Japanisation & the Zombie Apocalypse

America and Japan’s responses to their housing blow-ups have been eerily similar. So too have been the results.

As I wrote in August:

Essentially, in both the United States and Japan, credit bubbles fuelling a bubble in the housing market collapsed, leading to a stock market crash, and asset price slides, triggering deflation throughout the respective economies — much like after the 1929 crash. Policy makers in both countries — at the Bank of Japan, and Federal Reserve — set about reflating the bubble by helicopter dropping yen and dollars. Fundamental structural problems in the banking system that contributed to the initial credit bubbles — in both Japan and the United States — have not really ever been addressed. Bad businesses were never liquidated, which is why there has not been aggressive new growth. So Japan’s zombie banks, and America’s too big to fail monoliths blunder on. Policy makers “saved the system”, and ever since then have gradually dealt with slowdowns through monetary and fiscal easing.

Today Zero Hedge provide some empirical evidence for just how similar these events have been.

Stocks have followed broadly the same crisis-bailout-crisis-bailout pattern:


Money velocity has slouched at a similar rate:


Equity values relative to earnings have not recovered in either nation:


Some of those among us may say that all of this shows that Japanisation really isn’t that bad: with an ageing population, and powerful vested interests demanding consistently high government spending in spite of falling real incomes and falling real estate values, we’re about to head into a 15-year deflationary tunnel. “It won’t be pretty”, they say, “but it will be liveable.”

I think they’re wrong.

So what’s the key difference between America and Japan?

Look at the difference between Hurricane Katrina, and Fukushima.

From NewsFlash.org:

Reuters reported that Yakuza gangs have been sending trucks from the Tokyo and Kobe regions to deliver food, water, blankets and toiletries to evacuation centres in northeast Japan, the area devastated by the March 11 earthquake and tsunami which have left thousands of people dead and missing.

Not to glorify the Yakuza by any means, but compared to the looting and violence in New Orleans that followed Hurricane Katrina in August 2005, this speaks volumes about the enormous difference between Japanese and Americans in coping with natural crises or disasters.

Shortly after Hurricane Katrina left, some residents of New Orleans who remained in the city started looting stores in search of food and water that were not available to them through other means. There were also reports of carjacking, murders, thefts and rapes in the city, although many of these reports were found inaccurate due to the confusion. Then Louisiana Governor Kathleen Blanco had to temporarily deputize members of the National Guard and other federal troops to quell the looting and rioting. The governor said: “They have M16s and are locked and loaded. These troops know how to shoot and kill and I expect they will.”

Essentially Japan’s culture is a (largely) moderate, deferential, conformist, self-negating and (most importantly) united nation.

America is (largely) individualistic, greedy, bitchy and (most importantly) disunited.

From Colin Woodard’s sensational series of posts about America for Bloomberg:

The U.S. is wracked by internal discord between two blocs formed by seven of its 11 regional nations — the conservative bloc that includes the Deep South, Tidewater and much of greater Appalachia, pitted against the more liberal alliance of Yankeedom, New Netherland, the Midlands and the Left Coast. Increasingly, through American history, the conflict between these two blocs has been driving the nation apart.

The country has been exhibiting the classic symptoms of an empire in decline. Kevin Phillips — the political strategist who, back in 1969, used regional ethnography to accurately predict the ensuing 40 years of American political development – - has pointed out parallels with late imperial Holland and Britain. Like its superpower predecessors, the U.S. has built up a staggering trade deficit and sovereign debt while overreaching militarily. As financial services have come to account for a larger and larger share of national output, religious extremists have come to play a bigger and bigger role in political life.

Once a great exporter of innovations, products and financial capital, the U.S. is now deeply indebted to China, on which America relies for much of what it consumes and, increasingly, for the scientists and engineers who are needed by research and development firms and institutions. The U.S. citizenry is divided along regional lines. The country’s military has been mired in expensive and frustrating counterinsurgency wars in Mesopotamia and Central Asia, while barbarians have stormed the gates of Washington and Wall Street, killing thousands in the surprise attacks of September 2001.

