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Why Japan's "Lost Decades" Are Headed to America in 2016

It's only been a little more than a week since Shinzo Abe won election as Japan's latest Prime Minister in a landslide-election victory and the pundits are already lining up telling investors to "buy Japan" because it's "dirt cheap."

The hope is that Abe's promises of fresh stimulus, unlimited spending and placing a priority on domestic infrastructure will be the elixir that restores Japan's global muscle.

As a veteran global trader who actually lives in Japan part time each year, and who has for the last 20+ years, let me make a counterpoint with particular force – don't fall for it.

I've heard this mantra eight times since Japan's market collapsed in 1990 – each time a new stimulus plan was launched – and six times since 2006 as each of the six former "newly elected" Prime Ministers came to power.

The bottom line: The Nikkei is still down 73.89% from its December 29, 1989 peak. That means it's going to have to rebound a staggering 283% just to break even.

Now here's the thing. What's happening in Japan is not "someone else's" problem. Nor is it something you should gloss over.

In fact, the pain Japan continues to suffer should scare the hell out of you.

And here's why …

The so-called "Lost Decade" that's now more than 20 years long in Japan is a portrait of precisely what's to come for us here in the United States.

Perhaps not for a few years yet, but it will happen just as we have already followed in Japan's footsteps with a "lost decade" of our own.

The parallels are staggering.

Were it not for the names – Abe, Ishihara, Noda – the headlines being played out in Japan could well be our own especially when it comes to campaign promises of unlimited stimulus, more infrastructure development and a busted economy. All three were fundamental pillars in Shinzo Abe's reelection campaign just as they were in President Obama's.

The False Promise of Another Japanese Recovery

So now that Japan has its sixth Prime Minister in six years, will things change? Will Abe's efforts result in a Japanese recovery? Will this be "the" year Japan comes roaring back?


In fact, Japan has just fallen into another recession. The data show that Japan's GDP cratered -3.5% in the most recent quarter. Manufacturing is reeling and several iconic Japanese brands are poised for what will be very expensive and nationally traumatizing bankruptcies.

The country is the most indebted of any nation in the world with the combined total of corporate, private and public debt over 500% of GDP, according to Goldman Sachs.

The demographics are working against the struggling island nation as well. This isn't a policy debate. It's not a partisan issue. It's a numbers game and right now the numbers are getting smaller.

There are a mere 2.8 workers supporting each retiree right now. That's especially problematic at a time when the birth rate is declining so fast it looks like a toboggan run.

Worse, as I noted on Fox Business Network's Varney & Company recently, several surveys show that young Japanese simply aren't interested in sex, so a rebuilding of the domestic workforce is quite literally not going to happen.

You can attribute that to emancipated women, the cost of raising children, work pressures or other economics if you like, but that really doesn't tell the entire story nor get at the root of the problem – a lack of desire.

One survey from O-Net, one of Japan's largest online dating services, interviewed 800 young Japanese men and found that 83.7% didn't have a girlfriend. The survey also showed that 49.3% had never had a girlfriend. Another survey from the Ministry of Health, Labor and Welfare showed that 36.3% of young men had no interest in finding one.

The Wall Street Journal reported that 59% of Japanese females between the ages of 16-19 stated that they are totally uninterested in or completely averse to sex.

Married couples don't appear to be any different. Other data suggest that 40.8% of all couples are not only childless, but sexless as defined by not having had sexual intercourse for more than a month. So called "kamen-fu," or loveless marriages, are far more common than you would think.

It's no wonder the birth rate has dropped precipitously according to the National Institute of Population. Nor is it difficult to understand that "silvers," which is what the Japanese euphemistically call their senior citizens, will make up 40% of the population by 2060 despite the fact that the total Japanese population is expected to shrink by 1/3rd over the same time frame.

The implications of this demographic shift are tremendous. The newly elected Abe-san can print all the money he wants. He can build more bridges to nowhere and even double the Bank of Japan's inflation target to 2% if he likes.

It won't make any difference on anything other than a short-term basis.

That's because Japan crossed the point of no return and became a "post mature" society in 1995, according to the National Intelligence Council. The term, in case you're not familiar with it, means that there is a disproportionately large number of older people in a given society versus the younger productive and reproductive population.

Put another way, the country's "window of opportunity" quite literally closed.

The Window of Opportunity is Closing Here In America, Too

Many people are surprised to learn that the United States is in the same spot. But they are positively stunned to learn that our window of opportunity closes in 2015 — only three years from now, when we, too, become a "post mature" country, and the median age climbs above 45 for the first time.

In vehement denial that we're heading down the same path, they explain away the mountains of debt, the failed stimulus, the out-of-control corporations and complete political disarray. But they cannot explain away the demographics here anymore than they can in Japan.

When Japan's markets fell in 1990, the numbers were already going in the wrong direction. The productive-age population had peaked and was in decline. Ours is, too. In fact, so is most of Europe's.

Twenty-two years later it's no surprise that there are fewer jobs and fewer Japanese workers. Nor should it come as a shock that the island nation is reevaluating its immigration policy, its military, and its role in the international community. There are huge, multi-year impacts that are directly related to fertility rates, not the least of which is the inability to kick-start its corporations.

Here in the United States, for example, we tend to think that immigration will be the miraculous do all, end all. Our fiscal survival, in fact, is predicated upon it.

