After reading Elaine Kurtenbach's coverage of how Japan's latest dive into yet another recession is affecting young people there, I can only say, "The Keynesian koolaid is strong in this one."
The AP reporter's headline says that the recession was "unexpected," and her first sentence calls it "a surprise." Anyone watching economic events in the country, and I think that's supposed to include her, should have known it was imminent. Kurtenbach, and apparently every other Keynesian koolaid drinker is shocked — shocked, I tell you! — that the recession occurred despite "unprecedented stimulus," and believes that young Japanese really, really want yet another tax increase (bolds and numbered tags are mine):
JAPAN'S YOUNG FRET AS UNEXPECTED RECESSION HITS
When Prime Minister Shinzo Abe responded to Japan's surprise recession by delaying a sales-tax increase, it was a cause for worry, not celebration, for many young Japanese. [1] This generation, barely aware of their country's economic heyday, frets that putting off tough decisions now could make the future even worse.
Despite Abe's unprecedented stimulus efforts - almost everything short of dropping money from helicopters - Japan has slipped into recession less than two years after the last one. [2] With the country's debt rising, population aging and job security fading, young people in particular wonder when, and if, Japan will bounce back.
... Under pressure to reduce the developed world's heaviest per-capita debt burden, at over a quadrillion yen ($8.5 trillion), Abe raised the sales tax from 5 percent to 8 percent in April, and was supposed to increase it to 10 percent next year. But after the economy, already fragile after two decades of malaise, shrank for two quarters in a row, he put off the second increase until 2017.
(29-year-old trading company employee Mai) Yamaguchi was unimpressed by that decision. "I'm grateful to Mr. Abe for his policies to improve child care, but putting off the tax increase, well, they say the pension system is on the verge of bankruptcy. I think it would have been better to go ahead and raise the tax as planned," she said. [3]
... Though their nation is rich, with ultra-modern public transport, low crime rates and excellent public health services, most are making do without the security of lifetime employment enjoyed by their parents and grandparents.
... He (Abe) has pledged to vanquish Japan's long stagnation by injecting tens of trillions of yen (hundreds of billions of dollars) into the economy, [4] pushing prices higher and the value of Japan's currency lower. He also has promised a sweeping and drastic overhaul to help improve the country's crumbling competitiveness.
So far, that combination, dubbed "Abenomics," has yielded mixed results. [5]
... Over the past two decades, Japanese manufacturers struggling to compete with rivals in China have grown increasingly reliant on temporary or contract workers. Budget cuts have extended such practices into other fields such as teaching and nursing. Today, about four in 10 Japanese work in part-time or contract jobs with little job security and scant benefits. For young Japanese, permanent, career-track jobs are the exception, rather than the rule. [6]
... College student Yuto Tanaka, 19, said he knows that there's millions of yen (tens of thousands of dollars) in debt for every person in Japan. But fretting won't resolve that problem, and neither would an immediate tax hike, he said.
"If they raise the sales tax now, it will hurt the economy and tax revenues will fall anyway," [7] said Tanaka ...
[1] — The recession was not a "surprise," or "unexpected." Zero Hedge pointed to a government report which said that the country had slipped into a recession three weeks before it become official. The press should have seen this coming, and has no business calling it a "surprise."
[2] — So Japan has done what Paul Krugman, the economist turned New York Times polemicist, would have recommended for U.S. when it did "only" $800 billion or so in stimulus, plus a bunch of $1 trillion-plus deficits, largely financed by over $4 trillion in quantitative easing. And it hasn't worked.
[3] — What young people need to be worried about is whether the government can return the economy to a growth trajectory. That's not going to happen with another massive sales tax hike.
[4] — Sure, why not? Well, here's why: It doesn't work. As CNBC's Rick Santelli said during his famous rant in February 2009, "if the (stimulus) multiplier that all of these Washington economists are selling us is over one, that we never have to worry about the economy again. The government should spend a trillion dollars an hour because we’ll get $1.5 trillion back."
[5] — It's "mixed" only if you think that four recessions since 2008 is "mixed."
[6] — So Japan is about 15 years or so ahead of where we are in creating an young, demoralized underclass — and we're in a position to hasten it along with millions of quasi-illegal immigrants.
[7] — At last, someone who hasn't drunken the koolaid. Apparently in Japan, they're relatively few and far between. Another couple of decades of stagnation are on tap if that's really the case.
AP's Kurtenbach and others in the business press clearly don't understand that Abenomics won't work. Massive, essentially permanent stimulus never has.
Cross-posted at BizzyBlog.com.
