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Friday, September 12, 2014

Japan Continues to Get It Wrong

Japan's economy contracted 7.1% this past quarter.

How can a country with so many smart people have no clue about what makes an economy grow or is it more about the politics of keeping the status quo vs economic reality?

Is the government so concerned with not wanting to anger the public sector that it is willing to sink the entire country rather than deal correctly with the public debt? Is Prime Minister Shinzo Abe so afraid of the political fallout of making what will be an unpopular decision in the public sector that he just won’t do the right thing ever? This is the way it’s looking.

Since raising the national sales tax to 8% with an option to raise it to 10% in 2015 isn't a popular decision in the private sector, Mr. Abe and his political cronies had no problem with that decision.

It boggles the mind that economists think raising the sales tax, a tax on purchasing manufactured goods, is a good way to stimulate the economy. These people should not only be FIRED from their cushy jobs but have “Idiot” branded on their forehead so that nobody with any sense would ask them another serious question ever again.

Here’s a quote from that Leftist  Propaganda Outlet, the Associated Press from a guy named Junko Nishioka, a so called economist from RBS Japan Securities in Tokyo:

“Theoretically, there should be no impact from the consumption tax increase on corporate spending or long-term corporate planning, but a large number of Japanese corporations seemed to see a large impact from the hike on final demand”.

And why not? What theory is this guy relying on? The theory of drawing a paycheck for saying stupid shit I’d say. Kill this man!

So in light of the recent contraction, Mr. Abe is now having misgivings about raising the sales tax another 2% to a whopping 10% in 2015! That’s $.10 of every dollar spent, a dollar more for every $10.00. And consumption theoretically shouldn't be curtailed? How out of touch is this way of thinking?

This is the same old “the government can make money happen” theory that fails every time it is tried. Government can only transfer money, it cannot produce wealth. On the contrary, like we are seeing with Japan, the government can only siphon off money from production and thereby curtail growth. The government has too much overhead and in Japan, overhead is the 1000 lb gorilla in the room.

Japan’s public sector is mostly work for work sake. Their private businesses are streamlined and efficient and their public services are in the dark ages and are people heavy.

I was in Tokyo earlier in the Summer and went to the post office. You can’t even mail a letter yourself. There is no box to put the letter in. You have to go to a clerk and he will give you the stamps. Now Tokyo is a city that has 5 million vending machines. That’s right, hot and cold drinks, peach soda, coffee in a can everything…except stamps. What post office in the U.S. doesn't have a stamp machine? They all have a stamp machine. You can buy your own stamp, put it on your letter and put it in the mailbox yourself. In Japan I couldn't do that. I had to give it back to the clerk. Why? Because he needs a job.

If Japans government wants to address their public debt, then they have to address it directly. They have to cut the waste. Their bloated public works system is loaded with waste and is hemorrhaging money. They should deal with that before they go back to the already over-taxed private sector for more money.

Government has a responsibility, they never live up to it but they do, and that is to run the public sector as efficiently as possible as to be less of a burden on the taxpayers because the taxpayers ARE the economy. If they don’t have enough money to purchase goods because it has been siphoned off by government taxation then the economy will sink. The more they tax the less and less they will take in as consumption decreases which btw affects big corporate earnings because people aren't buying what they’re selling.

And it’s the poorest of the working class that are affected by sales taxes. Taking money out of the pockets of people who produce and putting it into non-productive public sector should not pass as sound economic policy nor a means to save a flailing economy, and Japan's economy is certainly that.

No, the Japanese government has had this all wrong for well over a decade now. The solution is to cut the public sector workforce and reduce the costs to taxpayers. Then cut the corporate tax rate probably in half so these now out of work people can find private sector jobs and then cut the sales tax back to 5% so people will have money to spend to buy goods and services that the companies can provide.  

It is obvious that government is too big and takes too much money out of the economy. That is the reality of the situation. Now having the BALLS to deal with it is something else again. Who is going to tell it like it is in the Japanese government. Obviously not Mr. Abe who would rather go along with a stimulus policy that has already been TRIED and has FAILED in every country it has been implemented. Look at the damage the stimulus has wrought in the United States: High public debt, increased taxation that equals reduced consumption, wage deflation, minimal job creation, stagnation and little hope a full seven years after the crash of 2007. And this is the plan that SAVED the United States from bankruptcy? Not yet it hasn't.

Cut the taxes and the public sector burden or eventually it will cut itself in the form of economic collapse. The economy can either be brought under control or it will hit the wall. Right now there is still a choice.
So which will it be Mr. Abe? 

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