In reality, it makes almost no difference whatsoever.

For instance, the Center for Immigration projects that immigration will increase the working age population to 58% of the total workforce by 2050. That's only 1% above the 57% projected rate with no immigration. If immigration falls, our population curve is indistinguishable from Japan's over the past 50 years.

As for the notion that immigrant children have more children (which is a key assumption in United States population-planning projections) — that, too, is flawed.

Not only does the data now show immigrant fertility rates are falling, but it also shows that fertility differences between American-born women of child-bearing age and immigrant women of the same age are not enough to increase the share of people falling into the productive working category.

In other words, immigration has only a minimal impact, if any, on slowing down the decrease in working-age population by 2050.

Put another way, there are presently 4.81 workers supporting every retiree over 65 in the United States. By 2050, this figure will shrink to 2.81 workers when you include immigration, and only 2.31 workers without. Remember, Japan's figure is 2.8 today and has dropped since the 1990s.

Many investors gloss over this relationship — if they are aware of it at all. That's a huge mistake.

By hitching their wagons and their money to populations where the productive population is in decline, investors are dooming themselves to a massive value trap. Sure they can capture periodic market bursts based on stimulus or some other influence, but over time they'll be fighting powerful, self-defeating headwinds because the falling number of people in their productive years ultimately translates into earnings declines and changing purchasing patterns. The opportunity costs are simply daunting.

On the other hand, hitching your wagon to countries with growing productive-age populations, you can capture the "window of opportunity" while it is opening.

That speaks to concentrating your assets and your investments on those choices backed by windows of opportunity still opening –like China's and Brazil's, which do not close until 2025 and 2030 respectively. And India's, which doesn't even open until 2015.

Obviously, all three of the markets I've just mentioned face their own challenges, so let's be clear: I am not saying you have to invest in them directly. Chinese shares are obviously prone to accounting "irregularities." Markets in India suffer from fragmentation. Brazil is struggling with inflation.

But I am saying invest because of them. That means making deliberate decisions to concentrate your assets and your investments in companies that will capitalize on places where the windows of opportunity remain open.

In some cases, that also means investing in those choices where the windows haven't yet opened but are expected to as suggested by population growth.

There's a big and profitable difference for investors who understand the contrast between the two.

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About the Author

Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at

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  1. Peter J | December 26, 2012


    • Dave the debt slave | December 27, 2012

      16th US Pres. Abraham Lincoln said. "The government should create, issue and circulate all the currency and credits needed to satisfy the spending power of the government and the buying power of the consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity."

      The structural inequalities of the modern financial system are designed to enslave the 99% in debt from cradle to grave. Privately owned central banks of industrialized nations siphon off the productivity of the workforce through taxation to pay the interest on the money supply created out of thin air. Fractional reserve lending leverage and general accounting practices allows chartered banks to create "Money of account" bank credit out of thin air and require repayment in "Money of exchange" (notes and coins) earned through labor and the sale of goods and services. International financial 0.1% vampires continue to bleed the middle class dry in an effort to maintain control over the media-hypnotized consumptionforce.

      Time to wake up folks and stop paying 100s of billions in annual interest on a 97% electronic US money supply to greedy banksters. The constitution allows the Treasury to create the money supply interest-free and this is the single most effective way for the US to get out of debt and return to the sound money practices and ethical financial principles of the founding fathers. Canada is no better unfortunately, borrowing 95% of its money supply at interest. Corruption is highly contagious I guess.

      • mike | January 5, 2013

        Nobody is paying the banksters. they are paying themselves. That is the point in keeping 75% of the population drugged and uninformed. It is also a good way to create a war within the country.You know anyone can say anything they want on here and in most places accross the USA. SO FAR. And I am not saying that will not continue past your lifetime. But so far true freedom has always been a myth. Since the day the majority left their kid at home alone and went out seeking greener pastures on an unknown urge to do so ,you have what you perceive to be chaos and only the few survive. And almost all of the survivors paid a cost somewhere,somehow…

  2. Lorenzo Borsini | December 26, 2012

    I think you missed Italy where we have specular problems such as aging population and youth without hope and migrating worldwide. Japan, Usa, Eu: is it the fall of the Old Industrial Empire based on Industry and reasonable Welfare?
    BRICS are building up their power on social dumping and our tech.
    We lost our future by delocalizing (for more profit) our industries and know-how.
    I appreciate your comments

    • 48ozhalfgallons | December 26, 2012

      "We lost our future by delocalizing (for more profit) our industries and know-how."

      Absolutely! Free trade works well until the profit motive (greed) is distorted to the point that political motives cause a nation to export its own competitive advantage. Globalization without taxation amounts to slow burn treason.

      • N.Paget | December 26, 2012

        48ozhalfgallons — Please explain how and why you have relabeled profit motive to greed. If you are employed by a business, your existence and pay depends on the profit motive. If you work for some government, then the question is are you overpaid? A test would be, if you could get the same pay in private industry. If not then your pay there is most likely a result of union interference. Lets just say, for know, that greedy results when ones pay is greater than what could be obtained in the free market. Most folks who label profit motive as greed, either don't understand economics or have been schooled in socialism.
        What taxes did you have in mind if I were to export my business and then import my production? Consider that the main political motive from the politicians and central bunkers point of view is to keep prices low in the US, so as to hide the inflation that results from too much spending and resulting currency debasement.

