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Japanification Revisited

2016 January 8
by Ian Welsh

The thesis Stirling and I were running from the early 2000’s was that the plan under which America’s elites were operating was Japanification. Run a bubble, and when it bursts refuse to take losses and go into stagnation.

This thesis has proved out repeatedly.

Let’s shine a light on the past. The oldest articles are in the wilds of dead blogs, but there are a few still available.

August 6, 2008:

In Japan, they call it the Bright Depression. Ever since the 1980s bubble burst, the Japanese economy has never been able to rev up its engines and roar again. Slow growth or small contractions have been the rule. It hasn’t been awful. It hasn’t actually been a classic depression. But, somehow, the good times have never come back. Unemployment, never previously a problem, just won’t go away.


There is going to be a recovery, it has already started in Asia. Job numbers should start turning around in the spring in the US, though the number of people employed as a percentage of the population will not recover this economic cycle, and probably not for a generation.

However, Japanification doesn’t mean you don’t get some recoveries. You do, then they sputter out. Employment never really recovers, wages stagnate, and things are just generally lousy without plunging the country into an all out depression. So, yes, in that sense the country was “saved’ from a Great Depression, but choosing the worst alternative.


The end result of Japanifying, regressive taxation (whether direct or indirect) and  attempting to restart the financial casino will not be pretty. There will not necessarily be any immediate disaster, and some numbers will look good. But the fundamental problems of the economy under Bush have not only not been fixed, they have been made worse and the evidence is being systematically buried. There won’t be another financial crisis immediately, but another one has been made inevitable.

This has all borne out.

June 6th, 2009:

 The strategy is simple enough.

1) Give the banks money.

2) Let them avoid acknowledging as much of their losses as long as possible.

3) Allow them to gouge taxpayers for as much as possible, to dig themselves out of their own hole over a number of years.

The end result of this is going to be Japanification–at best. Not a “lost decade,” as many folks have said, but a semi-permanent wavering between slight job gains and job losses, where a good economy never, ever, comes back. And because the US, unlike Japan, is not a net exporter, it’s questionable how long Japanification can work in the US, in any case.

Fun stuff.

November 12, 2009:

There is going to be a recovery, it has already started in Asia. Job numbers should start turning around in the spring in the US, though the number of people employed as a percentage of the population will not recover this economic cycle, and probably not for a generation.

However, Japanification doesn’t mean you don’t get some recoveries. You do, then they sputter out. Employment never really recovers, wages stagnate, and things are just generally lousy without plunging the country into an all-out depression. So, yes, in that sense, the country was “saved’ from a Great Depression, but by choosing the worst possible alternative.

Called shot. Accurate.

February 20, 2010:

Once more, the percentage of Americans employed will not recover to pre-Great Recession levels for at least a generation, probably longer. This is a deliberate policy choice and everything Obama and Bernanke has done—from refusing to take over banks, to refusing to force lending at reasonable rates, to engaging in an inadequate stimulus, to refusing to make banks recognize their losses, to doing everything they can to encourage slashing Social Security and Medicare, has had the effect of making Japanification more and more likely.

This is just a small selection of posts. I may go through the called shot posts at the time of the stimulus, TARP, and so on, but heck, they just say the same thing.

By papering over the problem, by “extending and pretending,” Bernanke, Geithner, Congress, and Obama (Bush gets a nod, but TARP would not have passed without Obama, it is his child) ensured a generation’s worth of shitty economy for most people.

Yes, if we had chosen not to “extend and pretend,” the hit in 2009 and 2010 would have been worse, BUT the economy today would be far far better. In choosing the method we chose to do the bailouts, we also made the choice to have a shitty economy.  Employment has never recovered, in terms of the percentage of the population, and will not (we’re about to hit a recession), wages are down for much of the population, and all the gains of the last economic cycle have gone to the top three to five percent.

Mind you, there was an historic stock bubble. The rich are even richer than they were in 2007. Obama and Bernanke’s policy has done what it was intended to: It has preserved, and then increased, the wealth of the rich.

