patrick.net

indigenous says

Bellingham Bill says

this is a fundamental non-understanding of macro economics.

I agree, Argentina had the second largest GDP in the world 100 yr ago. Today it is 26th.

The reason is continual meddling by the state(Juan and Evita Peron fame), the last event I heard about was the president confiscating private pension funds.

You might say they just did not have natural resources, but nether does Japan.

You might say they did not have the culture, but they did 100yr ago, but the government meddling affected their culture the same way as it has here.

Anyway I agree, this is a fundamental non-understanding of macro economics.

No the story of Argentina is a lot more complicated than government meddling. In the late 1800's Argentina had vast herds of cattle that had grown and grown since the spanish first introduced them. The pampas is one of the finest area's for grazing in the world. Problem was Argentina was a long, long way from any markets so the cattle were pretty useless. New technology in the form of reefer steamships all of a sudden made all these cattle valuable. So Argentina became very wealthy on exports because no one else in the world had the vast stocks of beef to export to the European markets. But Argentina was still Argentina. Education was still poor, corruption was still rampant, the banking system was still ingrown and inefficient. So when other countries caught up with the beef export boom Argentina rapidly lost wealth and moved back to the path it was on in the first place. Peron was a symptom, not a cause of the problems.

Argentina is just one in a long list of countries in history that became wealthy through being in the right place at the right time then going bankrupt trying to keep the party alive after the world moved on.

Bellingham Bill says

What happened to Japan was they hit a wall wrt growth.

http://research.stlouisfed.org/fred2/graph/?g=xqk

real GDP blue, employment red (right axis)

Japan was running a very high-debt economy 1960s-1980s, but the music stopped for them in 1990 and their high leverage in the private sector could not be repaid, too many speculators caught out by the change in credit conditions and loss of bubble pricing mentality.

Japan hit a wall called "the limitations of central planning." Their rapid economic growth in the 1950's-70's was largely the result of copying the good practices of the US. When they reached the US level by the 80's, they ran out of good things to copy. So their central planners copied and improvised upon a massive monetary bubble, bigger than even the US original back then. That's the fundamental cause of their stock market bubble and real estate bubble.

Japanese population stagnation is also the result of central planning and massive financial bubble: the funny money spewed out by the Japanese central planners have resulted in a warped population distribution, with too many people attracted to the tightly packed metro areas, where money printing is taking place. We know damn well that urban populations around the world tend to have negative population growth. It is the suburban and rural incubators that replenish the urban "lost" population generation after generation. Japanese monetary policy and central planning economic model simply have made their rural / suburban population incubators threadbare.

bob2356 says

going bankrupt trying to keep the party alive after the world moved on

this resembles Japan a bit.

The iPhone and now Android totally eliminated Japan's historical cachet in consumer (and prosumer) goods that has built up over the past 50 years.

Phones might have Japan OEM components, but they still kill global demand for Japanese-style consumer goods.

Automobiles -- Korea is killing them it looks like.

Maybe Japan Inc is still relevant in motorcycles, but that's totally niche.

What Japan needs to do now is skate to where the puck's going. Energy is the biggie. And other ways machinery and clever engineering can create wealth, like water purification, food engineering (artificial meat), etc.

They are going big into regenerative medicine, having perhaps the most efficient regulatory process for speeding these new therapies to market.

bob2356 says

No the story of Argentina is a lot more complicated than government meddling.

No the point is that if they had no debt, did not leverage, and hit the demographic wall, there would be no problem.

Private pensions in this country are highly regulated their assets are rock solid.

The public pensions on the other hand are not and will fail.

If Argentina had not practiced socialism the GDP could have shrunk without any problem.

indigenous says

if they had no debt,

Without debt we (who do not inherit our wealth position) are limited to roughly a hunter-gatherer standard of living.

Mexico has little private debt, and they're a basket case for it.

http://graphics.wsj.com/world-debts/#i[]=999&b=1

Wow, Argentina is actually the LEAST indebted country on that diagram!

So much for YOUR thesis.

The problem comes that selling future wealth-creation to buy now pushes up the price of stuff with inelastic supply curves -- real estate being foremost.

And that's the main trap Japan fell into, bidding up the cost of land in the late 1980s, same thing we did 2002-2006.

indigenous says

Private pensions in this country are highly regulated their assets are rock solid.

They weren't rock solid 5 years ago. What happened to your burning desire to see the 'market clear'? All 401ks, pension funds would be taken out with the trash with that, too.

Hell, if we just raised taxes to cover spending, corporate america would collapse forthwith due to a fall in consumer demand.

Blurtman says

They are going big into regenerative medicine, having perhaps the most efficient regulatory process for speeding these new therapies to market.

