9 ms·

Why Japan Is Doomed

111 points by startuprules 16y ago

NathanKP 16y ago
The original article title is "Why Japan is Doomed (and the U.S. and the E.U. too)". The Greek debt crises seems to be looming in the future for Japan, the U.S., and the E.U. as well. There doesn't seem to be very many serious plans to stop the accruing debt, and those who think that the debt is no problem are addressed in the article: Those in denial about Japan's reliance on ballooning debt to fund its status quo (and on America's exact same reliance) basically claim that "It can't happen because it hasn't happened."
drtse4 16y ago
Will someone be able to exploit this for profit? I haven't enough macro-economy knowledge to evaluate this, but looks likely. Sadly, i haven't seen yet any article on future scenarios in case of a global crisis caused by multiple nations going to default... any interesting link about this will be highly appreciated.
- arethuza 16y ago
  Credit Default Swaps could be purchased on the relevant sovereign debt. Given the success that various hedge funds had with this strategy during the crash of mortgage backed CDOs a couple of years back I would have thought that there must be a lot of speculation of this kind going on. Assuming that there are still sellers of CDSs out there...
  - carsongross 16y ago
    And remember: timing is everything. Japan has been obviously fked for a long, long time now, but hasn't paid much of a price for it in the bond market. Now that they are going to have to finance their debt externally, maybe reality will assert itself. But maybe not. Cheers, Carson
    - d2viant 16y ago
      You're exactly right, many people have lost a lot of money trying to bet against the Japanese debt situation. "Markets can remain irrational longer than you can remain solvent." -Keynes
  - d2viant 16y ago
    CDSs are being sold, but generally aren't available to small retail investors. An investor who is not accredited would need to hedge some other way.
- muhfuhkuh 16y ago
  George Soros seems to do really well in shorting dollars, yen, and euro in the last 3 years or so. Timing is key there, though, so if you can't you shouldn't. He's lately had his chips all-in on Asia, particularly stock exchanges in India and buying up yuan and sgd. Of course, because of these times of uncertainty, he's also long on gold bullion.
startuprules 16y ago
"Millions of Japanese aged 25 to 34 toil as temps or contract employees-- up from 1.5 million 10 years ago, according to the Ministry of Internal Affairs. These workers tend to earn about one-third the typical "salaryman" wages that their fathers earned" I lived in Tokyo last year in a cheap apartment with alot of young Japanese people, and I was very surprised by their lack of work ethic/prospect from my first time in Japan. They would bounce from temp work (typing) to temp work (waiter) to temp work (salesperson walking everywhere in tokyo door to door), quitting every 2-3 weeks. They would sometimes sleep in and not show up for interview, and wouldn't even call to reschedule. The way they would quit a job they didn't like is by....not showing up anymore. Keep in mind these are people that went to pretty decent universities in Japan, and speak ok english. And when they do get a full time job offer, they would have to wait almost half a year to a year to start working (which I would think depress their morale).
- masklinn 16y ago
  > and I was very surprised by their lack of work ethic/prospect from my first time in Japan Why would you be surprised by their "lack of work ethics"? They got fucked hard, so it's understandable that they aren't going to care much for "the man" anymore: they were told their contract was to work like mad in their studies, get to a good university and end up landing a good job in a multinational where they'd work their whole life slowly climbing up the hierarchy and pretty much guaranteed they'd be there for life. Instead, at the end of their studies they found an utterly slaughtered job market and a crappy economy in which Japan has been stuck for 20 years (especially those who got out during the Lost Decade of the 90s). They don't have "good work ethics" because they've managed not to be stockholm syndrome victims, and because reality showed them strong work ethics didn't matter, and promises were there to be broken.
  - billswift 16y ago
    A strong work ethic definitely matters to getting what you want, no matter what it may be, but you need to reorient the ethic to benefit yourself first. When I work for somebody else I work hard and do the best job I can, as long as I am there, for my own benefit. Among other things if you get in the habit of being sloppy or tardy, it tends to spread to other things you do, and they are hard habits to break once you let them get established.
w1ntermute 16y ago
Here, I'll turn on the Patio11 signal: 00000 0000000 000P11000 0000000 00000
- Ernestas 16y ago
  almost 2am in japan - waiting till the morning.
  - stcredzero 16y ago
    Something I would never expect Bruce Wayne to say!
    - umjames 16y ago
      Even Bruce Wayne has to sleep sometime.
      - gwern 16y ago
        No he doesn't; when he sleeps, he's actually lying in wait for his enemies.
        stcredzero 16y ago
        Actually, I think that's Chuck Norris.
- andrewljohnson 16y ago
  I believe I invented that :)
  - fuzzythinker 16y ago
    Did you copyright that ;) Anyway, took your word for it, so upvoted you, since I got a good laugh.
- 16y ago
nathanb 16y ago
