> As Japan's Economy Sags, Many Favor a Collapse
> By Clay Chandler
>
> These critics -- which include financial analysts, economists and
> entrepreneurs -- argue that Japan's biggest mistake has been to keep
> propping up a once triumphant but now outdated economic system. They say
> that letting it collapse, while painful in the short term, would free
> capital and other resources for more productive ventures that would foster
> real growth in the long term.
Yeah, a country called Germany tried this under Bruening's austerity budget in the 1930s. Fiscal sacrifices turned out to be the spark for the most colossal human sacrifice in human history. But Krupp's shareholders did well during the slaughter, and that's all that really matters, right?
> even if the firms' earnings prospects are weak or nonexistent. Companies
> that do business together buy one another's stock to keep prices stable -- a
> practice that insulates management from U.S.-style shareholder pressure for
> improved performance.
Japan's economic performance in the 1990s has been far from disastrous. In 1990, it still specialized in medium-tech goods and electronics; by 2001, its computer firms are major players in leading-edge tech, systems on a chip design, ASICs, telecoms, you name it. Meanwhile, US firms, under the lash of Wall Street, have played Japanese-style "zaiteku" (financial engineering) games by issuing stock options, punting cap gains, etc. (Intel and Microsoft are especially guilty of this).
> economic growth for the past decade. And without growth, Japan will never be
> able to pay down its debt, maintain or raise living standards, or care for
> its elderly.
It owes its debt to ITSELF. It doesn't need the US, the EU, or anyone else to tell it what to do. Japan could finance *twice* the budget deficit it has, without breaking a sweat.
> Japan's politicians fear the chaos that enveloped Eastern Europe and Russia
> after they embraced free markets. Unlike those countries, Japan has a high
> standard of living, but that's largely because the government has prevented
> the bankruptcy of many insolvent companies.
No, it's because Japan is a *metropole* with a kickass industrial base, which produces 50% of the world's robots.
> Many analysts are bracing for the de facto nationalization of at least two
> major Japanese banks in the next year -- possibly as early as September, the
> first time banks must issue half-year profit and loss reports under the
> stricter accounting rules.
Then nationalize 'em. Japan's postal savings bank, publicly owned, remains the soundest bank in Japan. Central Europe has a ton of publicly owned banks, which do quite well for themselves.
> underfunded. And in pushing through ineffectual public stimulus programs
> year after year, Japan's politicians have raised the nation's ratio of total
> public debt to gross national product to almost 130 percent -- higher than
> that of any other industrial economy.
Doesn't matter, as long as interest rates are low and you finance your own economy. It could go to 200%, 300% -- private debt in the US is now well over 200% of GDP or something like that, but we don't hear calls for liquidating Salle Mae and Visa, do we? One last point: Japan's deficit figures don't include Government assets, i.e. precious state-owned land near railroads, etc. Factor that in, and Japan's debt is something like 40% of GDP -- one of the lowest in the world.
-- Dennis