Wasn't the scientist in charge of the stem cell breakthrough accused of falsifying data?... And no other scientist has been able to replicate the results?

Bellingham Bill says

Mexico has little private debt, and they're a basket case for it.

Saudi Arabia isn't so far off Mexico on your chart and they seem to be doing just fine.

Spain has more private debt than we do and almost as much public debt and their economy has circling the drain for 5 years now.

Bellingham Bill says

So much for YOUR thesis.

That.

Bellingham Bill says

The problem comes that selling future wealth-creation to buy now pushes up the price of stuff with inelastic supply curves -- real estate being foremost.

Not true, you are saying that the problem is supply and demand, it is not. The problem is printing money that creates an illusion of short supply. That being said another factor is the state/fed regulations causing shortages that have nothing to do with the market.

Bellingham Bill says

And that's the main trap Japan fell into, bidding up the cost of land in the late 1980s, same thing we did 2002-2006.

Bullshit see the above same deal.

Bellingham Bill says

Hell, if we just raised taxes to cover spending, corporate america would collapse forthwith due to a fall in consumer demand.

No need just don't bailout GS, MS, AIG, TBTF, GE, Buffet, Imelt etc. the value instantly matches the market.

turtledove says

Blurtman says

They are going big into regenerative medicine, having perhaps the most efficient regulatory process for speeding these new therapies to market.

Wasn't the scientist in charge of the stem cell breakthrough accused of falsifying data?... And no other scientist has been able to replicate the results?

http://japandailypress.com/heralded-groundbreaking-stem-cell-research-from-riken-found-to-be-falsified-0146633/

Bellingham Bill says

Wow, Argentina is actually the LEAST indebted country on that diagram!

Yet the president is confiscating pension funds, that makes sense...

The thing that drives an economy is investment, which always goes where it treated best. When the president confiscates pension funds investment capital goes elsewhere. Which means the economy shrinks.

This may happen with no debt as well but not likely.

Spain is a different case as they are stuck with EU policies that decidedly benefit Germany and screw Spain.

New Renter says

Saudi Arabia isn't so far off Mexico on your chart and they seem to be doing just fine.

Well, they did nationalize their oil sector in the 1970s.

"The petroleum sector accounts for roughly 92.5% of budget revenues, 55% of GDP, and 90% of export earnings. "

80% of the labor force is non-Saudi. KSA has 300B bbl of oil reserves, divided over 20M Saudis that's 15,000 bbl per person or $1.5M worth of wealth in the ground at $100/bbl.

Nice little tailwind, that.

Spain has more private debt than we do and almost as much public debt and their economy has circling the drain for 5 years now.

yeah, debt isn't a great thing either when overdone, too. It's kinda like oxygen. If it just goes into real estate valuations, well, 'you're gonna have a bad time' as the kids say.

Norway, Sweden, Denmark, and the Dutch are all cruising for bruisings wrt debt take-on too, AFAICT.

But responsible debt is rather critical for capital formation. People borrowing to acquire capital goods that assist them in providing new wealth to their communities.

Capital -- hard capital, the capital of goods and human ability to create new wealth -- is a magical thing.

Bellingham Bill says

But responsible debt is rather critical for capital formation. People borrowing to acquire capital goods that assist them in providing new wealth to their communities.

Capital -- hard capital, the capital of goods and human ability to create new wealth -- is a magical thing.

Such debt also allows buyers to spend more, much more than if cash were the only method to pay, lets not forget that. Depending on the laws on the books that debt can snowball into virtual or even outright slavery:

http://www.pbs.org/tpt/slavery-by-another-name/themes/peonage/

indigenous says

Private pensions in this country are highly regulated their assets are rock solid.

You actually believe that? Some of the largest corporations in the US, the ones raking in record profits, have dramatically underfunded pensions plans. Private industry is just as able to underfund and get in trouble as the government.

bob2356 says

You actually believe that? Some of the largest corporations in the US, the ones raking in record profits, have dramatically underfunded pensions plans. Private industry is just as able to underfund and get in trouble as the government.

That is not my understanding. AIG for example had rock solid assets other than the small percentage involved with the derivatives. Even then they would have just BKed that portion but GS forced them to pay up on the mortgage insurance. A form of taxpayer peonage New Renter mentions above?

indigenous says

AIG for example had rock solid assets other than the small percentage involved with the derivatives.

That BS has been debunked time and time again, but it still pops up. Amazing. Don't let facts interfere with ideology.

bob2356 says

That BS has been debunked time and time again, but it still pops up. Amazing. Don't let facts interfere with ideology.