        • 48ozhalfgallons | December 28, 2012

          N.Paget: My complete response to your request for an explanation was apparently censored yesterday. I have no idea as to why. I wonder how many others are experiencing the same "China" approach to free expression in this forum. For that matter, this very well may also be censored.

          I believe you have failed to distinguish profit motive from maximum profit motive which is a distortion within a free market society.

          Lets suppose you are a hard working employee of a profitable company. The company choses to lay you off to increase profits. While you were working for that company, to increase profits, the company eliminated opportunities for your own personal development. In fact, you became accustomed to the overtime and had little time left to pursue your own development. Lets suppose that the opportunity to vote against corporate taxes for unemployment compensation arose while you were comfortably employed. Alas! You are now unemployed, middle aged, with no marketable skills and no unemployment insurance. Your profitable corporation has moved operations to where labor is cheaper so it can sell its products to the remaining employed (private or public) in your country at now higher profits. Your job searches have revealed that in order to maximize profits in a global environment, other companies paying similar wages for similar work you have competently done, have also moved their operations to cheaper labor markets . "If you are employed by a business, your existence and pay depends on the profit motive." Indeed! However, the company's profit in a global environment no longer depends on your existence, nor for that matter, your country's existence!

        • mike | January 5, 2013

          Very bad wording. What is happening is that the present school of thought is to satisfy the people with lots of money and/or enough money to continue to exist while not working for a cheaper wage (maybe even dirt cheap)to feed and shelter themselves. Instead the amount of money charged to get a useless college degree majoring in social skills and political media manipulation has turned the mind from reality to fanatasy just like most of Hollywoods great interpretations of truth on screen. And it has worked so far.and may continue to do so unless the terror strikes continuing across the globe actually hit home to a lot of people and infrastructure. Erasing paper dollars and using digital tranactions only through credit cards and debt forgiveness is just another level of denying freedom to an over crowded world just like and even worse than eraseing the value of real things usefull and flooding the market with helicopter drops of hundred dollar bills turned eventually into million dollar notes by a printing press. Monopolies are a big problem.
          However most people are starting to get the picture and there are good things happening but at what cost is the question.

  3. Rick | December 26, 2012

    Interesting facts about Japan. They will certainly make me think twice before investing there.

  4. Angelo Campanella | December 26, 2012

    It's all true. We have to engineer our way out of this trap: More savings; more entrepreneurs, less-to-no debt. "bootstrap" lifting comes to mind.

    • DD | December 26, 2012

      Angelo C. – And you don't think Japan and other countries are trying to do the same and find a way out of the trap w/more savings; more entrepreneurs, less-to-no debt etc., etc?

      Let's not forget the US mostly got into this mess due to the want of exploiting most of the Asian workers and for profit leading to pure greed.

  5. E. R. Wolcott | December 26, 2012

    looks good

  6. PATRICK from belgium | December 26, 2012

    a declining population could be and probably will be problematic short term, long term however it will be a blessing for this world ; mankind and all the other creatures will be much better of, so I d say : people, stop breeding excessively, its destructive!

    • DD | December 26, 2012

      Patrick – I am so, so with you on this. It just awes me when people fall for this BS and have way too many children. When a system has to rely its children and gchildrens taxes to pay for the older generation, something is very wrong. Each generation imo, needs to take care of it own, you mess up, oh well, that's just too bad.

      STOP breeding everyone! Two children only and you are done regardless of religion, how many times you marry etc.

    • 48ozhalfgallons | December 26, 2012

      You better consider who's breeding and not breeding. Darwin's principles are about to prove the end of western civilization.

      • Geoff | December 26, 2012

        Right on ! We will never like to say it and we will probably never learn to accept it but for a long time now the "lower half" have been outbreeding the "upper half". Wild populations keep viable by the simple Darwinian rule of survival of the fittest. Humans have developed the ability to keep most of us alive regardless of how sick, degenerate or incapacitated we are which can only result in a weakening of our gene pool. I am not a scientist but this fact is not rocket science – it is simple common sense. The hard question, as always, is what do we do about it before the human race collapses back into some form of the dark ages from which it will take centuries to recover.
        A little anecdote from our morning newspaper here. Two men were crossing a river in a SUV when they got stuck in deeper water than they expected. They climbed through the sunroof onto the roof of the vehicle as the water rose, called for help and then waited for someone to arrive. The shore was only some 30 metres away and the river braided, so swimming to safety was a definite option. Did they swim. No, oh no. They would have got the new iphones they got for Xmas wet. Enough said.

        • Andrew | December 28, 2012

          The down side of my occupation, E.R. Nurse, is that it interfers with natural selection. We spend huge sums of money on the least contributory/most consumptive segment of society. Everyone must work, everyone must save, and everyone must pay at least some federal income tax.

  7. Jay Preston | December 26, 2012

    Another thing about the "Japanese Disease." Almost all their stats are juggled. They cook the books. The data they use is cherry picked.
    The most egregious example is student performance. Only the college bound are tested, which yields an exceptionally high achievement rate.
    The rest of the kids are doomed to be human cyphers.

    • Beverly | December 26, 2012

      I respectfully disagree. I do not know where your cooked story is coming from. There is One and Only One mission for us, as Japanese students, which is to study til we drop. It is unfair for you to make such baseless and untrue statement.

