The Japanese Economic Dilemma in a Nutshell

Here is a note from a friend in Japan:

In today's Nikkei (Japanese version), on page 5, tucked behind all the hype about the government's decision to lower corporate taxes, in hopes that major companies will raise wages, was a short article on "three miscalculations about the economy" this year.

1. Tax revenues increased with the increase in the sales tax but consumer spending fell. Tax revenues expected to increase by about 5 trillion yen.

2. Weaker yen and higher stock market improved family assets for some I would say, but exports did not improve, and were about 8% lower than 4 years ago.

3. CPI (excluding fresh food) increased, resulting in a real wage decline. Rreal wages have been falling since mid 2013 and are now around 4% lower year over year.

Over the past few days I have been reading about the so-called lost decade of the 1990s and the government's policy decisions to try to kick-start the economy.

In 1990 the government had about 60 trillion in tax revenues and 69 trillion in general account total expenditures.

Now, the government estimates 52 trillion in tax revenues for fiscal 2014 but has more than 95 trillion in expenditures.

Even a second grade student can see that something is not working.

As you know, I think that there are three things that must be done.

Reform, reform, reform.

The Japanese economy is burdened with an unusually bad demographic problem, made much worse by the burdens of insider dealing, crony capitalism, and zombie banks and their corporations.

And its greatest burden of all is an elite that serves itself and its friends first and foremost, and that finds a greater kinship with its global counterparts than with the people whose interests it purports to represent.

 

"The conflict between the East and West was designed to scare the people of the world into accepting a convergence of these two monopoly systems of authoritarian power. The end result was to be a new Imperial Order and a New World Empire run by an elite self-perpetuating oligarchies from the leading nations of the earth."

Carroll Quigley, Tragedy and Hope, p. 860

 

Related:

Princes of the Yen: Central Banks and the Transformation of an Economy

Why the (Global) Kleptocrats Do Not Want a Recovery

The Pursuit of Global Corporatism

Comex Gold Futures Contracts and Options Calendar 2015

 

Gold Daily and Silver Weekly Charts - Liar's Poker to the Last - A Banquet of Consequences

Gold and silver caught a sharp bid on the London PM fix and NY open, probably an adjustment from the smack down yesterday that coincided with the demise of the December contract. See calendar below.

These 'technically' oriented sharp moves up and down are a symptom of what is wrong with the Comex, which will ultimately lead to a failure on the exchange of some sort.

 

Silver moved out of the warehouses as it tends to do.  Gold, not so much.  Plenty is 'delivered' but little is taken.   The reckoning will come when the music stops.  Until then the dancing must continue, because there is money to be made at it.

 

It just matters how long, and how wild the swings might become, as the divergence between world of paper in New York and London and the bullion exchanging hands in the real world more violently divergences, and how it converges again.

 

What could possibly go wrong?

 

Have a pleasant evening.

 

 

 

 

 

 

 

 

Cena Trimalchionis: The Feast of Trimalchio, Wealthy Vulgarian

'The Feast of Trimalchio' is from The Satyricon by Titus Petronius, which many consider to be the first Western novel.  It was an unusual form and subject matter, both a fictional story and satire about the dissolution of contemporary Rome.

 

As you may recall T. Petronius, Nero's arbiter eligantiarum, made a fictionalized appearance as a minor character in the novel Quo Vadis by Henryk Sienkiewicz.

Petronius never made any quote about business reorganization. A false quote made the rounds some time ago.

 

SP 500 and NDX Futures Daily Charts - Slouching Towards Year End

Mr. Market 2014 takes a final bow

Hard to believe that this is the second to last day of the year.

Stocks sold off in a very quiet trade, most likely a little cash raising in advance of a light spray on the tape tomorrow.

Most of the adults are off for the year now, and the juniors are executing their pat instructions for the most part.

The first week of January might very well see a rehearsed rally with any new money coming in, again depending on what else happens and the temper of the volumes if any.

Risks are obviously mispriced, but the bill may not arrive at the table for a little while yet, and timing is everything.

Have a pleasant evening.