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The Best Paid People in Our Societies Are the Worst People

2016 January 7
by Ian Welsh

In our society, who earns the most?

Basically people in the financial industry. Bankers, for shorthand.

Why? Because they can print money. In fact, they print almost all the money in society.

There is an argument that inequality exists because some people are just so much more productive than others.

This argument is a fantasy. To be sure there are a few “ten times” programmers and inventors who improved society and so on, but, as a group, the people who earn the most money in society are the people who destroy the most value. Bankers, prior to 2008, destroyed more money than they had made for the last decade. This is not in question. They destroyed trillions.

If they had taken their losses, they and almost every rich person in the First World would have been wiped out. Toxic debt was trading at less than ten cents on the dollar before the Fed stepped in and started accepting it as collateral at near par and said that it could be kept on books at “mark to model,” rather than market prices.

The effects of this were real. Real companies went out of business. Real people lost jobs. Real people wound up on the street. Real incomes cratered. Drive around suburban and exurban America. Look at the empty malls. The damage is right there.

Private bankers and financial execs make almost all of the investment decisions in our society. They decide what will be built, what jobs will be created, etc. They are the people who decide if something will happen and they make terrible decisions–even based on their own valuation system.

Based on what society needs, combined with central bankers, they make even worse decisions.

The bull market that started in 1980 and continues today has made a lot of people rich, and built a lot of houses (which were then condemned to keep their prices artificially high).

But there was an opportunity cost.

An opportunity cost is what wasn’t done.

The opportunity cost of the great bull market (that created all the oligarchs) is all the infrastructure work that wasn’t done, and all the avoiding climate change that wasn’t done. Or the fact that NASA was not properly funded, so that we had to wait until now to finally get cheap, reusable rockets.

The cost of this will be the many deaths from climate change, among other things.

That is the cost of bankers salaries, and oligarch’s tax rates, and the great bull market.

These people are not the most productive people in society, they are the most destructive people in society. They make the money they do because they have a positional advantage; they have more power than other people.

Earnings have nothing to do with merit, social usefulness, or productivity. They are a measure only of how much some people were able to grab. In this, they are little different than looting barbarians, replete with the huge death toll, and the raping (all the rapes which occur in the prison-industrial complex), and the pillaging, and so on.

Do not speak of “salary” and “merit” in the same sentence except with scorn. When the CEO doesn’t show up, so what? When the janitor doesn’t show up, though, hey! We find out who really matters.

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On Meditation

2016 January 5
by Ian Welsh

I’ve written on meditation a few times. Once more.

First, Vinay Gupta’s guide to meditation. This is a good one, and if you follow it, you will make progress. It is, also, not easy. Pay attention to Gupta’s admonitions on how to make sure you don’t stop because you’ve made it so unpleasant you don’t want to continue.

Second: Watch your mind. See where your attention is. Much meditation is about learning to control that attention, to put it where you want.

Third: If you can truly rest, that is truly put your attention nowhere, you will make progress very very fast. Almost no one can, but this is the royal road. Expect physical symptoms if you manage this. Ignore them.

Fourth: Anything to which you can pay attention is not you. You are the one paying attention.

Fifth: Meditation will bring up garbage. Horrible thoughts, fantasies, fears, etc…  Refer to #4. Don’t identify with any of it. It is not you, just what you are witnessing. No need to feel ashamed, scared, or anything else.

Sixth: Notice it all passes. Everything.

Seventh: Notice how much control you have. Can you tell me what thought you will be thinking in five minutes? Can you actually control your actions?

Eighth: What is always there?

Ninth: Don’t worry. Do what you feel you should, then don’t concern yourself with the results.

Tenth: Take these things as true, on trust and faith, if you can (they will help): There is a self (it’s just almost certainly not what you think it is), you are perfectly fine, and nothing can ever harm that which is truly you.

Finally, there is no need to get “enlightened.”  It does not matter, unless you want it, in which case, go for it.

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Free and Prosperous Societies Occur Only When the Basis of Power Is the People

2016 January 5
by Ian Welsh

Any apparent exception will end quickly, and is usually a legacy from a time when the people were needed.

