New Tsunamis Emerging NOW! – Martin D. Weiss, Ph.D. | Weiss Research

New Tsunamis Emerging NOW!

Martin D. Weiss, Ph.D. | Weiss Research

I first lived in Japan back in 1979.

The economy was five times larger than China’s. Its population was young and vibrant. Its government debt was less than 50% of GDP.

Now, when I go to Japan, I see an entirely different country. Its economy is less than one-half the size of China’s. Its population is the oldest in the world. Its debt, at 250% of GDP, is five times worse. And Prime Minister Abe’s victory in a spot election this weekend has given him the mandate to borrow-and-spend even more.

Each problem compounds the other in a vicious triangle:    

One of the main reasons the debt is so large is because the government has made so many commitments to transfer resources from young working people to old, retired people.

And one of the main reasons the economy has fallen so far behind is because supporting so many elderly is such a crushing economic burden for the shrinking number of young people.

In the early 1980s, I worked as a financial analyst at a major Japanese brokerage firm in Tokyo. My average workday was 11 hours, Monday through Friday, plus six hours on Saturdays.

I like work. So I had no complaints.

But at the time, most Japanese companies had been looking for a way to ease up a bit on the workload. So they introduced a new, “liberal” policy of giving us a day off on the third Saturday of every month. Whoopee! A weekend once a month!

I thought that was going to be a trend, and it was — for a while. Now, though, due to the shrinking workforce, many employers in Japan are reverting to the old days.

Nearly nine out of ten companies can’t fill their job openings. Nor do they want to hire foreign workers. Friends of ours who run the country’s leading recruitment firm have tried to persuade them to do so, but with little success.

Instead, the companies are demanding even more from their young employees, sometimes worse than the 1970s.

The pressure to perform is so intense, many simply have no time for a relationship. Marriage is a pipe dream. And all this compounds the …

Demographic Timebomb Exploding NOW

In 2015, Japan’s census confirmed that its population decreased for the first time since the government began counting in 1920. It is now expected to shrink from 128 million to less than 85 million in the next five decades.

The proportion of elderly will reach a mind-boggling two-fifths of the total.

Already, the number of truly old people in Japan (90 and above) has topped 2 million for the first time.

Meanwhile, the number of 18- to 26-year-olds has been falling for over two decades. In 1994, there were over 18 million in this age group. Now there are fewer than 11 million, down by about 40%.

In the wake of this demographic disaster, small towns across Japan are on the verge of collapse.

The bulk of the population is clustering around the Tokyo-Osaka corridor. In 1950, 53% of Japan’s population lived in urban regions. Now it’s close to 95%. In at least 15,000 communities, HALF of the population is over the age of 65.

In some rural regions, families tear down unused homes, turning the land back into fields.

Bears attack settlements in Japan’s north.

Wild boars ravage farmland across the main island of Honshu.

The full responsibility for rice fields and vegetable gardens falls on folks 80 years or older, despite disability and illness.

Japan’s “Solution”: Tax the People to Death

In 2014, Japan’s consumption tax (like a national sales tax) went up from 5% to 8%. Still another big hike — to 10% — is already law. (Due to Japan’s economic doldrums, it has been delayed until October 2019.)

Japan’s inheritance tax, already among the highest in the world, was jacked up even further in 2015. Standard exemptions were slashed by 40%. Suddenly, the number of average citizens subject to the inheritance tax surged.

Why such big tax hikes despite a mediocre economy? Mainly because there are fewer people to tax.

In any case, it hasn’t helped very much. After peaking in 1983, the government’s tax revenues have been going mostly downhill. Receipts from inheritance taxes plunged nearly in half, mostly because of a decades-long crash in land values.

Debt Doomsday

Compared to trends in GDP or the stock market, these kinds of trends in debt and demographics are relatively slow-moving.

They build up over a period of decades. People go about their lives and take them for granted. They’re mostly oblivious to the consequences.

The United States of America has similar troubles, just not as extreme.

“Don’t worry,” say the analysts. “It’s just slow-moving lava.”

So despite these horrendous pressures building up over time, Japan’s economy grows a bit. Its stock prices rise. False hopes spring eternal … until, that is, the tipping point.

When and how will that happen in Japan?

With his just-announced election victory, Abe will reform the nation’s pacifist constitution, opening the way for a major build-up in military spending. The country’s already-huge debt load will grow even larger; the need to float government bonds, even more urgent.

Then, events will unfold in very much the same way they did in 1990, when Japan’s stock market crashed and its economy sank into a multi-decade depression.

The Bank of Japan will raise interest rates — just one notch.

Bond investors will pull back — just a wee bit.

They will start selling their long-term government bonds — not in huge amounts at first, but enough to tip the balance of supply and demand for bonds. Enough to precipitate a pretty significant decline in bond prices.

As bond prices decline, other investors, including Japan’s largest insurance companies and pension funds, will begin to unload their bond holdings.