      As far as your comment of "The rest of the kids are doomed to be human cyphers." ; this is true for any country and everywhere.

      So please think, read, research and know the facts before you write. YOU are Wrong!

  8. Doc Clement | December 26, 2012

    Any good student of the market knew about this back in the 90's if you read any of Harry S. Dent books.

  9. Curtis Edmark | December 26, 2012

    I agree with this article. The history of the American stock market says that the market takes about 35 years to come full circle. You have a bull trend of about 15 years or so where the overall progression of the market is up followed by a bear trend of about 20 years where there are several rallies and plummets, and the overall market generates zero growth.. The last bull trend was from 1982-2000 which was the greatest in history. We are entering our 13th year of this current bear trend. (The S&P is now at 1426 where 13 years ago it was above 1500.) So history would say that we have at least 7 more years of these rises and drops. If you add the data from this article into the equation, this current bear trend may be far longer than 20 years.

  10. Yan | December 26, 2012

    Excellent article but somewhat too pessimistic. All it takes to turn Japan around is 1 Alexander or 1 Caesar or 1 Napoleon or worse of all 1 Dzjengihs Khan and the the world will tremble again including the 2 (whatever) Billion Chinese.

  11. tedbohne | December 26, 2012

    Methinks this fellow doth oversimplify. Indians? other poor countries with vast populations? could that be because these oafs have discovered that since americans will swallow any sort of bilge, rather than exporting the flower of american industry, manufacturing, for the Reagan flatulence of a "service oriented" industry? maybe rather than outsource the employment, they could pay such pitiful wages although acceptable to the soon to be INSOURCED labor? either way people in their middle ages, that would be Boomers now, lost in the outsourcing, and would lose in reversing that despicable act using foreign cheep labor.

    • Mike Noone | December 26, 2012

      Ted Bohne,
      These underdeveloped countries with vast populations?

      India is projected to have 380,000,000 middle class by 2020. Yes they started off by eating the crumbs that America allowed to fall from it's table.

      Here's the thing. By outsourcing not only production but also capital investment, the USA shot itself in the foot. The USA also exported it's systems and information to people who are hungry and motivated.

      When you add in the demographic inevitability of an aging population that has passed it's peak earning power and the consequential decline in tax revenues from them; increased healthcare costs. ( healthcare cost 100% more for a person over the age of 60 due to complications and increased healing times…)
      Lets throw in a smaller working/tax paying population many of whom have chronic student debt and are working for minimum wages and do some maths.

      Doesn't look too good to me…

  12. Beverly | December 26, 2012

    Keith Fitz-Gerald, please name one country that is contrary to your reasoning. IT goes SAME FOR ALL COUNTRIES IN TODAY'S ECONOMY! But, I guarantee you Japan will be up in no time.

    Keith Fitz-Gerald, Please go pick on someone else. Don't pick on Japan. U.S. may be a better pick for this particular article.

    • 48ozhalfgallons | December 29, 2012

      Beverly, I am assuming you are Japanese. I am profoundly sorry for the blow to your people that the tsunami caused. Katrina and Sandy as terrible as they were, were mere sneezes by comparison. The long lasting effects of a nuclear disaster were not a factor in either. Imagine if Indian Point was to blow up, then where would the U.S. be concerning its national psyche?

      I believe nuclear power can be the renaissance for the world economy, even mankind's evolution. Any country that pursues aggressive and continued modernization of nuclear technology will become a dominate economic force. Imagine if nuclear generation of electricity could have experienced the same level of evolution computers have. I believe the reason it has not done so is that governments and big utility partnerships intertwine to the point of stagnation by economic design. Governments must be involved along with NGOs to oversee safety only. The private sector must be left to determine profitability and research. Japan is correct to real from its current nuclear program which, like the luckier U.S., is a primitive unwieldy technology which needs to be dismantled if not overhauled before time and luck run out. Vast areas of land becoming uninhabitable is the quickest path to extinction. Isn't that what happened to the most successful species some 60 million years ago? That species didn't build vulnerable reactors, but the result was the same. It's ironic that our species can now predict and has the chance to alter the course of a collision, yet continues to indulge a technology which can bring about the same demise.

      I believe that the Japanese people have a unique opportunity in this time of seeming entropy of their society to go all in and pursue nuclear excellence as they have done in the past with consumer items. I remember how we Americans laughed at the little metal Japanese toys with the bend over tabs used to hold them together back in the early '50's. Now I see Prius's and PS III's, superb concert pianos, and the HD television network you developed in the '80's. Such ingenuity is your people's comparative advantage. Hardworking single mindedness is your people's competitive advantage. In the face of horrible disaster, rather than turning away from promising technology or worse yet returning to the same technology, the Japanese could make a national mission to advance nuclear power technology; a mission as noble and great as reaching for the stars; moreover, a mission which can re-invigorate your nation.

      However, an overarching engineering principle must prevail at all cost. It must pervade every aspect of design regarding such a powerful technology; this principle also applies to computer systems as we are realizing today. The principle is: If you can't turn it off, don't turn it on!

  13. Mike Sullivan | December 26, 2012

    Since Japan and the US both supported their corporations and their executives against the general workforce by assisting with anti-labor movements, tax incentives for moving factories overseas, tax credits for exploration, tax credits for pharmaceutical R&D, tax credits for new materials and processes for almost every industry, exceptionally low taxes on the wealthy, and a host of other "wealthy welfare" initiatives, maybe your drawing of parallels is appropriate.

