Off the keyboard of RE
Discuss this article at the Economics Table inside the Diner
A couple of weeks ago, the main Industrial Economies on the Collapse Radar were the PIIGS, and the main currency teetering on the brink of collapse was the Euro. Not so this week.
Now the focus of the MSM has drifted over to Japan, where a New Goobermint is on the verge of putting the Printing Press on overdrive. 20 years running here Japan has been mired in deflation, and in their infinite wisdom numerous MSEs are calling for Japan to Print Yen as fast as they can to keep Japan Inc. from hitting the D-Wall. Not Depression, DEFAULT.
In the post-WWII years right through the early 1980’s, Japan was the “Miracle Economy”. DEVASTATED and utterly broken after the dropping of Atomic Bombs on Hiroshima & Nagasaki, those Plucky, Hard-Working Japs CAME BACK by the 1970s to be the main producer of cool electronic gadgets from companies like Sony and Panasonic. Panasonic being the Brand name of Matsushita Electric here in the FSoA back in the 80s, you don’t see it much today.
The Nips took the Transistor Radio ball and ran with it. They had cheap labor a-plenty, and Investment Capital flowed into Japan to create a whole new class of Toys everybody just HAD to have. This before the years of Industrial Robots, the Japanese took their large population and turned them into Human Factory Robots, soldering together tiny components to make smaller and better Radios and then TVs than anybody here in America produced.
One of my most prized possessions of this era was a Panasonic Pop-Up 5″ BW TV I kept in my locker at the Lab to watch Late Night TV during the many dead hours of my shift. Eventually I replaced this with a Sony 5″ Color TV. 5″ was the maximum size of a TV I could squeeze ito my locker. Today, with Flat Screen LCD TVs, Iprobably could drop a 20″LCD Color TV /DVD player in the same locker, but they had not been invented yet.
For someone who grew up when TVs were encased in huge pieces of furniture to house all the tubes, such ‘portable TVs were an absolute MARVEL! The TV would even run on 8 “D” size Batteries, for maybe an hour or two anyhow and they were not Rechargeable in those days. If you had such a bad TV Jones you wanted to watch on the go somewhere, it would cost you a good $2 1980s dollars to flick it on for a while. Then after that the “safe” disposal of the batteries, which I never really figured out how was done anywhere. All my Used Batteries just went in the Trash with everything else.
Those crafty Nips followed up the Transistor Radios and Small TVs with a Steve Jobs type device, the WALKMAN! The early Walkmans took Cassette Tape Players and made them Portable, so you no longer had to be inside your McMansion to listen to music off the Victrola on Vinyl, now you could go JOGGING and still Bop to the Tunes of your favorite Rock Stars.
Of course we are all familiar now with the succession of devices you can carry on your person, for a while they morphed into Portable CD Players, then the MP3s and I-phones hit the market. Nowadays of course, you can carry in your pocket an All-in-One device that functions as your Phone, your TV, your Map and your Chauffer. OK, it doesn’t drive your car YET, but according to Google it WILL someday!
Along with making cool electronics, Japan Inc. got into the Bizness BIG TIME of competing wth Detroit for Making Carz. You didn’t see too many (if any) Jap Carz on the roadz in the FSofA in the 1960s when Detroit was producing the Muscle Carz like the Little GTO or Ford Mustang, but all of a sudden in the 1970s the HOTTEST Sportscar on the market showed up, the Datsun 240Z.
The Japs are producing this vehicle smack dab in the middle of the Oil Embargo, while here in Amerika the Carz Companies are on Life Support trying to figure out how to downsize their vehicles and make them more affordable for people to drive, how does that one happen? Clearly SOMEBODY is pitching enormous amounts of DEBT out to Japan to build HOT Carz, because they sure did not build up those factories on Savings they had from the period of 1945-1970. SOMEBODY in charge of issuing out Debt figured since the Japs did such a good job making cheap electronic devices, they could ALSO make good Carz cheap too! DEFINITELY cheaper than those Auto Factories in Detroit infested with Nasty UNIONS demanding a decent Wage and Pension to carry them through their years after their serviceability to the Company as a Production Line Drone.