Add in the damage to public confidence in the electoral system caused by the 2000 election, the near-total meltdown of the financial sector in 2008, and extreme political dysfunction in the capital, and it’s clear the U.S. hasn’t started the 21st century auspiciously.

Simply, America will blow up into secessionism, class warfare and civil unrest before standards of living for the middle class drop by anything like they have in Japan. The people will get mad as hell, and they just won’t take it anymore. They only hope for America is some kind of real recovery, coupled with new growth, and less dependence on foreign energy and goods. But with a zombified Japanised economy consisting largely of bailed-out uncompetitive failures there is little hope of that.

Civil unrest, followed by secessions, followed by a Second American revolution, is a far more likely scenario.

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16 thoughts on “Japanisation & the Zombie Apocalypse

  1. Not sure if this is significant but it’s interesting that the HQ’s of the TBTF banks are spread into most of the eleven nations. As a resident, I find it very interesting, and not surprising, that one of the “borders” of the nations cuts right through the Chicago area.

    I’ve maintained that 50 states is simply too few for the democratic experiment of the US to successfully continue with its present size of population. People feel they aren’t being politically represented and the mathematics bears that out. 535 representatives for a population over 300 million seems rather ancient. The number should be closer to 5,350 representatives. If that becomes unwieldy for a federal government, well that is precisely the point – the numbers have simply tilted the balance toward the central government which was never the intention of the union to begin with.

  2. Reminds me of the old times when I lived in America. One and a half years, 2004-2005. To me it was like heaven, compared to S Korea without all the forests of apartments and the signboards for private academy ads. (especially for the kids, America has about half of official school hours compared to east Asian nations, if you include private education American kids spend at most a tenth of time studying than a typical Korean or Japanese kid)

    What I discovered in the late months of my stay, however, was that American lifestyle depends too greatly on oil and other resources – if you live in the suburbs, it’s likely that you’d never be able to buy even a toilet paper without a car. Also I found out that nobody was ever saving their incomes. In Korea everyone saves at least 10%, sometimes even up to 50% of their income either for economic goals like buying a house w/o mortgages or as an insurance for rainy days. Americans on the other hands tend to spend as much as, or more than what they earn – the GDP per capita of Korea was about USD 15,000 with that of America being about 40,000, but somehow American standards of life cost something more like fivefold, or even tenfold of what Korean lifestyle cost.

    I think the fundamental cause of these economic problems in America is the addiction to free lunch – that of Americans, American large corporates and the US goverment. America though has a significant advantage over other countries, particularly the east Asian ones – its libertarian culture allows its citizens to freely express their ideas, be creative and innovative, etc. On the other hand, our education system subtly coerces our children to defer to their seniors and follow their ideas – I don’t see an Apple or Google being established in the Far East, at least for a decade from now. It could take centuries, or even millenia for this 5000-year-old ideology to change.

    If America dumps its glutton for free lunch economics and transforms itself back into the robust jungle of enterpreneurship, where new and sound ideas grow on the remains of old and obsolete ones, I’m bullish on it. America will probably once get back to be the leader of world’s innovation with its Asian factory copycats and European welfare-bums gazing at the nation with envy and awe. Otherwise… good luck. I’ll cross my fingers, but I ain’t betting on it.

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  4. We are not turning Japanese. We flirted with it, but our largest generation is our youngest, not our oldest. We had more kids born in the last 5 years that the 5 peak years of the baby-boom.

    • Also vastly more inbound (working age) immigration to US. But the point is that while the demographics might not line up, the economics (housing bubble & stock bubble followed by years of debt-deflation, zombification, QE, extend and pretend) are surprisingly close. And the demographic differences are an important reason why the US is likely to boil over.

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