Yep, I am another lunatic.
I lived and worked in Tokyo for HP in the ’80’s. In Nov ’88 in my exit interview as I was heading back to the U.S., I told my boss’s boss that Japan’s stock market was about to crash and Japanese banks would fail. They laughed at me.
Despite the fact that before I arrived, the business group I was responsible for had been flat for 20 years, but after I was there 4 years my business had grown 700% in Yen terms. But my managers did not, could not, accept my warning. The evidence was clear and right in front of me and them. (The Japan market crashed two months after I left.)
Japan was and is operating on 180 DSO. The true state of the economy is hidden by their Tegatta system, which is an accepted system of payment by negotiable note, and other interlocking devices. Company managers have stacks of these Tegatta notes in their safes which they use to pay off debts or buy things, with generally accepted rules of engagement. But the Tegatta debt is outside the monetary system, unrecorded and of unknown size and effect, on top of the official debt in excess of 100% of GDP.
So, not only does Japan have QE, official government debt over 100% of GDP with the requirement that banks purchase a % of government bonds, they have extensive cross holdings of corporate stocks and interlocking boards, and Zaibatzu (anti-competitive conglomerates), they are holding mountains of negotiable notes equivalent to about 6 months sales outstanding. It’s another layer of debt that Americans do not have. (But we do have student debt and credit card debt.) The weight of the Yen is enormous.
Thus you have an 18 yearlong recession in Japan, but most things appear to be OK if not prosperous. For example, retail stores are loaded with the latest and greatest inventory, but the stores do not actually own that inventory…it’s all debt. And yes, it is factored/discounted. A mountain of debt held up only by the mutual confidence of the Japanese people. Screw up and you lose face, and nothing worse can happen to you than that. Face is the ultimate result of political correctness.
Japan is still afloat because their largest market, the U.S., is still buying. But mutual diversity is not an advantage in this case. The mutual confidence among Japanese does not exist in America or Europe. Maybe in China and South Korea.
Taxes in Japan are very high, so high that salaries are suppressed significantly. One unacknowledged consequence: the Japanese population is not replacing itself…very low birth rate.
A long recession is spiraling downward to an eventual depression which could make the nation, as they know it, become extinct. Pushed along with some other problems caused by immigration policies, Europe already followed Japan off the debt cliff. Italy, I believe the second largest economy there after Germany, also runs on 180 DSO or more.
There also, except by the grace of God, the U.S. is heading. Except, at the moment, the U.S. has no giant export product in hand with which to save the U.S. economy from its debt crisis.
Enter Trump’s big opportunity “to make America great again:” Revive and build the U.S. energy export industry. That’s a 10 year project in the normal course of events. If the nation were on a highly focused mission, like going to the moon or a Manhattan Project, we could have a new market in 5 years. Better yet, the demand is there.