Oh ok that proves you are right then... to double dog prove it show us a graph...

indigenous says

bob2356 says

That BS has been debunked time and time again, but it still pops up. Amazing. Don't let facts interfere with ideology.

Oh ok that proves you are right then... to double dog prove it show us a graph...

It proves you are wrong, whatever regulation you are referring to isn't keeping private pensions any better funded than public pension funds. Here is just one of dozens of articles a simple google search provided. http://www.cnbc.com/id/100928506

You need to move beyond the simple thought pattern government always does it wrong, private always does it right mindset. Real world problems are more complex than that.

APOCALYPSEFUCKisShostikovitch says

Pestorkapalooza

Does that refer to the saintly Oscar Pistorius, who fornicated with a woman, didn't impregnate her, then shot her to death, then said it was all God's will? Following that example would seem rather to accelerate depopulation.

bob2356 says

It proves you are wrong, whatever regulation you are referring to isn't keeping private pensions any better funded than public pension funds.

This:

About the only workers who need not lose sleep over their pension benefits, say experts, are state and local government employees covered by public-sector pension plans. That's because most public pension benefits are protected by state laws and constitutional provisions. New hires in state and local government might have to accept a pension that's less generous than existing plans, but public-sector workers who are already rooted to a job and pension generally will be all right.

Benefit cuts might loom for many, but pension experts say that private defined-benefit plans are essentially safe. Among defined benefit private pensions, asset-to-liability funding ratios are in the range of 85 percent funded today, even after the fall 2008 financial crisis, according to a November 2008 research paper by the Boston College Center for Retirement Research

From this:

http://www.consumerreports.org/cro/money/retirement-planning/is-your-pension-secure/overview/is-your-pension-secure-ov.htm

But it is from 2009, few companies offer defined benefit plans, and demographics are not good.

My understanding was the regulations on pensions and insurance are very solid. In the article they say the funds are 85% funded. That is except for government workers.

APOCALYPSEFUCKisShostikovitch says

Japan needs Pestorkapalooza, a 14 day holiday to promote heterosexual fucking.

Some Japanese already do:

http://www.huffingtonpost.com/2014/04/07/japan-penis-festival-kanamara-matsuri_n_5106378.html

Apparently it works. Hell it may be the only thing keeping Japan's population from already having shrunken to oblivion:

http://www.google.com/publicdata/explore?ds=z5567oe244g0ot_&met_y=population&hl=en&dl=en&idim=city_proper:025280

Japan's interesting but I think they'll get by somehow.

I was there for a while in 88, real estate was so expensive that the land of the Akasaka palace was valued more than the entire state of California. In Ginza, the land area of a piece of paper was over $11,000, etc.

In rural areas, they had many "obasans"=grandmas=older women doing labor tasks which was surprising. Seeing a road crew comprised of ladies in bonnets holding shovels was a surprise. There were many women doing hand labor in seafood businesses.

I don't think Japan is going to invite many foreigners but time will tell.

The pace of life in Tokyo, Yokohama, etc. can be stressful so it's rough over there in many ways.

clambo says

In Ginza, the land area of a piece of paper was over $11,000, etc.

http://www.athome.co.jp/ks_14/dtl_1071260008

$14.2M for 782 m2.

1m2 is 16.6 8 1/2 x 11s.

$1100 per piece of paper. But this is only 200% zoning, so you can't build all that many units.

Here's 460m2 of high-rise land for $27M, 3X the per-meter price:

http://www.athome.co.jp/ks_14/dtl_6953818620

6 minutes from Shinbashi station (somewhat close in class to Ginza), no easy walk. 700% zoning though, which permits a 9-10 story building.

So I'd expect ultra-prime land in Ginza is still $11,000. Hell if we go at the 80-yen/dollar prices, the Shinbashi land was $4000 last year.

http://www.athome.co.jp/js_17/dtl_6953310845

is the most expensive listing I can find on athome, $50M for a 9 story building on 850m.

Valuing the construction at $400/foot, that's $20M for the land, not too bad, LOL.

x $50M per building . . . Tokyo real estate valuation's gotta be in the trillions and trillions . . .

Back when land zoomed to the moon, Japan interest rates were high too, 8% I assume. Now their central bank is actually buying REIT stocks. Dunno the interest rate the big builders get, but this really blows my mind.

ah, here's some old crappy buildings on somewhat valuable land:

http://www.athome.co.jp/js_17/dtl_8754387901

3 minutes from Roppongi station, 6 story building (built 1965) on 50m2 of land.

$3.5M so $4000 per piece of paper if we don't count the building.

http://www.athome.co.jp/js_17/dtl_6952936896

is $13M for a 1960s building on 188m 2 minutes from Kayabacho station. Not immensely valuable location, but also $4000/paper not counting the building.