Gyroscopic Investing

[quote=http://www.mauldineconomics.com/frontli ... ve-markets] This table is important. The Bank of Japan is now totally financing the government deficit, but this has not always been the case. Until the last few years, Japanese government debt was almost totally underwritten by Japanese savers. For many decades after World War II, the Japanese saved a high percentage of their earnings. And they tended to put their savings into various funds and pension plans that utilized high percentages of Japanese government bonds in their portfolios.

However, one of the things we know about savings rates is that they fall as a country’s population gets older because retirees must draw on their savings. The problem is compounded when the ratio of workers to retirees begins to fall, which it is doing rather precipitously in Japan. A few years ago I began writing about Japan and the consequences of a negative savings rate. This was a new phenomenon at the time. I pointed out that either the Bank of Japan would have to undertake large amounts of quantitative easing, or the government would have to run surpluses, or interest rates would have to rise. But if interest rates were to rise, that would make the deficit worse and could precipitate a deflationary spiral. On the other hand, monetizing the debt would cause the currency to devalue. And then, suddenly running a government surplus could trigger a recession.

Japan had to choose among disastrous scenarios. They chose to monetize and thus allow their currency to fall – that was the easiest and best of the disastrous choices. The time for good choices came and went long ago, when they could have decided not to run such huge deficits.[/quote]

Is it too late for us also?

I think that depends on the productivity of recent immigrants to the US.  That where most of the new manpower is coming from.

They are ridiculously productive! In many industries they are outcompeting the natives. Unfortunately, some of them seem to bring with them a lot of crime, domestic violence, and drunk driving.

Are they, though?  High productivity laborers are professionals like scientists, accountants, engineers, lawyers, or physicians.  The highest form of productivity is innovation.

Japan ain't going anywhere.

They are the most advanced country on the planet. They have an extremely tight coherent culture. They are extremely well educated. They are innovative. They were nuked twice and their major cities burned to the ground in WWII, plus multiple serious natural disasters to include a tsunami and nuclear reactor meltdown and they are still cooking along.

Japan is not going to vanish because their social progams are not adequately funded. Think about how ridiculous that sounds and you'll realize how ridiculous these economists saying these things are. A country that was nuked, earthquaked, tsunami struck, and had nuclear meltdowns is not going to fade into the night because retirement plans aren't being adequately funded and retirees are spending down their savings. I wish these economists would get a grip.

Japan will work out their problems just as they always have. A declining population in a country that is very overcrowded already is not the end of the world.

One trip to Tokyo and other Japanese cities will show just how wrong these articles are and the fear is mis-placed. Tokyo is one of my favorite cities. It makes many western cities look third-world by comparison. If anything, I think Western countries like the U.S. have far more to worry about in terms of longevity than Japan.

My only concern is that Paul Krugman was there recently giving advice to the Prime Minister. I'm afraid the PM might have taken Krugman's advice against all common sense. We'll see.

Lowe wrote: Are they, though?  High productivity laborers are professionals like scientists, accountants, engineers, lawyers, or physicians.  The highest form of productivity is innovation.

A crew of Mexicans most of whom spoke no English just re-insulated and re-stuccoed my house. Sure, it was manual labor and they weren't designing and operating Stucco-Tron 5000 robots or something. But man, let me tell you what, those guys worked outrageously hard and did a tremendously good job. If what they did doesn't count as "highly productive" I don't know what does.

Pointedstick wrote:

Lowe wrote: Are they, though?  High productivity laborers are professionals like scientists, accountants, engineers, lawyers, or physicians.  The highest form of productivity is innovation.

A crew of Mexicans most of whom spoke no English just re-insulated and re-stuccoed my house. Sure, it was manual labor and they weren't designing and operating Stucco-Tron 5000 robots or something. But man, let me tell you what, those guys worked outrageously hard and did a tremendously good job. If what they did doesn't count as "highly productive" I don't know what does.

Wouldn't it have been better if a crew of Americans had done that work? Are Americans not highly productive? Are insulation layers really a critical skills shortage the country needs?

craigr wrote:

Pointedstick wrote:

Lowe wrote: Are they, though?  High productivity laborers are professionals like scientists, accountants, engineers, lawyers, or physicians.  The highest form of productivity is innovation.

