Japan's Dying Economy Gives Us Glimpse Of Whats Coming

[Economy 52,843]

http://www.kyotobank.co.jp/houjin/report/pdf/201305_02_e.pdf

 

Japan has just lowered its benchmark rate below 0%. It has done so because years of 0% interest rates, QE money printing and massive overspending (which resulted in the worlds largest debt at 240% of GDP) has failed to take Japan out of deflation and on and off deflation

 

The Global economic model is designed to expand. People borrow to growth their businesses and pay back money with interest supported by economic growth. Banks need you to borrow to make money. Governments too have been overspending for 100 years but have kept debt levels managable because economy grew with it, so few Governments ever saw the need to ever reduce debt load.

 

Japan may be a glimpse of what happens when our economic model that is a ponzy scheme is subject to no growth. Japan has an aging and shrinking population. Demand for everything naturally falls. Not only does falling demand mean no business investment, companies are forced to lower prices to keep selling, falling prices also result in delayed purchases, and people see no need to invest money in somewhere useful instead just hoard cash because deflation makes cash an asset that gains value. The result is a downward spiral virtually impossible to break.

 

Japan has been stuck in this downward spiral for 20 years and it cant seem to get out of it no matter what it does. Even printing currency out of thin air isnt creating needed inflation because shrinking population and demand and consumers not spending force deflation to happen.

 

Japan is the first major economy to enter terminal decline due to demographics and putting our economic model to the test once it can no longer expand and we are witnessing its unpleasent realities.  While most of the developed world does not have demographics as bad as Japans, our population too is aging and birth rates dropping, eventually we may end up like Japan

 

Europe in particular has demographics starting to depict Japans and growth in developed world is stalling and we fell it in economic conditions. Whats happening in Japan may be what happens globally as the population is set to begin declining as soon as 2050

 

Our world may resemble Japan with little investment, reduced consumption and reduced ability to overspend as deflation makes debt burdens heavier to carry if our economic model does not change!!!

[AddMeOnMYSPACE 2,096]

Explain this to me like I'm five please 

[Economy 52,843]

6 minutes ago, AddMeOnMYSPACE said:

Explain this to me like I'm five please 

Im not sure how to simplify it...

 

ok basically without major technical explations...

 

Our economic system is designed to grow. Our lending, borrowing and spending habits even at the Government and Corporate level are based assuming the economy will grow and expand

 

Japan which has among the worst demographics in the world now has a shrinking population and thats believed to be why their economy keeps shrinking and why they enter deflation

 

It has resulted in a downward spiral for the past 20-25 years that Japans Government has tried desperately to break but they just cant no matter how hard they try

 

it seems our economic system is designed to keep expanding and when it doesnt, the economic conditions turn sower because you cant build on the ponzy scheme anymore

 

The rest of the world isnt as bad as Japan yet but our birth rates are dropping and population aging and were already feeling effects

 

Basically Japan as it is now could be a glimpse of our future Globally

[StarstruckIllusion 53,563]

Japan's economy is flopping? Nnnn I think they like ARTPOP a little too much 

[AM98GJ 3,086]

This was actually really interesting thank you for explaining it and in a way that's quite easy to understand. As an economics student I found it a quite enjoyable read 

[calmar 22,768]

Japan should take a page from Zimbabwe's book  Although Japan at least gets tourism. Zimbabwe only gets a few tourists that trickle over the bridge from Zambia at Victoria Falls. 

 

[Economy 52,843]

11 minutes ago, ROARyals said:

Japan's economy is flopping? Nnnn I think they like ARTPOP a little too much 

 

8 minutes ago, calmar said:

Japan should take a page from Zimbabwe's book  Although Japan at least gets tourism. Zimbabwe only gets a few tourists that trickle over the bridge from Zambia at Victoria Falls. 

 

Japan has had serious issues for 20-25 years. The Government has tried everything to end stagnation with no success. All they managed to do is get massive debt trying at 240% of GDP. Its not talked about much cause its old news. Most of us on this site werent even born yet when their problems started

 

But the thing is, the problems Japan has may be what we are starting to feel now in other Nations and why it seems like the economy wont improve. While few Nations have demographics as bad as Japans, they are deteriorating and population keeps aging and birth rates falling

 

peak population glibally is expected by 2050 which is within our lifetimes

[calmar 22,768]

Just now, Economy said:

Japan has had serious issues for 20-25 years. The Government has tried everything to end stagnation with no success. All they managed to do is get massive debt trying at 240% of GDP. Its not talked about much cause its old news. Most of us on this site werent even born yet when their problems started

But the thing is, the problems Japan has may be what we are starting to feel now in other Nations and why it seems like the economy wont improve. While few Nations have demographics as bad as Japans, they are deteriorating and population keeps aging and birth rates falling

peak population glibally is expected by 2050 which is within our lifetimes

Yeah, I understood the OP. I was joking about Zimbabwe's absolutely massive inflation starting in the late 90s. And I understand that hyperinflation is neither a good thing nor is inflation working in Japan thus far, but about what hyperinflation would do for Japan and how it might in some ways actually be positive there, as opposed to Zimbabwe. 

[Economy 52,843]

14 minutes ago, AM98GJ said:

This was actually really interesting thank you for explaining it and in a way that's quite easy to understand. As an economics student I found it a quite enjoyable read 

Do you agree with it?