What does it look like when a nation becomes insolvient? How does it affect its citizens? Its public services?
- startuprules 16y ago
  You're asking about countries that suffered from hyperinflation (US had a hyperinflation before also during the civil war) here's a popular blog from a citizen currently living in Argentina http://ferfal.blogspot.com/ http://ferfal.blogspot.com/
- incomethax 16y ago
  It looks a lot like how Greece was looking a few weeks back. (Probably still is looking in all likely-hood) Most of the national debt is written off, public services are cut or re-financed through printing money which has the nasty side effect of inflation and then eventually hyperinflation. Here's some examples: http://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hyperinflation http://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hype...
  - startuprules 16y ago
    Anybody with personal accounts from Iceland?
    - nedrichards 16y ago
      Yes. And since I lived in the UK my government impounded Icelandic owned assets up to their value[1] to pay me back my money. Yay for international relations! [1] http://www.telegraph.co.uk/finance/businesslatestnews/3185190/UK-freezes-4bn-of-Icelandic-assets.html http://www.telegraph.co.uk/finance/businesslatestnews/318519...
      - Ardit20 16y ago
        Yeah. Those were strange times. The PM had the decency to threaten to use anti-terrorism laws against Iceland!
deleted 16y ago
[deleted]
d2viant 16y ago
The part I don't understand is why Japanese citizens would accept such low returns on their investment for so many years, when so many investments outside of Japanese government debt would give them higher yields. Is it a cultural thing? Is it just pure altruism? Do they want to support their government that much that they're willing to ignore better investments for their savings?
- startuprules 16y ago
  The older Japanese population are pretty nationalistic. However, the Japanese corporations, not so much.
- brianobush 16y ago
  I think they are used to banks giving them next to nothing on interest for their savings.
- artsrc 16y ago
  Seems like a version of this: http://en.wikipedia.org/wiki/Equity_home_bias_puzzle http://en.wikipedia.org/wiki/Equity_home_bias_puzzle I don't know why US savers don't invest in Australian dollar accounts either. They pay about 6 times as much as US term deposits. http://www.infochoice.com.au/banking/savings-account/term-deposit-interest-rates.aspx http://www.infochoice.com.au/banking/savings-account/term-de...
  - codexon 16y ago
    I just checked two of those term deposits and they both require Australian residency. Can I get one of those without living in Australia?
    - artsrc 16y ago
      In Australia HSBC offers foreign currency bank accounts, but I can't see that on the US site. I work for a fund manager not a bank. Would an ETF for high yield, first world, countries fixed income products work? http://us.ishares.com/product_info/fund/index/FI.htm http://us.ishares.com/product_info/fund/index/FI.htm
stretchwithme 16y ago
We're borrowing 43% of our budget? Talk about unsustainable. I would seriously make plans for when the US is forced to stop this destructive pattern. Its going to be ugly.
- icarus_drowning 16y ago
  I can't see how it won't end up looking like a massive cut in entitlement spending, probably along the lines of Paul Ryan's most recent doomed proposal: http://www.roadmap.republicans.budget.house.gov/ http://www.roadmap.republicans.budget.house.gov/ This isn't to cheerlead Republican strategies (after all, I think the heart of Ryan's proposal is decidedly anti-Republican, since Republicans and Democrats alike seem to have based their party orthodoxy on not cutting spending, be that in the form of tax cuts or increased entitlements, respectively), merely to offer an example of the kind of cutting that will, but necessity, have to happen. Of course, there's always the "collapse of the US" scenario. Optimists, therefore, will prepare for the painful years of budget-cutting by refusing to rely on entitlements in their later years. Pessimists? Well, I suppose joining a survivalist encampment doesn't sound that bad...
- jpcx01 16y ago
  Don't worry about it. Krugman says deficits are ok.
  - jbooth 16y ago
    Krugman says that we're in a depression and that the one economic climate where you should run a temporary deficit is in severe recession or depression. Now, you can say that after 8 years of castigating Bush for deficits, he's all of a sudden ok with them under Obama. And you'd be right. But it's also true that Bush took inherited a surplus and doubled the national debt in a "boom" economy, while Obama inherited an already-massive deficit while in the most severe economic crisis we've seen in decades.
    - roc 16y ago
      > "he's all of a sudden ok with them under Obama. And you'd be right." No, you wouldn't. For eight years he castigated Bush for not paying down the debt. Krugman's advice is: borrow your way out of the bad days, pay it back on the good ones. There's plenty of policy there to disagree about. There's no reason or benefit to misrepresenting people's positions.
api 16y ago
For us, there's a music video: http://www.youtube.com/watch?v=gEmJ-VWPDM4 http://www.youtube.com/watch?v=gEmJ-VWPDM4
dRother 16y ago
If the US, EU, and Japan are doomed, who isn't? I don't think the answer is China and India. China's plan seems to be to lurch full steam ahead (no pun intended) into our style of entirely non-sustainable petroleum and coal fueled over-consumption.
deleted 16y ago
[deleted]