A crew of Mexicans most of whom spoke no English just re-insulated and re-stuccoed my house. Sure, it was manual labor and they weren't designing and operating Stucco-Tron 5000 robots or something. But man, let me tell you what, those guys worked outrageously hard and did a tremendously good job. If what they did doesn't count as "highly productive" I don't know what does.

Wouldn't it have been better if a crew of Americans had done that work? Are Americans not highly productive? Are insulation layers really a critical skills shortage the country needs?

Well, for all I know they are Americans. This is New Mexico, after all. But in terms of wages, this was an expensive enough job as it was. Had they been, say, unionized, I have no doubt it would have been double the price.

And in terms of skills shortages, yes, there is indeed a skills shortage of non-hispanic masons and plasterers, at least around here. Hispanics who come from abroad--or whose parents did--know these kinds of skills really well; white Americans around here mostly know how to build things out of wood, it seems.

But regardless, you just can't win. When the workers are paid well, the job costs too much. When they get the price down by paying them less, people complain that hard work doesn't pay!

Simonjester wrote: there is a phenomena of vanishing non-Hispanic Americans in several industries in America, starting with farm work but also effecting landscaping, yard maintenance, construction, cleaning etc. it is especially noticeable out in CA. once a Hispanic person becomes a team leader, crew chief, foreman or journeyman in a trade, the crew becomes all Hispanic, and eventually it starts to seem as if the entire profession is now a "Hispanic profession" or by association (or mis-association) beneath white or other minority Americans.. i don't believe they truly are, my suspicion is they just become locked out or very difficult to hire into without fluent Spanish and deep connections in the Hispanic community..

craigr wrote: Japan is not going to vanish because their social progams are not adequately funded. Think about how ridiculous that sounds and you'll realize how ridiculous these economists saying these things are. A country that was nuked, earthquaked, tsunami struck, and had nuclear meltdowns is not going to fade into the night because retirement plans aren't being adequately funded and retirees are spending down their savings. I wish these economists would get a grip.

Japan will work out their problems just as they always have. A declining population in a country that is very overcrowded already is not the end of the world.

Something I don't get about Japan is that I always hear that Japanese workers save a lot of their paycheck, and then I also hear that the population distribution is going to do them in because there are not enough young people paying into social programs. Well, which is it? It seems that people who have set aside money for themselves as they move through their working lives won't need as much financial help in their later years.

Also, aren't the Japanese light years ahead in terms of using robotics in health care for the elderly?

I agree with craigr as far as economists go in trying to fit Japan into their preconceived notions.  That's why you always read all kinds of different worries and explanations about Japan that all contradict each other.  It gets terribly hard to keep up and keep it all apart!

Japan does sort of have a Hispanic-equivalent type of restricted immigrantion at low levels, but they are marginalized from Japanese society.  It's certainly nowhere enough to replace what the robots are being designed for, if that were to be socially permissable.

As long as immigrants here assimilate and adopt our American liberal democratic values, I don't think we'll have a problem.  Are they?

P.S.  I can't imagine what Krugtron the Invincible possibly has to say to the Japanese and why he even has any crediblity with them after 25 years of his proscriptive policies failing.

MachineGhost wrote: Japan does sort of have a Hispanic-equivalent type of restricted immigration at low levels, but they are marginalized from Japanese society.  It's certainly nowhere enough to replace what the robots are being designed for, if that were to be socially permissible.

As long as immigrants here assimilate and adopt our American liberal democratic values, I don't think we'll have a problem. Are they?

There is a bit of a foreign underclass but it is tiny and that is exactly the way the Japanese want it. They would prefer to not have any foreigners at all, at least that is my impression. I have worked there and was treated extremely well as a guest in their country, but a musician friend of mine had a more interesting experience when he tried to delve a bit deeper. He was over there on a short-term contract and liked it so much that he declared to his employers his intention to stay for another six months and just kind of hang out. After that they weren't so nice anymore.

I'd be curious to hear what Mom has to say now that she has been in Japan for a bit. Her China insights were just so great.

I am by no means a person who always says "the US is the greatest country in the world." But when you take a little harder look at a powerhouse like Japan, you start to see these cultural aspects that aren't ideal. But, yeah, as MG implies, it's an issue when immigrants don't assimilate and adopt American values.