Franchise tracks the dominant military arm pretty close to exactly. The Swiss are free because of their fights in Pike formations.  Most of Dark Ages and Medieval Europe’s were not free, because the dominant military arm was cavalry. As the dominant military arm moves to infantry, the franchise and freedom expand.

When a society becomes militarily mass-mobilized, all the men get the vote. When a society is militarily mass-mobilized and it’s industrialized, all the women get the vote because they are needed to run the industry while the men are away fighting.

Militarily mass-mobilized societies require that the citizens be healthy enough to fight. In WWI, the British were aghast at the number of men who were ineligible for the draft because their health was too weak, or they were too short, and so on. They did something about it.

Agricultural societies tend towards the patriarchal, because much of the work requires men’s heavy muscles. Horticultural societies, where women can do the work, tend towards egalitarianism. Likewise, hunter-gatherer societies in climes where gathering provides most of the food, tend towards egalitarianism; the exception here is when the most valued food is gathered by the men. In traditional Eskimo society, for instance, where the men provided essentially all the meat and the women processed it, was not egalitarian.

Humans have three sources of power: military, productive, and (in modern societies) consumptive. Consumers are not useless in our society, but consumption is still the weakest leg of the tripod. The rich are happy to consume more, after all.

The conditions for widespread prosperity have faded. We no longer have mass-mobilized armies, but professional standing armies, and we are moving towards smaller armies with more robots, both autonomous and remote-guided.

Technological progress has made manufacturing far more efficient, and it requires far less people. The rest of the economy, unless it is required for manufacturing, now matters far less. Most service work is not highly valued and does not translate into military power, and extraction labor is a minor part of most economies.

The final source of power for ordinary individuals is simply the threat they pose to elites. As we move away from the mass-mobilized “just need a rifle” military, this fades as well. To the extent it still exists, it is being managed by the time-honored “oppression” method, with new technology allowing for a Panopticon State which would have made Orwell pine for the weak and limited surveillance of Big Brother.

This is not to say the commoners are entirely powerless. The full power of denial of area techniques shown in Iraq, Afghanistan and elsewhere hasn’t been properly appreciated.  These strategies would have worked just fine in the First World. Drones are cheap, and, in principle, could be manufactured by ordinary technicians. These aren’t F-16’s; you can make them in your garage.

Still, mass mobilization warfare is no longer the model, factories are not begging for more workers, there exists no longer any large expanses of land needing to be conquered in the name of colonialism, administered, or farmed.

As for money, banks make it, not people. We may move to a world where we fully appreciate that money is made out of thin air and reclaim control of money for the public, but so far the movement has been in the other direction–printing more and more of it for rich people.

At this point, most people are superfluous. As such there is no reason for elites to allow them freedom, power, or prosperity.

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Why Inequality Is Intrinsically Bad

2016 January 3
by Ian Welsh

For most of human existence, humans lived in hopelessly egalitarian societies. Hunter-gatherer bands, and even early agricultural communities, were very egalitarian.

If you want to go evolutionary, humans evolved in egalitarian surroundings. We were not chimpanzees, living in terrible authoritarian structures full of fear.

Inequality is interpreted by humans as a THREAT. This causes a chronic fight or flight response, which causes health and performance issues.

This is true even of the people on the top of the hierarchy. Those who have more power or money fear those below them.

The data on this, which is extensive in the book The Spirit Level is unambiguous. Even when people’s needs are met, the more unequal a society, the more unhealthy everyone is and the more unhappy they are.

Those who feel lower on the totem pole also perform worse than they would otherwise would. Remove the feeling of inequality, and they perform better.

This is before we get to the social effects, which are pernicious. Those at the top of the heap distort politics to keep themselves at the top of the heap, and engage in repression.

In middle agricultural societies like Egypt, and even late ones like medieval Europe, you see vast amounts of resources going into ideology, which is to say religion. The Pharoah is a God, he owns everything. Medieval kings (and beyond) have the “Divine Right of Kings”, they are chosen by God. The Indian caste system, and even Confucianism (slightly better because you can lose the mandate of Heaven), are other examples.

