In The Long Run We Are All Dead

It has been pointed out that the example of Japan tells us that everything is hunky-dory. This is Krugman's opinion. As I pointed out two weeks ago, this is not entirely wrong. 

However, it is clear that because of the power of compound interest, our current path is not sustainable. We may have a few years to make the needed changes, but what we are doing now cannot continue. It will take us ten years or so to reach the point Japan is at now. 

How is Japan doing? Uniquely, Prime Minister Yoshihiko Noda is being honest with his people:

Prime Minister Yoshihiko Noda said containing Japan’s public debt load, the world’s largest, is critical after Standard & Poor’s downgraded credit ratings on France, Austria and seven other European nations.

Europe’s fiscal situation “isn’t a house burning on the other side of the river,” Noda said on TV Tokyo Holdings Corp.’s program on Jan. 14. “We must have a great sense of crisis.” 

It is as difficult to cut spending in Japan as it is in America, so Noda is proposing to double the national sales tax to ten percent. 

Noda reshuffled his cabinet last week, aiming to win support for doubling Japan’s 5 percent national sales tax by 2015 to trim the soaring debt. S&P said in November Noda’s administration hadn’t made progress in tackling the public debt burden, an indication the credit-rating company may be preparing to lower the nation’s sovereign grade.

Why is Noda concerned? It is the exact same reason I am. If interest rates increase, a very bad deficit becomes a catastrophe. 

Japan’s government, which has enjoyed borrowing costs that are around 1 percent, wouldn’t be able to manage its finances if bond yields surged to 3 percent, Noda said last week. The country risks seeing a spike in government bond yields unless it controls a debt load set to approach 230 percent of gross domestic product in 2013, the Organization for Economic Cooperation and Development said on Nov. 28.

Even with this massive tax increase, things could get very bad in Japan. 

“The proposed increase in the consumption tax to 10% would not be enough to put the public finances on a sustainable track,” David Rea, a Japan economist at Capital Economics Ltd. In London, wrote in a report last week. “A larger increase is needed, and soon, but is highly unlikely without a specific mandate from the electorate as support from the opposition and even some elements of the ruling party is non-existent.”

This is the problem everywhere. There are a certain number of politicians who refuse to see reality. In America they are called Republicans and Democrats. I suppose Republicans could take comfort in that the fact that the Republican car is racing toward the cliff at 40 mph while the Democratic car is racing at 60 mph, but I am not comforted. Yes, as Lord Keynes said, in the long run we are all dead. This is not an encouraging fact as we live in Keynes' long run.

Going Dark

While I will not be "going dark" today here at Prophecy Podcast, I will not be posting anything other than this announcement that I support the one day strike of internet providers. Click here to see what going dark looks like. 

Why Aren't They In Jail?

This is a question that goes back to the Bush Administration. Obama has continued the Bush policies in most things, the lack of prosecution for bankster criminals is one of them.

Walk A Mile In Iranian Shoes: Is America Insane?

Newt Rick O'RomneyImagine you are a citizen of a country where:

A foreign government overthrew your democratically elected government and installed a dictator.

This dictator murdered your fellow citizens and plundered the country. 

You and your fellow citizens are finally able to revolt and remove the dictator. 

The foreign government tries, but fails, to install another dictator. 

The foreign government supplied and helped your neighbor to attack you and you lost 500,000 young men. 

The foreign government places sanctions against you and limits your trade and prosperity. 

How would you feel about that foreign government? 

Imagine that you are Iranian, and the foreign government is the United States. How would you feel?

But doesn't Iran want the bomb? Surely we must act now? Leon Penetta, our Secretary of Defense, recently admitted that Iran is not developing nuclear weapons.

Appearing on CBS’s Face the Nation on Sunday, Panetta admitted that despite all the rhetoric, Iran is not pursuing the ability to split atoms with weapons, saying it is instead pursuing “a nuclear capability.”

That “capability” falls in line with what Iran has said for years: that it is developing nuclear energy facilities, not nuclear weapons.

In fact the official position of the Iranian government is that nuclear weapons are forbidden by Islamic law. The article concludes with this:

Nuclear fuel enrichment is much different from enrichment for weapons. Most commercial nuclear reactors use lightly enriched uranium, which is between 3-5 percent enriched. Weapons-grade uranium must be enriched to approximately 85 percent or more of a key radioactive isotope for it to be usable in an atomic bomb.

Too many people are blinded by their ideology. American interference has just made things worse in the Middle East. We were geopolitically better off with Saddam Husein than the current crop of Iraqi leaders. $1 trillion dollars and counting for the war in Iraq. This is $3000 per person in America. $12,000 for a family of four. Was it worth it? 

The wag's definition of insanity is doing something over and over again even though it is not working. Is America insane? 

Media Manipulation

I know nothing about this group, but I thought that you would find this video about how our Media is controlled of interest.