help, Mish writes up, and links to, articles and data that point to a very bad future for Japan.


Immediately after the March 11, 2011 earthquake and tsunami, foolish Japanese politicians told the Japanese public that we should not be trying to live our lives normally. Shintaro Ishihara, the mayor of Tokyo, even told people that the traditional "Hanami" celebrations should be cancelled this year. 

Hanami is an old tradition whereby the Japanese go to park and eat and drink with friends under the cherry blossoms. 


Due to these sorts of short-sighted pronouncements, many famous Japanese festivals were cancelled and the country went into a sort of mourning like that of a funeral. Things still haven't gotten 100% back to normal. Now, because of these ill considered pronouncements, the Japanese people, businesses and the economy are paying the price.


The best thing the people could do is try to get their lives back in order as soon as possible as get back to work and get the economy back on track. In that way, with a strong economy, can we help those poor people who suffered in Tohoku in this terrible tragedy. But, no! The government wonks made their dumb announcements and now we are paying the price.


Japan prime minister Naoto Kan has announced his idea for reconstruction but he's not said how he will pay for it. The idea to raise taxes was floated but that died a quick death - especially after Kan's party got trashed in local elections this last Sunday. Now, ratings agencies suspect what I fear; more Japanese government debt.


That's the last thing we need. Mish writes:


Japan’s sovereign-rating outlook was cut to “negative” by Standard & Poor’s as the nation’s reconstruction needs following last month’s earthquake will likely add to what’s already the world’s biggest debt load.

The outlook on Japan’s local-currency debt rating, at AA-, the fourth-highest grade, was lowered from “stable,” S&P said in a statement today. The company had reduced the rating by one step in January in the first cut since 2002. Moody’s Investors Service said last month the disaster may bring forward the “tipping point” for the country’s bond market.

Today’s decision adds to pressure on Prime Minister Naoto Kan, who has yet to detail how the rebuilding will be paid for and how he plans to rein in longer-term fiscal deficits. As public spending increases, revenue will likely decline because of the economic hit from the disaster, with a report today showing retail sales tumbled the most in 13 years last month.

Moody’s today reported no change to its negative outlook for Japan's Aa2 grade rating, the third highest, after a reduction from “stable” in February because of political gridlock. Japan’s public debt will probably increase 5.8 percent to 997.7 trillion yen ($12.2 trillion) in the year started April 1, from a projected 943.1 trillion yen last year, the Finance Ministry said in January.


As I predicted in December of 2010, Naoto Kan will be gone by summer. That's the good news. The bad news? That will do nothing for Japan's political stability and our credit rating and economic outlook.


The only thing we can say for certain is that it looks to be a long hot summer in 2011.


Read the rest of Mish's post here: http://bit.ly/kOqL8i

Japan's Insane Tax-At-All-Costs Political Class

This will be my 800th posting on this blog. I think it is fitting that, after all that has happened, as through the short history of this blog, the economy of Japan and most western nations are close to collapse, as Japan's national debt is over 200% of GDP, as the US government has surpassed the legal limit on the debt ceiling for that nation and into de facto bankruptcy, as silver hits a new 31 year high to nearly $44 USD an ounce and gold is knocking at the door of $1500 dollars an ounce, that this 800th blog should be about taxes and the economy.

BEATLES CARTOON - TAXMAN

Once again, the news shows that our rulers never learn their lessons when it comes to taxation and debt. After the disastrous events of the last month starting on March 11th and continuing today, once again, the government of this country shows that their only answer to our financial problems is to raise taxes.

Jiji Press reports:

Tokyo, April 18 (Jiji Press)--Japan is considering raising the consumption tax by 3 percentage points for a limited period of some three years to secure funds to rebuild areas devastated by the March 11 earthquake and tsunami, officials said Monday.

   Japan will be able to secure 7.5 trillion in annual tax revenue by raising the tax rate to 8 pct from 5 pct, government and Democratic Party of Japan officials said.

   The nation is preparing the first supplementary budget for fiscal 2011 with the spending amount of some 4 trillion yen. The budget will be covered without new debt issuance.

   Tokyo is likely to compile more budgets for the current year, as many in the government and the ruling party believe that more than 10 trillion yen should be spent in total on the reconstruction of the disaster-devastated areas.