  14. Eileen | December 26, 2012

    Maybe our economic system discourages families: our tax code, family unfreindly work environment, constant threat of using cheap labor, corporatocracy, etc makes the American worker too stressed out to think about sex and having a family. You see, we are wired to eat, sleep and breed when things are going well; we do none of those things when they aren't. If you look at who is breeding, they fall into two categories: poor countries who breed because children provide extra hands for survival and countries like China, Vietnam or The Phillipines because their new found affluence allows them to "feed and breed." Like us, Japan and Europe, these countries will stop breeding when young people do not have opportunities for a life at least as good as their parents.

    You want families? Quit growing toxic food, thinking about profits and rewarding corporations for anti-social behavour. None of this will happen if we refuse to have an adult discussion about our tax code.

    • Geoff | December 26, 2012

      A cow won't have a calf when it is put under stress either. Modern life is almost designed to be stressful. The faster you go the more money you get to spend on bigger houses and i-whatsits – repeat – repeat – repeat until you finally collapse in a heap.

  15. dourdan | December 26, 2012

    daddy once said that he thought i was in over my head like great falls during a hurricane

  16. Dave the debt slave | December 26, 2012

    16th US Pres. Abraham Lincoln said. "The government should create, issue and circulate all the currency and credits needed to satisfy the spending power of the government and the buying power of the consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity."

    The structural inequalities of the modern financial system are designed to enslave the 99% in debt from cradle to grave. Privately owned central banks of industrialized nations siphon off the productivity of the workforce through taxation to pay the interest on the money supply created out of thin air. Fractional reserve lending leverage and general accounting practices allows chartered banks to create "Money of account" bank credit out of thin air and require repayment in "Money of exchange" (notes and coins) earned through labor and the sale of goods and services. International financial 0.1% vampires continue to bleed the middle class dry in an effort to maintain control over the media-hypnotized consumptionforce.

    Time to wake up folks and stop paying 100s of billions in annual interest on a 97% electronic US money supply to greedy banksters. The constitution allows the Treasury to create the money supply interest-free and this is the single most effective way for the US to get out of debt and return to the sound money practices and ethical financial principles of the founding fathers. Canada is no better unfortunately, borrowing 95% of its money supply at interest. Corruption is highly contagious I guess.

  17. H. Craig Bradley | December 26, 2012


    Americans will always want sex. Hollywood sells sex and violence. It may be illicit sex or even perverted sex (Gays), but it still is "sex". Drug companies sell Viagra to enhance male patients. Couples that don't have sex may have other outlets such as a mistress, the "pool man", or even internet "Sex" ( XXX web sites are all over the place). Remember to , Hollywood actor David Duchovny ( X-Files) separated from his wife in 2008 and voluntarily checked-in to a sex addiction treatment center for several months. Word has it he did not recover.

    • H. Craig Bradley | December 29, 2012

      Don't forget Japan's award-winning, celebrity X-City (Porn) actress, Maria Takagi. As I mentioned here, "Sex" has many alternative outlets. Even if young Japanese are not interested in relationships or even physical sex, it does not necessarily mean they are wholly disinterested either. It eventually has to come out in one form or another- it always does. For example, just look at the Catholic Church priest pedifile scandals.

  18. Ian | December 26, 2012

    The large number of retired people in the Western world are a first time phenomenon. Initially the reaction to their existence is that they are 100% a problem. But this is based on a now out-dated view of the elderly of previous generations who were broken by physical toil (with no acess to spare parts) and with meagre savings who were a drain on, and burden to, their family or the state until they died not long after finishing work.

    The baby-boomer retirees are not like that. They are capable of work still and of a huge contribution to the economy, because they have all the money! Workers and students are in hock to mortgage or tuition fee loans. The boomers are not spending because: 1/ they do not know how long they have to live, but they know it is longer than they budgeted for; and 2/ because of Bernanke's interest rate repression they are earning squat on their bank deposits.

    Raise Libor to 5% and pay 4% on bank deposits and the boomers will spend at least the interest earned. Lots of dodgy banks and especially property companies will go bust at that interest rate forcing their assets into stronger hands.

    Finally the solution to ridding us of the nuisance of tax inspectors, petty Federal or State jobsworths and regulators is to reserve those jobs for the retirees – on part time half pay basis and push the current younger occupants of the posts out to get a productive job. The regulators' jobs will be done more politely, with greater common sense, more slowly and at a much cheaper cost. There will be no career-builders in the departments because the occupants are not looking for another career. The incentive for the boomers to take the posts in the first place is to delay paying state pensions until age 70.

  19. Don of NY | December 26, 2012

    Can someone please explain how higher taxes is going to create jobs and improve the economy?

  20. Mark | December 26, 2012

    I have thought for at least a decade that the US was just 10 years behind Japan and Keith Fitz-Gerald just showed me I was not the only person to think so. Thanks
    Shrinking populations is the best thing that could happen. Yes it will hurt for a decade or two until the present 70 to 90 leave us. There world was built on the fact that most blue collar workers did not live past 72 so they did collect SS like they do now into their 90s. We also had wars and disease that could wipe out a 100 thousand or more people in a year. Employment opportunities are shrinking because many job are being done by machines. The only jobs that produce real wealth for a nation are manufacturing, farming and mining. The consumer and service sectors are just taking money out of one pocket and putting it in other pockets. A little wealth gets lost with each exchange. The service sector is great because it greases the wheels. The problem is like a lot of big companies they lay off the employees making the product but keep most of the mid level staff that don't generate anything but reports. Things will only get better when you cut the pie for fewer people not smaller pieces for more people.

