Reporting from: Tokyo, Japan
Japan has a rich history. More than a millennium of history has shaped its unique culture today. Centuries ago, it enjoyed the distinct advantage of its island geography to keep out invaders, a distinct advantage over the Chinese who were constantly fighting off invading hordes.
But that insulation left the underworked samurais to go soft. Years of trade isolation kept them from becoming a truly lean force, so much so that when the Black Ships arrived in the 1850s, Japan had no choice but to re-open trade.
Of course, in our lifetimes Japan is known for its remarkable comeback after its defeat in World War II. Destroyed cities were rebuilt into modern centers of trade that were the envy of the world. The economy flourished. Until it stopped flourishing.
Today, however, Japan is deeply in debt and in financial ruin. The level of denial within it is as splendorous as my view hiking across from Mount Fuji two years ago.
The newly nominated governor of the Bank of Japan has promised unprecedented money printing in an era of unfathomable money printing. If that weren’t enough, one of the central bank’s deputies has suggested the Bank should buy long-term bonds to help it manage inflation within a desirable range.
Yet the amount of debt accumulated by the Japanese government is now in the quadrillions when denominated in yen. Trillions? That was so yesterday. Fifteen zeroes now round out the indebtedness of Japan.
And as if someone were signaling them to put the pedal to the metal on borrowing, 10-year bond rates are now barely half a percent. That puts them among the lowest this century. And it makes it seem as if the party could go on forever. With a willing bond market, why not?
Japan is now even using psychology to basically trick its citizens into spending money, promising them through various speeches and campaigns that prices will once again go up. The goal is to force the Japanese to spend money to rejuvenate the economy.
Normally, it’s the United States leading the charge on crappy proposals that spread. People worldwide are now poisoning themselves with American fast food sandwiches composed of fried chicken breasts as a bun for more crappy hormone-laden food inside. Likewise, the Land of the Free has exported its own poison abroad by field-testing liberty-sucking policies (like FATCA, for example), then convincing other governments to join in. Those that don’t will often feel the wrath of not playing along.
However, in this case, I’m afraid it is Japan that will lead the way in bad policy. If they can borrow such amazing sums of money even with a 240% debt-to-GDP ratio, why shouldn’t Uncle Sam be able to step up to the window for more money. Even an infinite amount of money.
After all, a quadrillion is a long way away.
Peter Schiff calls this concept a “frightening cancer” that will wipe out some American families that don’t know any better. After all, Americans have failed to learn the lessons of the last stock market crash.
In fact, most humans throughout history have failed to learn the lessons of history. That’s why we find ourselves in messes like these – time and time again.
Yet five thousand miles across the Pacific Ocean in the Land of the Free, American policy makers are learning an important lesson from the Japanese: your quantitative easing policies are being embraced by the other bankrupt nations of the world without consequence. At least not yet,
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