What would Egypt have been like if all the resources which went into making Pharoah look like GOD, had gone into general welfare? It was a vastly rich society, which produced floods of crops; the wonder of the ancient world.

All inequality is, in part, the result of an ideological push. When we examine societies transitioning to higher inequality, it always includes the creation of an ideology which justifies it.

This is because all power within a human society (not between societies) is ideological at base. It may be enforced by men with weapons, but if those men stopped believing in the justifying ideology, or, in many cases, if most of the subjects stopped believing in it, the inequality would end. Power over people requires power over their imaginations, over what they think is right, their ideas about the natural order, and so on.

The 1980s were the “Greed is Good” decade. What followed was the most unequal industrialized society in modern history–but the ideology came first.

You must convince humans that large amounts of inequality are justified.

This is patent nonsense in most cases. The bankers, who are the best paid people in our society, destroyed more value than they created in the 2000s, even by their own accounting methods. Compensation has nothing to do with real value, and at this point it is probably negatively correlated. A teacher or nurse produces far more value than almost all bankers. Indeed, so does a janitor or a garbage collector. Not that this is difficult to pull off, as bankers, frankly, produce negative value.

The rich, as a class, are parasites. They arrogate to themselves the right to give permission for others to do things. That being the case, their only existential justification is if more beneficial work occurs because of their “management” than would otherwise. In the history of the world, this has been more rare than not.

Inequality is thus a political and organizational negative. It ensures that more effort goes into unproductive and destructive activities, which are of benefit to very few.

Inequality is unhealthy, makes people unhappy, and distorts politics in terrible ways.

These negatives are intrinsic to inequality. Beyond a relatively low level, there is no such thing as “good” inequality.

More on this in future pieces, including discussing the “incentive effect.”

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2015 in Review

2016 January 1

It was an “interesting” year, a year which clarified much.

Economically, this was a year of slow down and continued oil price collapse. China’s slow down is the core cause of all this, exacerbated by the insistence on austerity in Europe and to a lesser extent in the US. Many pretend austerity hasn’t been imposed in America, but it’s just been less austere than Europe.

Accelerating inequality has continued to undercut demand. There is too much investment supply in the world and too much money, though calling it investment supply is misleading; it is mostly money which seeks returns without wishing to create a new company, road, or product.

On the good side of the equation, renewable energy continues to drop in price, with coal now being underpriced by solar.  Battery prices are dropping and the process of moving from hydrocarbons to renewables continues. This is undercut by the collapse in hydrocarbon prices, but that will only slow it down.

The mass switch to renewables should have happened years, or rather, decades ago. It would have been more expensive then, but the mass market would have pushed prices down sooner and it would have been a far better way to spend money than on things like the Iraq war or Japan’s insane pouring of far more concrete than the Japanese islands could ever need.

Neo-liberal orthodoxy and the power of entrenched interests, however, would not allow for the massive subsidies necessary to make renewables and energy saving cheaper than hydrocarbons–indeed, subsidies flowed mostly to hydrocarbons.

The price of this will be some rather large number of people dead. I’m guessing the marginal cost is two billion dead or so. The Paris accords are all very nice, but they are too late and unenforced. The hothouse gasses in the air now are sufficient to release methane from northern Russia, the polar seas, and various other sources.

We are past the point of no return on this, and 2015 simply confirmed its inevitability.

A number of significant technologies are coming on line. Blockchains, electric cars, VR, and reusable rockets. Electric cars and reusable rockets should have happened ten and 15 years ago respectively, but were not allowed–until private companies manipulated the situation so the profits would go to themselves.

Hillary Clinton made an idiotic comment about a Manhattan Project on cryptography (the NSA already spends an inflation-adjusted Manhattan Project equivalent every 30 months.) But NASA should have been funded so that reusable rockets (an improvement on the Space Shuttle) were created long ago, and hybrid cars (really batteries) should have been being crashed as well.

While such cars would have had lower travel range than we’d have liked, subsidies and deliberate policies making sure that charging and battery exchange stations were built could have made them feasible far before now.