Suddenly and without warning, Japan will face its Doomsday of Demographics and Debt.

It will blow up. And in the process, trillions of yen in flight capital will flow to the safest safe haven on the planet — the United States of America.

It will drive up stock prices in one last-hurrah!

The First is in Europe. It is the tsunami of autonomy, independence, separatism, and ultimately, civil war.

It is the stuff of collapsing empires and splintering nations.

It is the same centrifugal force that tore apart the Soviet Empire of Lenin and Gorbachev … the Yugoslavia of Tito and Milošević … and now threatens to do something similar in the Spain of Rajoy.

Over 450,000 people pouring onto the streets of Barcelona just 48 hours ago to demand independence from Spain. It’s a powerful trend that could dismember Europe, crush the euro and drive a tsunami of flight capital to U.S.A. markets — and gold.

This tsunami hit hard this past weekend in Barcelona, the capital of Catalonia … and as Madrid moved viciously against them.

Not only to crush the independence movement of the breakaway province, but also to remove pro-independence leaders from power … shut down their legislature … and take control over a vast regional government with 200,000 civil servants.

But this is not just a weekend episode that comes and goes. It has deep roots in long-term cyclical waves that go back centuries.

In fact, it was over 300 years ago that Catalonia backed the losing side in the battle of the Habsburg dynasty against the Bourbons. Then it was the latter, who, in turn, captured Barcelona in 1714 and dashed the Catalan’s first major hopes for autonomy.

In the twentieth century it got worse. As highlighted in Foreign Affairs this month, the Spanish state under Franco inflicted cultural genocide on Catalonia. Franco dismantled institutions and associations tied to Catalan identity. He drove out the Catalan language from public life. And worse.

For Catalans, it all started happening again on what they call 1-O (1st of October). That’s when the Spanish police busted up their referendum for independence and brought all those horrid memories back in a flash.

This new wave of separatism is not limited strictly to Spain. There are also dozens of others in Europe — some like a dormant volcano, some ready to erupt, all a real and present danger to the European Union.

There are secessionist movements in Belgium, Croatia, the Czech Republic, Denmark, France, Germany, Italy, Netherlands, Poland, Romania, Slovakia, and the UK (still a member of the E.U.)

The European Union’s risk of dismemberment is bad enough when countries like Britain resolve to exit. It’s far worse when the member countries themselves splinter into pieces.

The second tsunami is in Japan. It’s a long-term cyclical wave that goes back 71 years minus one week … to a day in 1946 when most baby-boomers were not yet born, when I myself was just 45 days old.

That was the day that the new Constitution of Japan was promulgated. with these words …

“Aspiring sincerely to an international peace based on justice and order, the Japanese people forever renounce war as a sovereign right of the nation and the threat or use of force as means of settling international disputes.

“In order to accomplish the aim of the preceding paragraph, land, sea, and air forces, as well as other war potential, will never be maintained. The right of belligerency of the state will not be recognized.”

That was then.

This is now … and it’s all about to change.

Poll workers in Tokyo just hours ago, counting the votes that have empowered Prime Minister Abe to unleash a new wave of borrowing and spending for defense.

In fact, it was just yesterday that the great defeat which gave birth to those words was replaced by the fear of a new great defeat by North Korea that could make the words seem naïve, even reckless.

As a typhoon bore down on the Japanese archipelago, Japanese voters went to the polls, their votes were counted, and Prime Minister Abe’s governing coalition won a hastily called election.

Most voters didn’t understand exactly what they were voting for. Many didn’t even know why they were voting to begin with.

But for anyone who has closely studied the cycles of war, the reasons are obvious:

Abe wants to rewrite the constitution to clear the way for Japan’s rapid militarization.

Then, he wants to borrow and spend whatever it takes to build Japan’s military might.

The threats from North Korea are the stated reason. But it’s the surging military might of China that’s the true reason.

China’s active forces are now, by far, the largest in the world with 2,183,000 in uniform. Japan has only 247,000. They’re outnumbered by China nine to one.

North Korea’s active military has nearly as many soldiers in uniform as the entire U.S.A. armed forces. And if you include reserves, North Korea’s military has well over 7 million, or more than TRIPLE the size of America’s!

So you can imagine how intimidating that is for the people of Japan … just 10 minutes away from North Korea’s ICMB launch pads … with no viable anti-ballistic defenses … and with military forces that are outnumbered by North Korea’s by 24 to one (including reserves).

This fear — and this reality — is the force that will unleash a new tsunami of spending and borrowing in Japan, with dire consequences for financial markets.

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Comments

  • Clyde Duncan  On October 24, 2017 at 5:11 pm

    A Thought Just Sprung To Mind ….

    “Desiderata” (Latin: “desired things”) is a 1927 prose poem by American writer Max Ehrmann

    “The universe is unfolding like it should ….”

    The More Things Change – The More They Remain The Same

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