Difference between Japan and US debt & behavior.

Question: Thank you for your two great columns about the U.S. national debt. I'm a Japanese citizen living in the U.S. on assignment. As I understand it, Japan's national debt is even higher than that of the U.S. Yet Japan is very slow to change, if at all. The Japanese government continues to have large budget deficits. Doesn't Japan face even worse scenarios than you predicted for the U.S., and can they affect the global economy?

-- Yuki, Phoenix

Answer: Japan has the second-highest government debt in the world, while the U.S. has the largest. But, what's even more important is to look at the government debt as a percentage of total GDP. The U.S. debt is roughly 100 percent of its GDP, while Japan's debt is 200 percent of its total GDP. So, one could predict even more dire consequences for Japan. However, I beg to differ. Here is why...

My analysis is based on five fundamental differences between Japan and the U.S.:

Japan's military spending is negligible, at 2 percent of its budget. U.S. military spending is 17 percent of our budget. I'm not passing judgment on our military expenditures and commitments around the globe. That is a national-policy debate. I'm simply stating the facts.

Japan has no immigration problem. Japan is a homogeneous society that's essentially closed to outsiders. Japan is not a hyphenated country -- no Mexican-Japanese, Indian-Japanese, African-Japanese or Korean-Japanese. Japan does not publish its public ballot in multiple languages. Japan does not have the burden of millions of illegal immigrants on its schools, health-care system, justice system and education system. Japan protects and defends its borders. Most of the immigrants from throughout Southeast Asia landed in the U.S., even though Japan was much closer. Again, I'm not passing judgment on U.S. policy, just stating the facts.

Japan's government debt is owned by its citizens. In comparison, much of the U.S. government's debt is owned by foreigners. If Japan taxes its citizens to pay for its debt, then it goes back to its citizens. So, it is a self-contained loop. In the U.S., we need China and others to fund our budget deficit. So, our interest payments go out of the country.

Japanese society's ability to prevail through hardship is incredible. Just compare the behavior of Japanese citizens after the recent earthquakes and tsunamis with the behavior of Americans after the hurricane in New Orleans. The Japanese suffered through cold, hunger and lack of clean water and food in the affected areas, but they persevered with no looting and no civil disobedience. The Japanese citizens turned off heaters in their homes to preserve power for their industry. And large quantities of lost cash were turned in by Japanese citizens, during their cleanup efforts. Such behavior would be considered unprecedented and very unlikely in the U.S.

The Japanese largely purchase Japanese products. In a recent trip to Japan, I visited an appliance store. It only displayed Japanese brands for refrigerators, washers, dryers and cooking appliances. When I asked for Whirlpool, I was escorted to the back of the warehouse where there was a Whirlpool refrigerator in poor condition. There is no such "buy American" sentiment in the U.S. So, we continually send money to foreigners.

Although there are significant issues in Japan with its government debt, the liability is not national, since it is owned internally. U.S. government debt, by contrast, is a national liability. Japan's economy has been stuck in neutral for 22 years. The Nikkei stock index peaked in 1989 at 38,915. Today, the Nikkei is at 8,665. So, Japan has already endured a muddle-though economy with frequent recessions, which is one of the outcomes I predicted for the U.S.

Japan has two possible options. The first is to go through an extreme contraction of government spending, which its citizens are more likely to bear than the citizens of any other country. The second option is to print the money and devalue the Japanese yen. One U.S. dollar was equal to 125 yen just five years ago; today it is 78 yen. The yen is nearly at all-time record strength and can afford some devaluation. Devaluation would also make Japanese exports more competitive, something the Japanese love.

Happy New Year to all of my readers! May you all find peace and prosperity in 2012.

"Ask Steve" by writing to steve.sanghi@microchip.com. Read and comment on all columns at azcentral.com/members/User/SteveSanghi.


Read more: http://www.azcentral.com/arizonarep...30us-japan-debt-difference.html#ixzz1itMfeZgd

 

Good article and good thoughts. But how are Americans supposed to implement these ideals with our government giving away the proverbial candy store when it comes to trade deals?

You are also making the case against multiculturalism- an absolute SACRAMENT of liberal ideology.

But in the end, people will purchase products that satisfy the individuals quest for overall price/value/needs satisfaction. With that being the bottom line, in addition to the previous points, it's no wonder we're in the situation we're in.

I would LOVE to see more national pride.

 

As you can see, the Japanese own most or all of their debt. So the money to pay it off is recirculated back into the Japanese economy. Unlike America, where it is given to foreigners and much of those dollars leave our economy.