   To finance the second and later budgets, the government will issue reconstruction bonds. Many think that the revenue from the envisioned tax hike should be used entirely to redeem the reconstruction bonds, the officials said.

It says in the first paragraph, "Japan is considering raising the consumption tax by 3 percentage points for a limited period of some three years..." Sure. Only three years, right? And after that, we're supposed to believe that the Japanese government will have their financial house in such good order and fine shape that they can cut taxes? What planet are these people living on? Has the Japanese government ever cut taxes? How, pray tell, are they supposed to be able to do that when the economy is so bad and, as I mentioned, our public debt has surpassed 200% of GDP?

History also shows us what happens when sales taxes are raised. There will be a correlating drop in sales equal to the percentage of the sales tax; raise taxes by three percent and sales will drop by three percent. And who winds up paying for this kind of sales tax hike? Not the ultra-rich or corporations who have all sorts built-in tax advantages. The rich only have to spend a few percentage points of their income for basic foodstuffs. The average middle class household is spending 15~25% or more just for survival. Hit them with a sales tax increase and you hit them below the belt. 

The good example goes like this: Say, average millionaire wants to buy a new yacht? No problem. It's needed to entertain guest so it is a business and tax write-off. But, say, the single mother with a two kids whose husband has run off and doesn't pay any alimony, is not buying yachts and diamond necklaces, she is scrimping and saving to buy milk, eggs and rice. and the basics she needs to survive.

A 3% hike in her grocery bill hits hard. 

The average household is is also expected to carry the burden of massive public debt created by the government. It is this government who arbitrarily decides to tax one class of poor people to give to another class of poor people (in this case, the average Japanese family gets taxed to pay for the suffering and reconstruction of the poor who suffered in the Tohoku disaster) all the while the government takes a margin for delivering these services and gives no-bid reconstruction contracts to their cronies.

Nikkei 225 at ¥9441 on April 19, 2011

The economy is already in desperate shape. Japan's credit rating has been downgraded in the last year and the Nikkei 225 is wheezing away at under 9,500 (it is at 1/4 the amount it was at the height of the bubble economy) and it has also been reported that 15.7% of Japan's population now live below the poverty level. Think about that. 

And, with all of that, with all of this suffering and misery caused by badly thought out government policies, these people want to raise taxes? They must be completely insane.


Japan owns trillions of dollars in US government bonds that were bought with tax monies taken from the public. The value of these bonds have lost some 40% over these last 10 years due to the rapid decline of the US dollar, yet, even with this, the Japanese government has painted Japan into a corner whereby we cannot unload this debt without causing a quick rise in the yen and hurting Japan's export economy.

Silver & gold price explosion is flashing warning signs about the economy

Gold breaks new record to $1503 the day of the posting of this article

Not only that, at least twice in the last 365 days, Japan (and most recently foreign central banks) has intervened in the dollar x yen rate and flushed billion of yen (billions of US dollars) in foolish attempts (that haven't worked) in order to lower the value of then yen.


The fact of the matter is that, for reconstruction, as Peter Schiff points out, Japan should want a stronger yen as that would make our buying of oil and raw materials as well as other items needed to rebuild the ravaged areas cheaper.


But, no! As usual, when it comes to doing something about the economy, the government cannot admit its errors and try to strip them away. As is the case now, and has always been the case, the government of Japan's answer to financial problems is not to cut spending or to sell poorly valued and foolishly bought US government backed securities (that lose value every day), but the answer is, and always will be to spend and raise taxes.


That is why our economy has been so messed up for this last 20 years and that's why is is so easily predictable that our economy will be messed up for at least the next decade or more as Mish Shedlock so skillfully points out.


The politicians who live on dead and proven failure Keynesian economic policies are leading this country down the road to ruin. It will be soon enough, at this rate, that Japan will be like the Philippines. Throw this situation in with how the youth of this country have no where near the dedicated and hard work ethics of their fathers and grandfathers and you have a chemistry that spells out for a very grim economic future indeed


When we look back at what happened in twenty years from now, we'll not be surprised for a second that Japan will be jokingly referred to as the Northern Philippine archipelago.