  21. Richard Lefcourt | December 26, 2012

    Now I get it. All the porn in the movies and all over tv nowadays is really designed to save Social Security by encouraging the creation of more worker bees. Brilliant. So what if we run out of water or food in the process.

  22. Tokyojoe | December 26, 2012

    Interesting points Keith. Lived in Japan for 18 years and was there during the roaring 80's and 90s bust. Saddens me to see what has happened to Japan. Great country…great people. But like all countries, states, counties, municipals, corporations, and people all over the world struggling through this mess…we have to conclude "it's the debt stupid" – that which has been created out of thin air! Illusion has become reality…the true nature of the system is being revealed…the creators of debt vs the indebted! Instead of shackles around our feet, digits on the backup hard drive in the back office of a bank determines who eats and who starves.

  23. walt iwaniw | December 26, 2012

    Hold it what about the demand for goods and services for retired baby boomers ranging from wheelchairs to coffins as a new market forseniorcitizens demands willbebooming

  24. Edward L. Hardister | December 26, 2012

    So, what is an already over-populated nation supposed to do? Should the leaders tell their people to keep on breeding until they are literally packed elbow-to-elbow as, for example, in the old Charleton Heston movie "Soylent Green"? I say that an infusion of additional working-age population, whether by means of more births, more immigration, or a combination thereof, is but a temporary solution to the problem of overpopulation. I applaud Japan for its courageous and determined approach to solving the national problems of all of its people. According to the information available to me, they are well fed, well educated, highly civilized, relatively secure and crime-free, have an excellent infrastructure, little unemployment, a stable goverment, and a more than adequate healthcare system. If their economic environment is not conducive to reckless speculation, devastation of finite natural resources, and conspicuous consumption in order to produce new generations of noveau rich, I cannot conclude that it is a real problem for the Japanese people considered in the entirety.

  25. Mike | December 26, 2012

    I was a bit disappointed in the direction the article went. I thought the main problem in Japan and in the US is the policy of Quantitative Easing, just as Keith points out "unlimited stimulus, more infrastructure development and a busted economy". An aging population is always a concern however it wasn't the "plague" that hit Japan or has entered the US. It was the poor judgement of allowing a policy of QE. This monetary policy is not meant to help an economy recover from a crisis, it is meant to help politicians win votes. I know there are a lot of higher educated people than myself who will say that I am wrong and QE is meant to help an economy recover from a crisis well, Japan's recovery process is about to hit its 24th year.

  26. Tom - NYC | December 26, 2012

    America is heading for collapse. Era of Dollar is ending – Give it another 10 to 20 years and things will be so bad here that even immigrants will leave. Luckily for them, they will have a place to go back to. You may ask collapse – no, never. Here's why collapse will happen: Greed, Corruption, Destruction of middle class, Bureaucracy, Too many regulations, Too much import not enough export. Government that creates problems, rather than solving them. Increasing national debt. Riots will start, poor will come on the streets – and only God knows what will happen than. One thing is certain – End of America is near!

    • DD | December 28, 2012

      Tom-NYC – And I think there will be many worldwide who will be happy to see the end of the US (and puppets) and will thank the Lord.
      Kind of tells you something doesn't it?

    • H. Craig Bradley | January 11, 2013

      One more reason:
      Barack H. Obama and the mindless stooges on the dole who reelected him.

  27. ed the grocer | December 27, 2012

    A work force that is not quite large enough to meet demand will pressure manufacturers to automate, train, ensure safety, pay well, and create shifts that match the labor supply. That situation will beat a twenty cent an hour peasant working in the dirt any day.

    • 48ozhalfgallons | December 27, 2012

      I would like to believe your thesis, grocer. Have you given thought that such a workforce is actually being engineered into our society. Instead of working in favor of labor, though, it is working to favor business. I hear every day how there are 1000's of good paying jobs going begging because of a shortage qualified applicants. Don't you think that is rather strange coming from managers of immensely profitable companies? I really believe that there is a shortage of workers in America who will work for $1 a day; THAT would qualify many workers. A company could even afford to train the bright ones for that level of pay.

      It's an economic impossibility for an insufficient work force to create enough demand to pay its own high wages. It's in the same realm as energy management for increasing population without expecting environmental sacrifice.

      Another quandary: Would a decreasing population generate enough good minds to allow technological and social solutions to be realized through time? Population reduction will allow more space per capita, but could it cause stagnation and eventually entropy? Entropy bests describes Japan's dilemma. As our own population increases with increasing educational dilution, a different kind of entropy will happen for us.

      • ed the grocer | December 30, 2012

        We won't recognize the next successful society. It won't involve sitting on a hilltop staring at the moon. It will serve billions. We need huge steps forward in safe food production, health, durable ( I mean durable ) goods, and many other areas. It won't involve more crap from China. Remember that most of the violence in the world is propagated by a select few and could stop quickly. We have become entranced with money when it is the structure of our society that has really fallen behind. It is a race that we are losing not with each other but with, for lack of a better word, Mother Nature. We are using the wrong measuring sticks. ( try this; success is growing more corn. the real result is waves of overweight people. )

  28. Max | December 27, 2012

    Keith Fitz-Gerald is absolute correct about the Japan investment environment! No doubt it is hard to predict the Japan's future but there are many other indicators which a layman on the street can feel that Japan is now towards the end of the era.