The majority of buildings in the US could have been made energy neutral using technology we had in the 1990s.

This may seem like a long diversion from “2015,” but the point is that, in 2015, stuff that should have happened long ago, that needed to happen long ago to stop catastrophe, finally began to happen in earnest–only because these enterprises are finally profitable for private companies. I’m glad Musk, et al. are creating reusable rockets and electric cars, but these things should have been happening ages ago.

And remember: What Musk and his competitors want is space mining, which they believe will create the world’s first trillionaire. Making space private property, primarily commercial, will make many of our problems far far worse than they could have been.

On the political side of the equation, 2015 was filled with frustration-borne changes. Syriza’s election fizzled into capitulation, in Canada the Liberals (who, despite great photo ops, look likely to govern largely from the center right) came into power based on an appetite for change. Trump took the lead in America’s Republican primaries, with Cruz and Carson coming on strong.  Bernie Sanders is challenging Clinton strongly from the left. In France, LePen had her best showing ever, though it was frustrated by an “Anyone But LePen” vote. Portugal had a strong showing of the left, and so did Spain.

And, very promising, Jeremy Corbyn stormed to the Labour leadership in England on a very left-wing platform.

These are, however, pre-revolutionary, pre-war developments. The old regime is failing, neo-liberalism’s double-down on austerity means that ordinary people are doing badly. The media has lost its stranglehold on the narrative and people are willing to take a run at anyone who looks like they can make the economy better. They do not care, particularly, if that person is left- or right-wing, they will try anyone who does not parse as part of the current regime. (Yes, Trump has money, but he doesn’t parse as a normal politician, at all.)

They will take the left, or they will take the right. In the 1930s, the US got FDR, but France, Italy, and Spain were not so lucky.  Whoever looks likely to “fix things” will get in eventually.

The European project took some hits in 2015 which may prove fatal. It is clear that the current regime in Brussls is anti-democratic and, more importantly, that they will not (and perhaps cannot) fix Europe’s economy. Even more importantly, it is becoming clear that it is impossible for most countries to have healthy economies within the EU and certainly not within the Euro; the policy flexibility, including monetary flexibility, needed is simply not available.

2015 was also the year that the West’s foreign policy failures came home to roost, with a huge influx of refugees into Europe, causing political chaos. This influx is minor in comparison to what Lebanon, Turkey, and other countries in the region have experienced, but a Europe in austerity does not want to absorb large numbers of refugees.

I have this written before, and I will say again: We are in a pre-war, pre-revolutionary period. Such periods can last a long time, sometimes decades, so this doesn’t mean “War and Revolution tomorrow,” but it does mean that the conditions are now in place. Ideological control, generally, and media control, specifically, are failing, repression is on the rise, the majority of economic gains are going to a handful of people, the majority of the population feels like they are losing economic ground and are willing to try new types of politics–including what amounts to fascism. The international regime is breaking country after country, destroying them physically, destroying their economies, and so on. Failed states are proliferating.

2015 confirmed this in spades. Every attempt to pull back from the brink (such as Syriza in Greece) was rebuffed.

So, repeated disasters have failed to change neo-liberal economic policy, and neo-conservative foreign policy; repeated warnings about climate change have led to an inadequate response, and 2015 confirms that we will continue to stumble towards multiple catastrophes.

The best hope resides in sensible parties on the left, by which I mean something quite different from what the media does.  Corbyn is not a radical. He is a 1960s liberal, a post-war liberal, with a side of environmental understanding and an appreciation for the harms inflicted by racism and sexism.

There are some more radical experiments being conducted being performed in small batches, around concepts like instituting basic incomes and changing how money is created. Those may lead to a more significant change of the political economy going forward and are what I would truly fear if I were an oligarch (money creation more than basic income–an improved dole doesn’t really threaten them.) We shouldn’t get too excited by this, yet. Canada performed an experiment in basic income in the 1970s, for example.