111 points by startuprules 16y ago

The original article title is "Why Japan is Doomed (and the U.S. and the E.U. too)". The Greek debt crises seems to be looming in the future for Japan, the U.S., and the E.U. as well. There doesn't seem to be very many serious plans to stop the accruing debt, and those who think that the debt is no problem are addressed in the article: Those in denial about Japan's reliance on ballooning debt to fund its status quo (and on America's exact same reliance) basically claim that "It can't happen because it hasn't happened."

drtse4 16y ago

Will someone be able to exploit this for profit? I haven't enough macro-economy knowledge to evaluate this, but looks likely. Sadly, i haven't seen yet any article on future scenarios in case of a global crisis caused by multiple nations going to default... any interesting link about this will be highly appreciated.

arethuza 16y ago
Credit Default Swaps could be purchased on the relevant sovereign debt. Given the success that various hedge funds had with this strategy during the crash of mortgage backed CDOs a couple of years back I would have thought that there must be a lot of speculation of this kind going on. Assuming that there are still sellers of CDSs out there...
- carsongross 16y ago
  And remember: timing is everything. Japan has been obviously fked for a long, long time now, but hasn't paid much of a price for it in the bond market. Now that they are going to have to finance their debt externally, maybe reality will assert itself. But maybe not. Cheers, Carson
  - d2viant 16y ago
    You're exactly right, many people have lost a lot of money trying to bet against the Japanese debt situation. "Markets can remain irrational longer than you can remain solvent." -Keynes
- d2viant 16y ago
  CDSs are being sold, but generally aren't available to small retail investors. An investor who is not accredited would need to hedge some other way.
muhfuhkuh 16y ago
George Soros seems to do really well in shorting dollars, yen, and euro in the last 3 years or so. Timing is key there, though, so if you can't you shouldn't. He's lately had his chips all-in on Asia, particularly stock exchanges in India and buying up yuan and sgd. Of course, because of these times of uncertainty, he's also long on gold bullion.