    The technological industry losses to other country such as Korean. LG and Sumsung are far superior then Sony, Toshiba and etc…. Hyudai car are more price reasonable and better in quality compare with Honda and Toyota.

    Please do not forget, Japan have other risks such as environment risk, natural disaster and of course, political risk that Japan has never believed what they had done in WWII. The young generation might not know as everyone will not like to know their ugly past…and without studying history independently can mislead the young generation into another war with neighbourhood countries… I think war can be used by politicians as scapegoat for their failure!!

    Great research by Keith Fitz-Gerald.

  29. Joshua Lee | December 27, 2012

    Thank you Peter for an eye opening article on the USA and Japan. Capitalism appears to be losing its appeal based on our ancesters hard work, we have. Reaped the rewards, its now time to get our hands dirty once again, stop borrowing and earn an honest days living. Japan is a victim of its own success; longetivity through discipline, superior diet and healthy regular exercise upon retirement too! As Im from the UK I would add now living in Japan point out that: population needs to reduce in size otherwise there'll be a world famine. So thats a positive sign of us completing a full economic life cycle. Investing is tough so cheap long term plays that is a mixed bag with good divident yields in varying currencies is the best one can hope for. I will continue to not rely on any government to pay my retirement pension as far as I can?!

  30. James | December 27, 2012

    Keith, you make me think because we think differently. I love that. You bring up good issues that are relevant to the times. I agree with you on one point, however, but not on another point. For instance, I agree with you that Japan is on a decline. The Nikkei hit a record high of 17,000 at the end of 1989 then dropped to half to where it is wallowing today at about 9,000. However, I disagree with you that the U.S. will follow Japan and go into a long term decline.


    U.S. and Japan are two very different countries.

    Japan is homogeneous, the people think alike and the ones that think differently get hammered down. U.S. is heterogeneous. It is a melting pot and anything goes, everyone puts their two cents piece into the pie and hash it out. This is where original ideas or creativity come out.

    Japan is conservative. It sticks to old ways . The U.S. is liberal. Change is a fact of life. Can you see Japan getting rid of their rice industry? In Hawaii, the sugar cane and pineapple industries were the main economic engines for a century and were treated like sacred cows. Both industries are essentially gone. If someone had said it 20 years ago, I would say, "You're nuts!".

    The biggest reason U.S. will not follow Japan and go into a long term decline is the fact that our energy situation has changed dramatically. Horizontal drilling and hydrofracturing have opened up the a new source of energy for the U.S. i.e. shale oil and natural gas. Japan does not have anything close and must import their energy and/or go back to nuclear energy. Japan energy costs will remain high or go higher while the U.S. energy costs will go down and remain lower than Japan.

    Japan will get itself out of its doldrums one of these days because it is a highly educated country. Its people are hard working and highly motivated. The country maintains a sense of balance through its martial arts training background. The rising sun is its country symbol. It is down, but not out. The country will rise again … one of these days.

    For now, today, of all the global economies, the best place to invest is the U.S. for the simple reason that other countries are in worse shape than the U.S.A. The U.S.A. has a bright economic future. It will encounter minor bumps, but continue to grow. This will occur inspite of the favoritism to big banks, the ongoing political battles, and the huge federal deficits. The U.S. is not static. It is nimble. Change is occurring for the better. I really believe it!

    Happy holidays and good investing in 2013 and beyond!

    • Keith Fitz-Gerald | December 28, 2012

      Hi James.

      Thanks for the kind words and the disagreement!

      I would add only one point to your last observation about the US…for all our troubles, this nation is filled with clever, resilient people who will find a way to work through this mess even if our government cannot.

      In fact, I think many nations will find that their people are smart, intelligent and resourceful individuals who will prosper…even if the state doesn't get out of the way.

      I don't know about you, but personally speaking, that gives me hope.

      Best regards for a wonderful new year whatever it may bring,

      Keith :-)

  31. Keith Fitz-Gerald | December 28, 2012

    WOW! strike that…double wow!

    Thank you for the time and obviously deep consideration you've clearly put into your responses. This is precisely the kind of discussion I envisioned when we created the Money Map Press and Money Morning, in particular. It makes me very proud to have such engaged, articulate people like yourselves as part of the "family."

    Even if we have varied opinions, together we are stronger and the perspective we share on such a unique issue broader as a result.

    All the best regards for a prosperous New Year!

    Keith :-)

  32. Joshua Lee | December 28, 2012

    Thanks again Keith! I have just seen an interview with Mark Dampier. Year end results and forecast for the new year. Japan did badly, no surprises there but taking a 10-20 year view will be happy to invest again 10% of my portfolio in a dividend fund. 10% in the US and 20% in emerging markets with UK based small caps. Anybody else willing to stick their heads on the block?