The real dangers in the world are increasing. For the first world, this doesn’t mean “Islamic Terrorism,” which has never been an existential threat; it means political and economic instability at home. The people one should fear most are almost always one’s own leaders, both political and economic, rather than foreigners, and this remains true.

I’ll write more about what the future holds, those shoots of hope that are visible, and what we can do about it in the New Year.  In the meantime, I hope my readers all had good 2015’s personally, and that 2016 showers you with prosperity, health, and happiness.

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Live Preview for Comments

2015 December 31
by Ian Welsh

I’ve had a number of requests from commenters asking me to provide the ability to preview their comments. That is now possible. Unlike many previews, this one happens as you type, below the comment field, NOT after you press “Submit Comment,” so be sure to check your grammar, links, punctuation, and so on before clicking.

The preview does not show lines between paragraphs. They appear after posting.

Thanks to commenter and past guest-author MarkFromIreland for the suggestion of a preview which runs client-side and not server-side, to keep my hosting company happy.

New CAPTCHA Added for Comments

2015 December 27
by Ian Welsh

Most readers never comment, if that’s you, ignore this missive.

The site went down today for a few hours because of a comment spam attack.

Comments that trigger the site’s spam filter will now be given a CAPTCHA to complete. If you complete it, your comment will go into moderation.

If you fail the CAPTCHA, your comment will be deleted immediately and permanently so that my ISP doesn’t shut the site down again.

So, if you are served a CAPTCHA, I strongly suggest you make a copy of the code (CTRL-C on a Windows machine) before filling in the CAPTCHA, in case you make a mistake.

Hope you’re all having a great Christmas week!

On Hate

2015 December 26
by Ian Welsh

My recent article on Hillary Clinton and the reasonableness of hating her caused some confusion, especially when I said I don’t hate Clinton, though surely there are good reasons to do so.

The issue is this: While it is reasonable to hate people who have done great wrong to ourselves or to other people, hating does the hater little good and much harm.

Hate, and its brother, anger, can supply energy and motivation, but they are like shots of adrenaline. Over time they damage  the body and poison the mind. If used at all, they should be used in moderation, lest you hurt yourself more than the person you hate or at whom you angry.

Worse, this world is full of people it is entirely rational to hate. From those who run the corporations poisoning the world, to those engaging in wars which should not be fought, to those profiting from those wars, to—well, the list is, if not endless, long enough that no one can reach an end, though Dante tried in the Inferno.

Hate is thus never-ending, a poison cup which runneth over. No matter that you drink it to the dregs, it is ever full.

And, for me at least, hatred and anger are unpleasant. I do not enjoy the experience. Oh, like adrenaline or coffee, there’s that shot of energy, but it’s an ill feeling overall. It’s very hard to feel free and easy and happy and be topped up with hate.

Nor is hate necessary. There is no need to hate Clinton, or Bush, or Obama, or ISIS or anyone else in order to oppose them. Not hating doesn’t mean you have to be “nice” or “agreeable,” it simply means you are choosing not to allow a particular emotion to be your experience of the world.

Feel free to oppose evil with glee or happiness or delight. The evil doesn’t care about your hate, only the effectiveness of your opposition.

You can oppose evil without allowing it to control your mind or your emotions at all. If you find you can’t stop the anger or hate (or any other emotion), well then, you no longer control yourself, do you? Your enemies, in effect, are choosing your consciousness for you.

That seems like a very great power to give to one’s enemies, or to anyone else, for that matter.

So, no. I don’t hate Clinton, or even Bush, Jr. Not any more. Nor am I angry at anyone for longer than an hour or two, and rarely even that long any more. The last time I was angry for long was during the Greek crisis and I didn’t like it. So the question I asked myself was: “Is my being angry helping the Greeks in any way?”

No, it wasn’t.

So I stopped being angry, and was happy.

Letting anything in the world, let alone your enemies, control your consciousness, is foolishness. Again, if you think you’ve made a choice to hate, try to choose the opposite. Say: “Today, I will not hate or be angry, I will choose to be happy instead.”

If you can’t, you may have a problem.

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Merry Christmas

2015 December 25
by Ian Welsh

I hope the day finds you well, and happy.