Why Japan Is Doomed

http://www.oftwominds.com/blogaug10/Japan-doomed07-10.html

by startuprules • 16 years ago

111 89 16 years ago

NathanKP• 16 years 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• 16 years 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• 16 years 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• 16 years 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

d2viant3• 16 years 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• 16 years 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.

startuprules6• 16 years 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).

masklinn4• 16 years 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• 16 years 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.

startuprules6• 16 years ago

I totally agree. I should add that I was surprised merely because in my head, I had this notion that Japanese people were mostly hard working and true to their crafts, before I had entered Japan.

To add, young Japanese people also don't have the option of being an entrepreneur, because that notion is still widely shunned by society. So they toil in misery for many many years without escape.

potatolicious2• 16 years ago

Oh bullshit - I'm surprised you got as many upvotes given that this is supposed to be the entrepreneurial bunch (and our previous mega-thread involving Scott the useless college grad).

Boo hoo, so the economic sucks and you were lied to your whole life about how your employment situation was going to work. So? This does not excuse laziness and a crappy work ethic.

Perhaps their chronic unemployment stems from the fact that they meander through life rather than actively fighting for what they want. Japan isn't some third-world backwater, there are opportunities abound for people who are willing to work and fight for it - just like it still is in the US. The ones that sit and pout all day (like Scott, from the NYT article) are the ones who will never get out.

MikeMacMan• 16 years ago

I think the temp and contract work has increased because the contracting and temp staffing industry has exploded in Japan in the last 15 years. There's also more fluidity in the labor market now, meaning that people can more easily move from job to job without being stigmatized.

For someone in their 20s who can't or doesn't want to depend on their parents for a place to live, then the prospect of making 2500yen/hr as a temp, instead of a paltry 200,000/month (and being overworked) as a salaried employee, is appealing.

patio112• 16 years ago

That is a social phenomenon alright, but freeters are not coextensive with Japanese youth. Japanese companies offering part-time employment frequently offer it on a day-labor basis: you do your day, you get your money, and you and the company are even. The employment relationship is as durable as those struck up with the gentlemen standing outside your local Home Depot in the United States. There are cell phone websites where you can browse jobs and be doing mind-numbing greeter-style work within 20 minutes.

You'd find very, very different professional norms if you either hung around my salaryman buddies or hung around young ladies of my acquaintance who are on the "pink-collar" track.

w1ntermute• 16 years ago

Here, I'll turn on the Patio11 signal:

Ernestas• 16 years ago

almost 2am in japan - waiting till the morning.

stcredzero2• 16 years ago

Something I would never expect Bruce Wayne to say!

andrewljohnson• 16 years ago

I believe I invented that :)

fuzzythinker• 16 years ago

Did you copyright that ;) Anyway, took your word for it, so upvoted you, since I got a good laugh.

patio112• 16 years ago

I love you guys, but a) it is 4:50 in the morning and I am scarcely coherent and b) there are several dozen HNers in Japan.

Groxx• 16 years ago

Do they have signals? Do their signals work so effectively (4:50? Yoiks)?

I think we need a signal-tweet-feed, so someone can set up an alarm system for when their signal is activated. For great justice!

nathanb• 16 years ago

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

startuprules6• 16 years 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/

incomethax• 16 years 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_hype...

startuprules6• 16 years ago

Anybody with personal accounts from Iceland?

jeromec• 16 years ago

Interestingly, Eurozone members like Greece can't hyperinflate their currency, since members share common currency, but can't simply print it on their own. The worst they can do is default, which would still have a nasty financial domino effect, but it does leave open the possibility of kicking Greece out of the Euro and taking the hit.

sp332• 16 years ago

People might start bartering, i.e., doing business without involving government-backed currency.

eru• 16 years ago

That might happen in a severe deflation. In a (hyper-)inflation I'd expect people to use foreign currencies.

varjag• 16 years ago

I lived in a country with 600-3000% inflation for a few years. The way we stashed was by converting assets to U.S. dollars.

Hope it helps.

Ardit204• 16 years ago

I think Russia went bankrupt in the 90s when communism collapsed. So The IMF forced them to sell of their assets, like gas companies, oil, energy, whatever else. People bought them really cheap and are now billionaires, or as the media is free to call them Russian oligarchs.

It has taken two decades for Russia once again to at least try and act like a super power in the world stage.

As for normal people, well I would suppose they got a bit richer because well they were starving in 1989 when communism collapsed so really things could only get better. But if it happened to a rich country like America then it would probably turn to a second rate country like poor India or Mexico. There would be no cleaner to clean your street to start with...

ajuc• 16 years ago

In Poland before the communism fall there were big inflation - it made all savings worth nothing in a course of a few months (people were saving for kids flats for 10 years, then these savings on bank account were worth 10 times less after a few months - many people still didn't get that money from "flat savings acounts" (ksiazeczka mieszkaniowa) - that money nowadays is less than a few days of work.

But some people had luck - I know family, that bought one family home for credit in 1986, credit was for 30 years. Then, after a few years father went abroad to work a few months for $ (on the farm), then paid the whole credit back for these $.

Of course country had to default eventually, but many people paid their credits that otherways would be paying to this day. So that's one way of profiting from hyperinflation.

All in all it wasn't so bad, people just were using $ or Deutche Marks (it was illegal to own them then, but it was legal to change your $ to polish currency, only change rate was were unjust). So many Polish businessmans started as people illegaly trading $ to zlotys. Crazy times that were, millions laying in the streets.

d2viant3• 16 years 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?

startuprules6• 16 years ago

The older Japanese population are pretty nationalistic. However, the Japanese corporations, not so much.

brianobush• 16 years ago

I think they are used to banks giving them next to nothing on interest for their savings.

artsrc2• 16 years ago

Seems like a version of this:

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-de...

codexon• 16 years 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?

ajb• 16 years ago

Currency risk. Lots of Japanese do try to invest abroad (the famous 'Mrs Watanabe'), many of whom have been hurt badly by the recent currency fluctuations.

stretchwithme2• 16 years 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• 16 years 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/

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• 16 years ago

Don't worry about it. Krugman says deficits are ok.

jbooth4• 16 years 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.

caf• 16 years ago

The US is in a somewhat unique position - as the de facto reserve currency, it can inflate its debts away.

Like Monopoly's "Get Out Of Jail Free" it's a card you can only play once, though.

Ardit204• 16 years ago

Am sure Japan can do that also since they have their own currency and can print plenty of money.

One person mentioned some numbers however, such as 2500 Yuan per hour. I am sure that figure one day was 25 Youan, but inflate and inflate, some zeros have been added.

I guess however having prices go up also, such that say bread is 1000 Yuan you do not get real inflation if you print slowly. But, I doubt anyone want to take a chance.

I would think also that it is not so easy and it is not really a get out of jail card. Money have value as long as they have power. They can print as much as they like, as it seems to be the case with Japan, but if prices go up accordingly, they would need to print more, and prices go up and print more and Germany 1930s or Zimbabwe 2007.

Paying off debt is a good policy, whether be it a country or individual. Saving is a good policy too.

stretchwithme2• 16 years ago

BECOMING the reserve currency is very beneficial. The US printed over 4 trillion bucks and it just went into vaults somewhere in exchange for $4 trillion bucks worth of stuff.

But when we blow it and are deep in debt with declining ability to borrow cheaply, we could also lose this special status. and $4 trillion will come back and make goods more expensive for everybody stuck with no far-less-desirable paper.

api2• 16 years ago

For us, there's a music video:

http://www.youtube.com/watch?v=gEmJ-VWPDM4

dRother• 16 years 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.

Why Japan Is Doomed

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