startuprules 16y ago

"Millions of Japanese aged 25 to 34 toil as temps or contract employees-- up from 1.5 million 10 years ago, according to the Ministry of Internal Affairs. These workers tend to earn about one-third the typical "salaryman" wages that their fathers earned" I lived in Tokyo last year in a cheap apartment with alot of young Japanese people, and I was very surprised by their lack of work ethic/prospect from my first time in Japan. They would bounce from temp work (typing) to temp work (waiter) to temp work (salesperson walking everywhere in tokyo door to door), quitting every 2-3 weeks. They would sometimes sleep in and not show up for interview, and wouldn't even call to reschedule. The way they would quit a job they didn't like is by....not showing up anymore. Keep in mind these are people that went to pretty decent universities in Japan, and speak ok english. And when they do get a full time job offer, they would have to wait almost half a year to a year to start working (which I would think depress their morale).

masklinn 16y ago
> and I was very surprised by their lack of work ethic/prospect from my first time in Japan Why would you be surprised by their "lack of work ethics"? They got fucked hard, so it's understandable that they aren't going to care much for "the man" anymore: they were told their contract was to work like mad in their studies, get to a good university and end up landing a good job in a multinational where they'd work their whole life slowly climbing up the hierarchy and pretty much guaranteed they'd be there for life. Instead, at the end of their studies they found an utterly slaughtered job market and a crappy economy in which Japan has been stuck for 20 years (especially those who got out during the Lost Decade of the 90s). They don't have "good work ethics" because they've managed not to be stockholm syndrome victims, and because reality showed them strong work ethics didn't matter, and promises were there to be broken.
- billswift 16y ago
  A strong work ethic definitely matters to getting what you want, no matter what it may be, but you need to reorient the ethic to benefit yourself first. When I work for somebody else I work hard and do the best job I can, as long as I am there, for my own benefit. Among other things if you get in the habit of being sloppy or tardy, it tends to spread to other things you do, and they are hard habits to break once you let them get established.

w1ntermute 16y ago

Here, I'll turn on the Patio11 signal: 00000 0000000 000P11000 0000000 00000

Ernestas 16y ago
almost 2am in japan - waiting till the morning.
- stcredzero 16y ago
  Something I would never expect Bruce Wayne to say!
  - umjames 16y ago
    Even Bruce Wayne has to sleep sometime.
    - gwern 16y ago
      No he doesn't; when he sleeps, he's actually lying in wait for his enemies.
      - stcredzero 16y ago
        Actually, I think that's Chuck Norris.
andrewljohnson 16y ago
I believe I invented that :)
- fuzzythinker 16y ago
  Did you copyright that ;) Anyway, took your word for it, so upvoted you, since I got a good laugh.
16y ago

nathanb 16y ago

What does it look like when a nation becomes insolvient? How does it affect its citizens? Its public services?

startuprules 16y ago
You're asking about countries that suffered from hyperinflation (US had a hyperinflation before also during the civil war) here's a popular blog from a citizen currently living in Argentina http://ferfal.blogspot.com/ http://ferfal.blogspot.com/
incomethax 16y ago
It looks a lot like how Greece was looking a few weeks back. (Probably still is looking in all likely-hood) Most of the national debt is written off, public services are cut or re-financed through printing money which has the nasty side effect of inflation and then eventually hyperinflation. Here's some examples: http://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hyperinflation http://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hype...
- startuprules 16y ago
  Anybody with personal accounts from Iceland?
  - nedrichards 16y ago
    Yes. And since I lived in the UK my government impounded Icelandic owned assets up to their value[1] to pay me back my money. Yay for international relations! [1] http://www.telegraph.co.uk/finance/businesslatestnews/3185190/UK-freezes-4bn-of-Icelandic-assets.html http://www.telegraph.co.uk/finance/businesslatestnews/318519...
    - Ardit20 16y ago
      Yeah. Those were strange times. The PM had the decency to threaten to use anti-terrorism laws against Iceland!

