Best of the Week
Most Popular
1.US Paving the Way for Massive First Strike on North Korea Nuclear and Missile Infrastructure - Nadeem_Walayat
2.Trump Reset: US War With China, North Korea Nuclear Flashpoint - Video - Nadeem_Walayat
3.Silver Junior Mining Stocks 2017 Q2 Fundamentals - Zeal_LLC
4.Soaring Inflation Plunges UK Economy Into Stagflation, Triggers Government Pay Cap Panic! - Nadeem_Walayat
5.The Bitcoin Blueprint To Your Financial Freedom - Sean Keyes
6.North Korea 'Begging for War', 'Enough is Enough', is a US Nuclear Strike Imminent? - Nadeem_Walayat
7.Bitcoin Hits All-Time High and Smashes Through $5,000 As Gold Shows Continued Strength - Jeff_Berwick
8.2017 is NOT "Just Another Year" for the Stock Market: Here's Why - EWI
9.Gold : The Anatomy of the Bottoming Process - Rambus_Chartology
10.Bitcoin Falls 20% as Mobius and Chinese Regulators Warn - GoldCore
Last 7 days
Comfortably Numb: Surviving the Assault on Silver - 17th Oct 17
Are Amey Street Tree Felling's Devaluing Sheffield House Prices? - 17th Oct 17
12 Real-Life Techniques That Will Make You a Better Trader Now - 17th Oct 17
Warren Buffett Predicting Dow One Million - Being Bold Or Overly Cautious? - 17th Oct 17
Globalization is Poverty - 17th Oct 17
Boomers Are Not Saving Enough for Retirement, Neither Is the Government - 16th Oct 17
Stock Market Trading Dow Theory - 16th Oct 17
Stocks Slightly Higher as They Set New Record Highs - 16th Oct 17
Why is Big Data is so Important for Casino Player Acquisition and Retention - 16th Oct 17
How Investors Can Play The Bitcoin Boom - 16th Oct 17
Who Will Be the Next Fed Chief - And Why It Matters  - 16th Oct 17
Stock Market Only Minor Top Ahead - 16th Oct 17
Precious Metals Sector is on Major Buy Signal - 16th Oct 17
Really Bad Ideas - The Fed Should Have And Defend An Inflation Target - 16th Oct 17
The Bullish Chartology for Gold - 15th Oct 17
Wikileaks Mocking US Government Over Bitcoin Shows Why There Is No Stopping Bitcoin - 15th Oct 17
How to Wipe Out Puerto Rico's Debt Without Hurting Bondholders - 15th Oct 17
Gold And Silver – Think Prices Are Manipulated? Look In The Mirror! - 15th Oct 17
Q4 Pivot View for Stocks and Gold - 14th Oct 17
Gold Mining Stocks Q3’17 Preview - 14th Oct 17
U.S. Mint Gold Coin Sales and VIX Point To Increased Market Volatility and Higher Gold - 14th Oct 17
Yuan and Gold - 14th Oct 17
Tips for Avoiding a Debt Meltdown - 14th Oct 17
Bitcoin Hits New All-Time High Above $5,000 As Lagarde Concedes Defeat and Jamie Demon Shuts Up - 13th Oct 17
Golden Age for GOLD, Dark Age for the Stock Market - 13th Oct 17
The Struggle for Bolivia Is About to Begin - 13th Oct 17
3 Reasons to Take Your Invoicing Process Mobile - 13th Oct 17
What Happens When Amey Fells All of a Streets Trees (Sheffield Tree Fellings) - Video - 13th Oct 17
Stock Market Charts Show Smart Money And Dumb Money Are Moving In Opposite Directions—Here’s Why - 12th Oct 17
Your Pension Is a Lie: There’s $210 Trillion of Liabilities Our Government Can’t Fulfill - 12th Oct 17
Two Highly Recommended Books from Bob Prechter - 12th Oct 17
Turning Point Nations On The Stage - 11th Oct 17
The Profoundly Personal Impact Of The National Debt On Our Retirements - 11th Oct 17
Gold and Silver Report – Several Interesting Charts - 10th Oct 17
London House Prices Are Falling – Time to Buckle Up - 10th Oct 17
The S&P Is A Bloated Corpse - 10th Oct 17
Are Gold and the US Dollar Rallying Together? - 10th Oct 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

Modern Delusions, Japan Thinks It Can Balance Its Budget

Economics / Japan Economy Jan 28, 2017 - 06:58 PM GMT

By: John_Rubino

Economics

A recurring problem for most developed-world governments is explaining why last year’s plan didn’t work while convincing voters that this year’s new and improved plan will do the trick. This is especially tough when the new plan is pretty much the same as the old one and therefore just as likely to fail.