  33. KrisA | December 29, 2012

    Interesting article, to be sure, but I do not quite believe the statistics on immigrants in America. The reason for this is that the process of gathering data on immigrants only accounts for the ones that are hear legally. How many people are here illegally, living in the shadows, anxious to stay under the radar? So, we have no idea how many are here, and certainly not how many kids they have or are planning to have. I cannot believe that one of our problems is going to be not enough poor people having kids.

    My take on what ails America is the widening gap between rich and poor, wider than the gap in any other industrialized nation. The reason for this is outsourcing of good paying jobs and the demonizing of unions. A nation that increasingly must do part time work so companies don't have to give them benefits (I know many people who do this) or work at Walmart or Burger King for wages so low they must apply for medicaid and food stamps, is not a nation that is going to prosper, no matter how hard people work. It is a nation that will go deeper into debt with credit, and force the government to subsidize them as well so the corporations that hire them can maximize their already huge profits. This is what is not sustainable. We need to overhaul the system so corporations will keep the jobs here, and not squawk about paying wages people can actual live and prosper on. There must be open dialog between management and unions. This is what Germany does, and they are doing quite well. Happy New Year everyone, and I enjoyed reading the comments here, articlulate and intelligent.

  34. KrisA | December 29, 2012

    Also, it is necessary to mention the "elephant in the room" which is the untold billions of dollars sunk into being the world's policeman, with all the endless wars and American military presence around the world that entails. We still have a military presence in what was formerly western Europe, can't they come home now that the cold war has ended? Factor in the cost of all the traumatized and wounded veterans of all these wars and you have a very large chunk of change, indeed. How can we lessen the impact of this? Perhaps the burden should be shared by the rest of the world. We could afford it once, but not any more.

    • ed the grocer | January 2, 2013

      You have forgotten already the Congress being told that the US government does not control the military. NATO does. The USA and Canada are suckers and are bullies for people that they do not understand. All those wanna be North American Saviors of the World will wake up one morning and realize that they are standing on a great pile of fiat money. Hillary being the latest sad example. We came, we saw, he died, how repulsive.

    • ed the grocer | January 2, 2013

      And it is trillions not billions.

  35. Richard Russell | December 30, 2012

    Thanks to everyone for a very thought provoking read!

    Happy New Year


  36. Russell Cervenka | December 30, 2012

    The one question that I am amazed no one asked, " How can it be that young people in Japan have
    no desire for intimate physical relations?!?" Has the population been fed some horrific, chemical,
    hormone-destroying agent, secretly put into the national food, and water supply? Also, it is an
    unnatural inclination, of a sick, modern society, to not want children. When the greatest, most
    philosophically-sound, and also prosperous and happy societies flourished, in Europe, and the United
    States, there were large families. Many lived on true, family farms, where they grew most of their
    own food, as my father's family did. My father, and all his brothers and sisters were very healthy,
    athletic, and intelligent. The goodness, health, and intelligence, of a people, along with the richness
    of their soil, and their access to pure, plentiful water are essential, basic to a strong nation. Also, a
    philosophy that discourages perversity, and purely materialistic attitudes which do harm to children
    and all the people. The people need natural, good foods as well. All of these positive factors no
    longer exist in the U.S., or Europe. The economic situation is a product of these factors, NOT vice
    versa !!

    • ed the grocer | January 2, 2013

      Even before the financial problems, many youth were resigned to no real career, no money, and nowhere to live. The streets may be busy but Japanese are still private persons and are not ready yet to live ten to room.

  37. James | December 31, 2012

    Hi Keith,

    Just got on the computer and read your friendly reply, personal views on the people that make up our country great and best wishes for 2013.

    The bottome line: The USA is still the greatest country in the world, hands down, inspite of our problems.

    What gives me hope for our country: I am a sports fan and I love watching football, baseball, and basketball played at the high school, college and professional levels. Sports depict the real world in a different arena. Leadership changes, new players come in old players fade away or switch to different teams, and energize the teams or make them retrogress. Competition is the name of the game.

    The same thing is happening in the political arena. In Hawaii, our two senate seats will be occupied by newcomers as our venerated senior senator 88 year old Daniel K. Inouye, Chairman of the Senate Appropriations Committee, who served our country and our State with dedication and distinction for half a century passed away on December 17 and 88 year old Senator Daniel Akaka is retiring and leaving office in January. Replacing Inouye and already sworn in will be 40 year old Brian Schatz (pronounced shots) and replacing Akaka will be Maizie Hirono, who was born in Japan and raised in Hawaii. We have two House of Representative seats and one of them will be occupied by a newcomer, 31 year old Tulsi Gabbard, a Captain in the U.S. Army and veteran of two tours of duty to Afghanistan. Tulsi Gabbard is an up and coming politician who is bright, articulate, and eager to serve. These two individuals represent the new generation and will be the future leaders of our country, if they serve the people.

    I assume, like sports, what is happening to Hawaii will be occurring in other States or will occur as the old guard is replaced by the new guard. The best should be playing in this special arena, not the ones fumbling and making bad passes. Our privilege to vote is a powerful tool and each one of us has that right. The ballot box is where changes are made in the U.S.A.

    I salute the late Senator Daniel K. Inouye. He brought out the best in America.

    Therein lies our greatest hope. We are looking for politicians who serve our country like the late Senator Daniel K. Inouye, who was thoroughly equipped to do good works.

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  39. Don R | May 9, 2015

    How exactly does an abstract statistic like 'productivity' and its decline as a result of an aging population effect the physical economy?

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