Japan and the Cleanest Dirty Shirt

I have mentioned the serious economic issues that Japan is facing. The debt to GDP ratio is the highest among all developed nations. At some point this will cause cracks in the economy, maybe one should call them chasms. Rather than blog long and hard on Japan's future, instead I have decided to post two charts.



As you can see, the number of workers has reached the level of 30 years ago. This will continue to decline as Japan seems to show little interest in reproducing itself.



This is the main reason that workers are declining, Japan's demographics stink, and as the saying goes, "demographics is destiny." Adult diapers are outselling infant diapers. This cannot be good.

Why are Japan's coming troubles positive for the US? 

"[America is] like the cleanest dirty shirt," says Mohamed El-Arian, CEO of the bond-trading firm Pimco. "When you're on a business trip that gets extended and you don't have any more clean shirts, you wear the one that's least dirty." 

Thus when a crisis comes money will flow to the US as it is perceived that it is in relatively better shape. This will give the US more time to put its house in order. This makes me guardedly pessimistic.

The best scenario is that the US puts its house in order, but this will be painful. Better a little pain now than a lot more later on.

Get ready.

So Far, So Good

As near as I can tell the negative trends for the US economic future outweigh the positive trends. One friend on Facebook commented on my theories and suggested that yes, there is a business cycle and a recession can obviously be expected.  This reminds me of two jokes. The first is that Pundit Smith did predict the last recession, but then again he predicted 5 of the last 3 recessions. I resemble this. But then there is the other joke. A man jumped off the Empire State Building and was heard to say half-way down..."So far, so good." 

Yes, so far things are good. But I see the ground rapidly approaching. This is not a normal business cycle recession, it is a once in a century event worse than the really bad event in 2008. I do not expect that US dominance will end in this next crisis, but the US dominance will be mortally wounded. 

Here are the positive and negative trends as I see them. 

Positive Trends

1. Things are bad in Japan.

2. Things are marginal in China.

3. Things are mixed in Europe.

4. The US dollar is still King.

5. The US military is the strongest.

Negative Trends

1. Interest rates are at low rates; this cannot last.

2. Corporate profits are at high rates; this cannot last.

3. The US budget deficit continues with no solution in sight. 

4. Medicare is not sustainable.

5. The US military is the strongest. 

Over the next week or so, interspersed with my normal eclectic posts, I will blog on some of these issues. 

2+2=4

It is interesting that prominent economic "experts" do not understand economics.

What happens if you raise the wage above the market price?

In the short run, nothing. But in the long run you have businesses hiring fewer people and cutting fringe benefits, new businesses do not open, or when they do they use labor-saving technologies. You have even more manufacturing going overseas.

You do not see the job not offered, but you do see the person lucky enough to keep their job at the higher wage. Thus the benefits are seen, but the costs ignored.  A minimum wage actually hurts the poor.

This video gives a presentation of basic economics, the kind of thing you learn in Economics 101, but the experts with the PhDs have forgotten.

What Was He Thinking?

While I agree with some of the ideas in this short video, i.e. the poorest in the US is wealthier than most people around the world, I do think that there is a basic flaw in the presentation. Using income inequality to defend income inequality is got to be one of the dumber concepts I have seen in a while. Yes, if poor nations were wealthy they would be better off. This is called "begging the question." 

Mr. Mustache

I thought that I would share something from one of the sites I regularly read:

If you’re surprised to hear that I knew nothing of the looming shutdown, and that I don’t read (or watch) the news at all, then you will get a lot from this article. Because I’m going to suggest that unless you work directly in the news media industry yourself, you too should be paying absolutely no attention to the news.

I am not sure I entirely agree, but Mr. Mustache has a point. I have cut down on my news consumption, but should I cut it even more? Does it actually matter one month or even one week from now? I doubt it. I actually had a blog post on the uselessness of news. 

But with regard to the current government shutdown, except for reading the faux outrage on Facebook, I also know almost nothing about it. My wife, watching Russian news, may know more. 

I do not feel deprived. All I can say is, thank God. I really mean that, for it was my contemplation of my theme here of leaving Babylon that led me to reduce my news consumption. 

Ah, the bliss of not letting politics consume you! Turn it off now. It is too late for the guy on the left, but you can do it.