Let’s take Japan as our first object lesson. Its government is the world’s most deeply indebted relative to GDP. Its population is the world’s oldest, with the number of retirees on public assistance soaring. Yet for some reason its leaders keep promising to balance the budget, only to be forced to push the date further into the future with each new report.

Japan’s budget surplus goal elusive with worsening fiscal health

(Mainichi) — Japan foresees a bigger-than-expected primary deficit of 8.3 trillion yen ($73 billion) in fiscal 2020, highlighting the daunting challenge of achieving a surplus that year, the latest estimates by the Cabinet Office showed Wednesday.

The figure is a sharp revision from its previous forecast of a 5.5 trillion yen deficit in July. The government expects tax revenues to be smaller than initially projected in the face of slowing income growth and sluggish consumer spending.

In Wednesday’ meeting, Abe called for the swift enactment of a record-high budget plan worth 97.45 trillion yen for fiscal 2017 starting in April due to ballooning social security costs.

Abe has touted growth in tax revenue in recent years as one of the achievements of his “Abenomics” policy mix. But the yen’s advance in the run-up to the election in November of U.S. President Donald Trump has cast a shadow on Japanese companies’ earnings and the outlook for tax revenue.

Japan’s fiscal health is the worst among major developed countries. Its graying society is expected to boost social security costs further, raising the bar for drastically reducing total spending.

The latest projections were based on the scenario that the Japanese economy will grow 3 percent or higher in nominal terms and 2 percent or higher in real terms. In the July to September quarter last year, the world’s third-largest economy expanded an annualized real 1.3 percent.

This dance has been repeating for as long as most Japan watchers can remember, and the choreography never changes. Back in the 1990s the country responded to bursting financial bubbles with massive increases in public borrowing and spending, propping up the banks and builders but taking on inordinate amounts of debt to do so. Each subsequent budget has offered more of the same, with ever-higher debt and ever-lower interest rates.

Meanwhile the Japanese people, like most rich societies where women have a choice in the matter, have lost their taste for reproduction. More workers are retiring than are being replaced, which increases the cost of public pensions relative to the tax base and accelerates the slide towards insolvency.

Nothing mysterious here – and nothing unique. The entire developed world is in the same general fix. But admitting impotence in the face of overwhelmingly bad numbers isn’t a political option. So leaders consult their economists, who pull out the same old Keynesian models recommending the same old solutions: Borrow and spend more money while lowering interest rates and the economy will grow out of its limitations.

Japan’s mistakes began earlier than those of Europe or the US, so they’re more obvious. But the trends are the same everywhere and the policy responses, as a result, are eerily similar. Europe’s demographics and growth are almost as dismal as Japan’s, so the European Central Bank buys up all the government debt in the system and pushes interest rates below zero. When that doesn’t produce the promised boom it starts buying corporate bonds. When this experiment fails Europe will — based on the think tank chatter — ban cash, start buying equities and force rates even lower.

The US, meanwhile, elects a president who promises a massive infrastructure build-out financed with new borrowing – in other words, what Japan has been doing for the past couple of decades, straight from the Keynesian playbook. And few in the mainstream point out the similarities because, well, at least we’re doing something and that’s better than nothing, right?

Actually, no. Nothing is better than something, if the something is what created the problem.

The Austrian school of economics alone seems to get all this. But it’s easy to understand why politicians shy away from the idea that once societal leverage reaches a certain point there really is nothing to be done but let it burn. As von Mises famously put it:

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

And as another Austrian School writer notes,

Ultimately, it is not deficits per se but total government spending that distorts the economy and starves the private sector of resources. But deficits are insidious because they give the illusion of freebies in the near term, and the reckoning comes with a vengeance down the road.

Anarcho-Capitalist.  Libertarian.  Freedom fighter against mankind’s two biggest enemies, the State and the Central Banks.  Jeff Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Services and host of the popular video podcast, Anarchast.  Jeff is a prominent speaker at many of the world’s freedom, investment and gold conferences as well as regularly in the media.

© 2017 Copyright Jeff Berwick - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Jeff Berwick Archive

© 2005-2017 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

Catching a Falling Financial Knife