 

I think it may explain in part why the world and Europe is particular cant seem to get growth back up

 

 Not only is slower population growth hurting an economic system designed to grow, but slower growth and lower inflation also means our Governments cant overspend and still lower their debt-GDP ratios with economic growth. Now we need austerity to fix debt issues and were having issues with that

 

we used to cheat a ponzy scheme financially when government overspent a lot and that stimulated the economy. Now our economic growth has slowed too much to allow us to cheat that way

[Lord Temptation 11,209]

1) Japan has a rapidly declining population

2) Yet it has vast hoardes of foreign currency reserves

3) And the highest rate of suicide in the "Developed" world

4) Basically, Japan doesn't invest in the younger generation

5) Wealth has nowhere to go. It just stays put. Ideas die because banks are ever more conservative and restrictive with their lending practices

6) Japan is an ailing dinosaur economy. The most racist people on Earth. 

[Economy 52,843]

35 minutes ago, calmar said:

Yeah, I understood the OP. I was joking about Zimbabwe's absolutely massive inflation starting in the late 90s. And I understand that hyperinflation is neither a good thing nor is inflation working in Japan thus far, but about what hyperinflation would do for Japan and how it might in some ways actually be positive there, as opposed to Zimbabwe. 

Well money printing isnt working in Japan for 2 reasons...

 

#1 its in the form of QE. The US did this from 2008-2013 and Europe is doing it. The Central Banks creates money and uses it to buy up assets to create a wealth effect by increasing stock market and it buys bonds to force yields lower. So the currency doesnt enter the economy directly. It does so indirectly by raising value of of peoples assets which they can choose to sell but people must choose to do so.

 

QE is better than just printing money and giving it to Government because the Central bank creates a balance sheet and portfolio of the money it printed and pumped into financial markets. If they miscalculated and inflation ran too hot, the central bank could see fit to sell those assets and pump liquidity (currency) out of the system and put it back into non-existance. You cant do that with money Printing Zimbawe did for example. What they did wasnt QE (Quantitative Easing)

 

#2 more currency in economy wont raise inflation without money velocity (speed of monetary transactions and money flow)

 

You can create all the currency in the world, but if people hoard cash, delay purchases, and falling demand forces companies to sell cheaper, then that money doesnt flow and deflation cycle is never broken

 

Japans shrinking economy is also something that has a root cause behind it. Trying to force inflation artificially may help symptoms but doesnt fix the problem. Zimbabwe doesnt have this shrinking economy and population issue like Japan does

 

And hyper inflation is not good either. Its just as had as deflation or worse. It too causes poor resource allocation just like deflation and destroys savings. Also gives no chance for businesses to budget and theres no stability or investor confidence in economy.

[Economy 52,843]

19 minutes ago, Lord Temptation said:

1) Japan has a rapidly declining population

2) Yet it has vast hoardes of foreign currency reserves

3) And the highest rate of suicide in the "Developed" world

4) Basically, Japan doesn't invest in the younger generation

5) Wealth has nowhere to go. It just stays put. Ideas die because banks are ever more conservative and restrictive with their pending practices

6) Japan is an ailing dinosaur economy. The most racist people on Earth. 

The economy has gone dormant basically. The wealth just sits there and doesnt circulate. The economy is basically innactive but nothing is waking it up

 

and their cultures xenophobia doesnt help. They need more immigration desperately!!!!

 

Also read my reply above  ^^^^^ cause i responded to ur other question

[AddMeOnMYSPACE 2,096]

43 minutes ago, Economy said:

Im not sure how to simplify it...

 

ok basically without major technical explations...

 

Our economic system is designed to grow. Our lending, borrowing and spending habits even at the Government and Corporate level are based assuming the economy will grow and expand

 

Japan which has among the worst demographics in the world now has a shrinking population and thats believed to be why their economy keeps shrinking and why they enter deflation

 

It has resulted in a downward spiral for the past 20-25 years that Japans Government has tried desperately to break but they just cant no matter how hard they try

 

it seems our economic system is designed to keep expanding and when it doesnt, the economic conditions turn sower because you cant build on the ponzy scheme anymore

 

The rest of the world isnt as bad as Japan yet but our birth rates are dropping and population aging and were already feeling effects

 

Basically Japan as it is now could be a glimpse of our future Globally

Freaky stuff

thanks for taking the time 

[Lord Temptation 11,209]

7 minutes ago, Economy said:

The economy has gone dormant basically. The wealth just sits there and doesnt circulate. The economy is basically innactive but nothing is waking it up

 

and their cumtures xenophobia doesnt help. They need more immigration desperately!!!!

 

Also read my reply above  ^^^^^ cause i responded to ur other question

The economy has been dormant since the 1990s. 1989 was the last boom year for Japan. Ironically, it was also the birth year of the web. And since then, Japan's leadership in applied sciences, particularly electronics, has faltered. Samsung (Korea) and Apple (California) now dominate. Japanese are obsessed with status. Instead of substance. Yes they need more immigration. But the older generation will rather die trying to prevent their idealized racial monocultural society from falling apart. 

[Shipper 13,114]

How about follow America's lead and let immigrants in? That is one sure way of getting the population up. I know a couple of people, Japanese culture enthusiasts aka anime otakus that would love to emigrate to Japan. US has been allowing immigrants in for this purpose but then again the concerns for safety and all these  "immigrants are stealing jobs, raping women, terrorizing the innocent, stealing your dogs whatevers" etc will come about. They might need to go about it? For a country that is very ethnocentric, that would be really difficult. They side eye foreigners like invaders in some parts.

(If you think US is racist, you've never been in ASIA. You probably just don't understand them but they are racist AF. That's why they don't get called out. This is based on my experience though.)