Also notice how Japan tries and protect it's companies by buying mostly Japanese products. Something Americans don't do, then complain because these companies move out of the country and take those good paying jobs with them. They can't figure out why we have so many poor and why are all those middle class jobs gone. We are our own worst enemy.

 

Great article. The only real fact is how the debt is managed and distributed.

There are Korean-Japanese. There are a lot of Chinese manufactured goods.

Plus, the Japanese aren't addicted to spending— the US is.

 

Nothing wrong in spending. But what are we spending it on? We don't try and support our industries, thus they have to move out to complete. Much like Whirlpool did when they closed their refrigerator plant that had been operating in Indiana since the 1950's and moved to Mexico, laying off 1,100 workers. Because LG was dumping refrigerators on the American market and Americans trying to save a buck, bought them up like mad.

 

Correct me if I'm wrong, but isn't LG a Korean company?

The reason I bring it up is it's an area I actually agree with Donald Trump on. We've spent decades and billions of dollars protecting the South from the North. On top of that, we give them favorable trade deals. Trump is right when he says we need to take the approach that since we've invested so much in protecting them, they need to pay up if they want access to our markets.

I have to concede I was a former free-trader. While I'm not for being an isolationist, I think there's a happy medium between where we are now, giving away the candy store, and isolationism.

I don't see much interest in this from the left or the right.

Sad.

 

Whirlpool Accuses Samsung, LG of 'Dumping ... - Wall Street Journal





online.wsj.com/.../SB1000142405274870380630457623268065365...


Mar 31, 2011 – Whirlpool accused Samsung Electronics and LG Electronics of dumping refrigerators in the U.S. and asked the Commerce Department to take ...



Whirlpool accuses Samsung, LG of dumping washers - Arab News





arabnews.com/economy/article556488.ece


Dec 31, 2011 – NEW YORK: Whirlpool Corp. on Friday accused two South Korean rivals, Samsung Electronics and LG Electronics, of dumping washing ...



Whirlpool again files anti-dumping charges against Samsung, LG .


english.yonhapnews.co.kr/.../0502000000AEN20111231000100315...


Dec 31, 2011 – Whirlpool again files anti-dumping charges against Samsung, LG..By Lee Chi- dongYonhap) -- In the latest of its formal accusations against ...

They already have been charged with dumping refrigerators. Now Whirlpool is saying washers too.

Meanwhile the town in Indiana has been devastated, losing their one main source of industry and jobs

 

Yes, it sure is Korean. Korea, Japan and China all are out to dominate all our industries. We are more than happy to help them all we can.

 

And our government sits by silently. And just so you know, I don't think the reaction would be much if any different if a Republican were in the White House.

 

I don't think so either. They were warned many years ago that we couldn't have free trade with countries that pay pennies on the dollar without having some restrictions and expect to keep our industries and both sides didn't listen. The people are just as bad.


[ame="http://www.youtube.com/watch?v=Rkgx1C_S6ls"]Giant Sucking Sound - Ross Perot 1992 Presidential Debate.flv - YouTube[/ame]

 

Our government did sit by and did nothing while Japan shut us out of their markets and took over one industry after another. Just read this whole article and see how. Not just the part about televisions.


IN THE BEGINNING, THE TV CARTEL:

A very famous example of Japanese national government and corporate
coordination to take over a foreign industry is that of the Japanese TV cartel,
first set up in the 1960's. This is how Japan took the free-world TV industry
away from the United States. PBS TV's "Frontline" program did an excellent
documentary on this called "Coming From Japan", (see Appendix for how to get
transcript via Internet).
In the 1960's, the Matsu(*)(*)(*)(*)a Industrial Electric Company, Sanyo, Toshiba
and others formed a TV cartel in Japan. They got US TV technology from the
giants in the industry (Zenith, RCA, Quasar) in the following way. The Japanese
government prohibited US made TVs from being sold in Japan. Instead, they
insisted that the technology be licensed to Japanese manufacturing companies
rather than importing (still often the case today in Japan). The US companies
thinking they could still make money this way, agreed to these terms which
enabled the Japanese companies to acquire the technology on how to build TVs.

The above Japanese companies, with tacit approval from the Japanese
government, set up a cartel to inflate TV prices in Japan in order to turn
around and use the money to sell below cost TVs in America. This was to drive
US makers out of the American and world markets. US TV makers went bankrupt or
left the industry as they could no longer fund research to continue making
improved and high quality TVs. They could not compete with the artificially low
Japanese TV prices in America and were forbidden to enter the Japanese market
to take advantage of the high prices there. Hence, the US makers could not make
money. Furthermore, secret deals to thwart US customs, illegal under US trade
law, were set up by Japanese TV makers and US retailers such as Sears and
Montgomery Ward to sell Japanese TVs under store brand names. Concurrently, the
Japanese mounted an important lobbying effort in Washington to ensure that this
scheme was not disrupted by the US government or customs services [Agents of
Influence p77]. As a result, once famous brands such as Sylvania, Quasar,
Admiral, Philco and RCA have vanished or are foreign/Japanese owned. Zenith is
the only remaining US TV maker today. No US companies make VCRs although they
were an American invention.