deleted 16y ago

[deleted]

d2viant 16y ago

The part I don't understand is why Japanese citizens would accept such low returns on their investment for so many years, when so many investments outside of Japanese government debt would give them higher yields. Is it a cultural thing? Is it just pure altruism? Do they want to support their government that much that they're willing to ignore better investments for their savings?

startuprules 16y ago
The older Japanese population are pretty nationalistic. However, the Japanese corporations, not so much.
brianobush 16y ago
I think they are used to banks giving them next to nothing on interest for their savings.
artsrc 16y ago
Seems like a version of this: http://en.wikipedia.org/wiki/Equity_home_bias_puzzle http://en.wikipedia.org/wiki/Equity_home_bias_puzzle I don't know why US savers don't invest in Australian dollar accounts either. They pay about 6 times as much as US term deposits. http://www.infochoice.com.au/banking/savings-account/term-deposit-interest-rates.aspx http://www.infochoice.com.au/banking/savings-account/term-de...
- codexon 16y ago
  I just checked two of those term deposits and they both require Australian residency. Can I get one of those without living in Australia?
  - artsrc 16y ago
    In Australia HSBC offers foreign currency bank accounts, but I can't see that on the US site. I work for a fund manager not a bank. Would an ETF for high yield, first world, countries fixed income products work? http://us.ishares.com/product_info/fund/index/FI.htm http://us.ishares.com/product_info/fund/index/FI.htm

stretchwithme 16y ago

We're borrowing 43% of our budget? Talk about unsustainable. I would seriously make plans for when the US is forced to stop this destructive pattern. Its going to be ugly.

icarus_drowning 16y ago
I can't see how it won't end up looking like a massive cut in entitlement spending, probably along the lines of Paul Ryan's most recent doomed proposal: http://www.roadmap.republicans.budget.house.gov/ http://www.roadmap.republicans.budget.house.gov/ This isn't to cheerlead Republican strategies (after all, I think the heart of Ryan's proposal is decidedly anti-Republican, since Republicans and Democrats alike seem to have based their party orthodoxy on not cutting spending, be that in the form of tax cuts or increased entitlements, respectively), merely to offer an example of the kind of cutting that will, but necessity, have to happen. Of course, there's always the "collapse of the US" scenario. Optimists, therefore, will prepare for the painful years of budget-cutting by refusing to rely on entitlements in their later years. Pessimists? Well, I suppose joining a survivalist encampment doesn't sound that bad...
jpcx01 16y ago
Don't worry about it. Krugman says deficits are ok.
- jbooth 16y ago
  Krugman says that we're in a depression and that the one economic climate where you should run a temporary deficit is in severe recession or depression. Now, you can say that after 8 years of castigating Bush for deficits, he's all of a sudden ok with them under Obama. And you'd be right. But it's also true that Bush took inherited a surplus and doubled the national debt in a "boom" economy, while Obama inherited an already-massive deficit while in the most severe economic crisis we've seen in decades.
  - roc 16y ago
    > "he's all of a sudden ok with them under Obama. And you'd be right." No, you wouldn't. For eight years he castigated Bush for not paying down the debt. Krugman's advice is: borrow your way out of the bad days, pay it back on the good ones. There's plenty of policy there to disagree about. There's no reason or benefit to misrepresenting people's positions.

api 16y ago

For us, there's a music video: http://www.youtube.com/watch?v=gEmJ-VWPDM4 http://www.youtube.com/watch?v=gEmJ-VWPDM4

dRother 16y ago

If the US, EU, and Japan are doomed, who isn't? I don't think the answer is China and India. China's plan seems to be to lurch full steam ahead (no pun intended) into our style of entirely non-sustainable petroleum and coal fueled over-consumption.

deleted 16y ago

[deleted]