So, inside 20 years or so from about 1970 to 1990, the Nip Auto Industry grew like a CANCER, and by 1990 the Carz that Toyota and Nissan were producing were BETTER than the ones coming off the production line in Detroit. The Nips became the Beneficiaries of the Credit Machine, and Detroit got Triaged OFF the Credit line. Result in 1990 is that Detroit looks like this:
The Credit/Debt Machine marches around the world, always looking for new places with either Cheap Labor or Cheap Resources, preferably both but not always available. The Post-WWII Japs got pegged as a great source of cheap labor, and they already had some ndustrial Infrastructure available there to build on, since not EVERY Big Shity in Japan got Nuked, only Hiroshima and Nagasaki. Note that NEITHER of those Shities were the manufacturing centers that Tokyo and Osaka were. If you truly were out to destroy the enemy’ fighting capacity, why would you drop your ONLY two A-Bombs on dipshit towns like this and not drop them on the places building the Planes and the Boats?
Japan became the NEW Manufacturing Center for Asia in the post-WWII era, and credit flowed freely toward it for many years to build up this infrastructure on a couple of very small islands really. The islands themselves did not have that much in the way of resources, but they DID have a large and basically conplacent population of Slaves who would do as they were told and live with it. They evolved over tine into the Salarymen, and the Feudal Structure of Japan Inc never reallychanged. What did change was that in the intervening years the population of Japan EXPLODED. The population inside Japan at the end of WWII was about 70M today it is about 140M. About doubled in 40years.. Those islands cannot support this population, no way no how even with the best in Hydroponics IMHO.
Anyhow, despite what I think are fairly obvious limitations in terms of size, Japan Inc was the beneficiary of an enormous amount of credit which went into building their Electronics Industry, Autmotoive Industry and the Nuclear Plants necessarry to supply the megawatts of ower necessary to run those industries. MASSIVE amount of debt accumulated from the Get-Go here, and in the 1980s Japan was sthe Bubble of ALL TIME. The Nikkei shot up to the MOON, and the real estate the Imperial Palace sat on was worth ore than ALL of CA real estate. LOL. This demonstrates the logic of the “free market” in action.
Japan represents a great example of just how long you can keep a Big Economic Bubble Inflated here, and they appear to be tottering badly at the moment. Frankly, in the aftermath of Fuk-U-Shima it surprises me they have lasted as long as they have, but really this is the result of TPTB who will not let ANY Debt Structure collapse in action. The Yen has served as a Go-To Carry Trade Currency for YEARS here, and the “Big Boys” aka the TBTF Banks and Illuminti hold a LOT of Yen. Ya can;t let that currency drop off the map, it would destroy just about anyone who holds some of it, and that is about everybody invested in th Industrial Paradigm.
Thing is for the Nipponese right now, they are getting SUFFOCATED. If they can’t devalue theiryen and make their export products cheaper, they can;t COMPETE with the chinese and others who now have similar industrial infrastructure. They have a MOUNTAIN of debt they accumulated over the last 40 or so years, mostly held internally but still “valued” by the BIS. The BIS Valuation is what makes Yen worth anything at all on International Markets. So you now get a new Goobermint promisingto Print to Infintity if necessary to devalue yen to match or beat the devaluing dollar and euro. Who can prit faster and does it really matter?
Short answer, no it does not matter. All these currencies are proxies for energy and they can devalue against each other to try to be “competitive” in the Oil Product Market, but they can’t make the Oil ay cheaper as an input.. The more they devalue the currency, the more the oil costs them. Ya cannot win this game as long as you play it and Japan Inc. is about Outta Cards now.
Like Greece but on MUCH bigger scale though, TPTB CANNOT let Japan Inc. FAIL. Everything possible on the numerical level will be done to prevent that failure for so long as is possible. If any of these Lynchpin Currencies FAIL, the whole SYSTEM fails. It remains an open question as to which one will fail first, but right now I think Smart Money is on the Yen. I personally will short the Yen now as part of my Hypocrisy in action.
The Nips are TOAST.