In the 1980's the Japanese applied this same strategy to the computer flat
panel display industry (also invented in the US) and now completely dominate
that industry as well. Before that was motorcycles, machine tools and computer
memory chips (the US tried to retaliate but failed as our companies couldn't
organize with each other during the now famous "dram shortages" a few years
ago). It will be happening again in the financial services industry [Yen! p32],
telecommunications equipment, kitchen/washing appliances and aircraft
manufacturing during the 1990s and beyond [Newsweek 1/18/93 p17].


http://www.csse.monash.edu.au/~jwb/japanyes.txt

 

More big government nonsense. There should be no tariffs, no such thing as dumping.

Let the free market compete. If Americans can't conjure the technology to beat labor, then so be it, then wages shall fall until the marginal revenue product of labor is adequate for efficiency.

Americans cannot nor should not protect American industry. The market decides winners, not the central government. You liberals sicken me!

 

You are not talking to a liberal here and I assure you that we are insane if we don't have tariffs on cheap imported products from China and other low-way countries.

 

You certainly are a liberal. Take your hands of the free economy. America should have the manufacturing technology and ease of capital (machinery) to make American-made medium-range goods more efficiently. They fail for various reasons: poor management, unions, so forth. Not because of China.

China is good, it provides competition. Competition is good. I don't think anyone, in today's America, could make a living off manufacturing $1 toys regardless of the technology. Not with today's operating costs. Good riddance.

 

OK, I'm a liberal if you say so.

But you are wrong if you think America does not need to protect our industry from foreign competition.

No nation can survive as disconnected consumers of foreign goods.

Honestly, if you are an American I don't know where people like you get such goofy ideas.

 

I know you're a liberal. I'd like you to show me where in the Constitution it says the government's responsibility is not only to protect the people but to protect their jobs.

If you wanted to start a campaign to 'buy American' go for it, you'd be influencing the market in an acceptable way. If you want to force the people to buy American, then that's something different. I am proud to say that, in what is left of America, the consumer has a choice!

 

What do you think the government exists for?

If government has no purpose then we could have just remained a British colony and let King George make the laws.

 

So where in the Constitution is it? You want the government to protect jobs, protect employment? Why don't you go back to FDR and his little buddies so you can draft your version of the Constitution that says Americans have the 'right' to employment at a good wage. Because that is not part of my America.

Socialist scum!

 

How about Article I, Section 8?

Section. 8.

 

I don't see how protecting jobs is regulating commerce.

 

Why do you suppose the framers of the Constitution wanted or thought they needed to regulate commerce?

 

Sorry, but this article is dead wrong. First off, the majority of U.S. debt is ALSO owned by AMERICANs. The idea that foriegners "own" most of our debt is wrong. Also, it doesn't really matter who's buying U.S. treasuries, government debt isn't like a house mortgage. Foriegners can't forcibly collect their debt, it's retired on schedule or sold on the open markets for market value. Secondly, the fact that Japan spends little on military and STILL has twice the debt as the U.S. is NOT a good thing. Finally, the U.S. has the unique position of being the world's favored reserve currency. This means that the U.S. government can acquire debt for a price less than any other organization on earth....including Japan. Even with one credit rating dropping the U.S. credit rating interest rates have still remained incredibly low.

 

Read this article for a better understanding of U.S. debt. http://www.nytimes.com/2012/01/02/o...-E-FB-SM-LIN-NUD-010212-NYT-NA&WT.mc_ev=click

The U.S. earns more in net interest from its ownership of foriegn debt than foriegners holding U.S. debt earn.

 

I think one problem with such a large national debt as we have in the US is the reliance on borrowed money from foreign countries like China.

That gives them economic and political power over us that is not in our best interests.

It's true that China can't foreclose on the US but the can severely disrupt our economy if the refuse to keep loaning us money.

 

This is what happens when you create a society where money is the ultimate virtue.
You got people who only buy the cheapest options. You got companies who outsource jobs. When you reduce everyone in society to a consumer and encourage everyone to spend beyond their means and live in perpetual debt, don't be surprised when your society turns to (*)(*)(*)(*).