Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Global Economic Depression Unemployment- Learning from Japan

Economics / Recession 2008 - 2010 Apr 24, 2009 - 03:34 AM GMT

By: Mike_Stathis

Economics

Best Financial Markets Analysis ArticleI ran across an interesting story about how Japan is using a somewhat innovative approach to deal with its own symptoms of what will eventually be recorded in history books as the global depression. http://www.nytimes.com..


The Japanese government is paying travel expenses (plus a little extra money), or about $3000 apiece for migrant workers who agree to return back to their homeland. They must agree never to come back to Japan for work. Critics in Japan have lashed out at the program calling it “inhumane” and “destructive” for the future economy. Maybe the Japanese government realizes just how bad things are going to get.

As bad as things are in the United States, they are even worse in Japan. With expectations of a productivity decline of over 6% for this year alone (more than twice the decline expected in the U.S.), Japanese officials realize that it’s time to take some drastic measures. So they’re willing to help preserve what jobs remain for Japanese citizens. That begs the question…why can’t Washington learn from the Japanese?

The arrogance of Washington to ignore previous lessons learned from Japan’s “lost decade” might explain the current approach taken by the U.S. Treasury in dealing with the insolvent banks. Then again, there are other possibilities.

In the early ‘90s, when Japan’s real estate and stock market bubble burst, this created massive problems for its banking system similar to what has recently happened in the United States. Rather than correct the problem, Japanese officials took the wrong measures. Part of the reason for these oversights was that they underestimated the severity of the crisis. They did not realize how much an imploding real estate market would devastate the banks. As a result, they made small gradual moves, all which were insufficient and misdirected. Ultimately this caused deflation and a 15-years annual decline in real estate prices.

Similar to recent measures taken by the Federal Reserve, Japan slashed interest rates to 0%. At the same time, rather than recapitalize the banks, they made inadequate cash infusions to the banks while passing several fiscal stimulus packages in order to buttress the economy. Sound familiar? Finally, they even tapped into private investors to bad the bad assets from the banks and manage it themselves. None of these measures worked. And I don’t see them working in America either.

In each case, U.S. officials have tried a piecemeal approach while insulating themselves from the real solution; nationalization of the banking system. Similar to Japan, if Washington does not soon nationalize the banks, taxpayers will lose the majority of funds already handed out.

As we now know, the most intense damage was done nearly ten years later during what is known as the Asian Financial Crisis of 1997. While the causes are not certain, most experts believe it began after Thailand removed its currency peg to the dollar. This led to widespread economic devastation in Southeast Asia, setting off a wave of bank failures, including in Japan. One thing I am certain of is that Alan Greenspan’s response to the crisis only made the dotcom bubble worse. In fact, it caused the bubble to burst in 2000.

Make no mistake, without nationalization, America’s banks will share a similar fate as those in Japan; bank failures, massive losses of taxpayer funds and a lost decade. In fact, things are likely to be far worse.

From 1992 to 2005, Japanese banks wrote off nearly $1 trillion USD, or about 19% of the annual GDP at the time. Already, U.S. banks have written off around $650 billion (sources vary) or about 5% of the trailing GDP. Although it’s almost impossible to say due to a variety of variables, in my estimation the total write-offs for U.S. banks will end up being at least $4 trillion before it’s all said and done. However, I would not be surprised to see that figure double. It all depends on many things. If by chance some miracle happens, the write-offs might be contained to $2.5 trillion, but no less; still about 19% of GDP (based on my mean estimates of GDP over the next few years).

Already, Washington has allowed changes to mark-to-market which could help lessen the write-offs in a number of ways. But one thing is certain. Nationalization of the banks is the only real solution. And the sooner Washington realizes that, the less damage will be done. You cannot cheat the system. No matter what additional schemes the Treasury and Fed devise, the damage will be borne by many. That’s a guarantee.

In my opinion, Washington’s economic “experts” have concluded that the only lesson worth learning from Japan is that protectionism must be avoided at all costs. The rational (I would imagine) is that the severity of Japan’s lost decade was somewhat moderated by increasing exports to the U.S., China and other nations.

The only problem is that the real mistakes made by Japan were how they dealt with the banks. As well, America doesn’t have much to export. In my opinion, Washington is using this as a front to protect the toxic free trade policies which only enrich corporate America and their wealthy shareholders; not you or I who might own 2000 shares of Unitedhealth or Exxon-Mobil, but the families that own millions of shares.

How is it possible for Paulson, and now Geithner and Summers to repeat the same mistakes made by Japan?  How stupid can they be? Perhaps it’s a matter of arrogance. Maybe it’s simply a matter of taking a “win at all costs” attitude for their banking friends.

Oh well, I suppose Washington won’t borrow Japan’s program of sending migrant workers home; or better yet expand upon the idea by actually enforcing federal immigration laws because America is much different than Japan. Japan’s government has placed its citizens as the top priority, while Washington’s top priority is corporate America.

By Mike Stathis
www.avaresearch.com

Copyright © 2009. All Rights Reserved. Mike Stathis.

Mike Stathis is the Managing Principal of Apex Venture Advisors , a business and investment intelligence firm serving the needs of venture firms, corporations and hedge funds on a variety of projects. Mike's work in the private markets includes valuation analysis, deal structuring, and business strategy. In the public markets he has assisted hedge funds with investment strategy, valuation analysis, market forecasting, risk management, and distressed securities analysis. Prior to Apex Advisors, Mike worked at UBS and Bear Stearns, focusing on asset management and merchant banking.

The accuracy of his predictions and insights detailed in the 2006 release of America's Financial Apocalypse and Cashing in on the Real Estate Bubble have positioned him as one of America's most insightful and creative financial minds. These books serve as proof that he remains well ahead of the curve, as he continues to position his clients with a unique competitive advantage. His first book, The Startup Company Bible for Entrepreneurs has become required reading for high-tech entrepreneurs, and is used in several business schools as a required text for completion of the MBA program.

Restrictions Against Reproduction: No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the copyright owner and the Publisher. These articles and commentaries cannot be reposted or used in any publications for which there is any revenue generated directly or indirectly. These articles cannot be used to enhance the viewer appeal of any website, including any ad revenue on the website, other than those sites for which specific written permission has been granted. Any such violations are unlawful and violators will be prosecuted in accordance with these laws.

Requests to the Publisher for permission or further information should be sent to info@apexva.com

Books Published
"America's Financial Apocalypse" (Condensed Version)  http://www.amazon.com/...

"Cashing in on the Real Estate Bubble"  http://www.amazon.com/...

"The Startup Company Bible for Entrepreneurs"   http://www.amazon.com...

Disclaimer: All investment commentaries and recommendations herein have been presented for educational purposes, are generic and not meant to serve as individual investment advice, and should not be taken as such. Readers should consult their registered financial representative to determine the suitability of all investment strategies discussed. Without a consideration of each investor's financial profile. The investment strategies herein do not apply to 401(k), IRA or any other tax-deferred retirement accounts due to the limitations of these investment vehicles.

Mike Stathis Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules