ZIRP Leads To Social Collapse Of Families

When industrialization comes to town, immense social changes are unleashed.  In particular, women cease being chattel and become their own agents.  Women’s rights rises.  The ZIRP system the US has embraced has tremendous dangers.  Denninger has noticed what I have explained in the past: the US is now, thanks to being a ZIRP banking system, is now a carry trade tool!  This will cause us to unwind exactly like Japan did after its immense credit bubble.  Today, I want to expand on the social implications of all this, as seen from within families in Japan and the US.

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Can Japan Avoid Another Lost Decade? – Forbes.com

Japan’s Lost Decade might thus be more aptly called its “Lost Decades.” The sharp economic slowdown of the early 1990s culminated in a recession in 1998-99, only to be followed by another near decade of recessions and paltry growth. Being the most trade-dependent of major industrialized nations, Japan suffered the worst GDP contraction among these countries in first-quarter 2009, and is on track to perform the worst of the G-3 in 2009. Aggregate demand slid precipitously, and deflation took hold once again, despite massive fiscal spending and monetary expansion. My analysts and I project Japan’s recession will persist through 2009, then give way to gradual recovery in 2010.

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Though the pace of economic contraction has slowed since first-quarter 2009, the inventory-driven rebound in production and exports will at best make for stabilization at low levels, rather than a strong economic expansion. Japan’s recovery will hinge on external demand from the U.S. and Europe–the main final consumers of Japanese goods. Chinese demand, which helped boost Japan in 2005-07, may be of little help this time. China is the top destination for Japanese exports, but Chinese demand is mostly a function of U.S. and European demand. Most Japanese exports to China are inputs for goods bound for the U.S. and Europe, not finished goods bound for Chinese retail stores or raw materials needed for infrastructure projects.

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Forbes magazine supports ‘free trade’ very aggressively.  But even while doing articles like this one, the magazine cannot put 2+2 together and see the DANGERS of ‘free trade’.  Japan is the world’s #3 economy now that it was displaced by China which will be #1 in another 20 years or less.  But Japan isn’t #3 in consumption.  The Japanese people consume less and less and less and those who used to own cars are not owning cars anymore and everything is being reduced drastically.

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The major reduction in Japanese consumption is all things that revolve around building a family: buying a larger home, buying things and services for the children, setting up the children so they can leave the home.  Instead, this is all imploding.  As the childbirth rate collapses towards zero, families cease expanding and begin disintegrating.  In the case of Japan, women are divorcing men more and more and instead of remarrying, like in the US, they often live alone with their sons and increasingly, their daughters.

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Japan is trapped in a perpetual ZIRP system.  Zero interest rates are not a wonderful thing.  It kills incentive to save money via handing it over to banks who then make the money grow by lending it out and then sharing the interest accrued with the savers.  Instead, it makes more sense to put money under the mattress.  Or ship it overseas.  And this is the Japanese carry trade: desperate Japanese wanting to make some money via a bank lending money, sending their savings, en mass, overseas.

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The Market Ticker

The last week or two I had noticed that the /DX (dollar index) had a somewhat-odd correlation to the stock market – one that had not been present to the same degree, if present at all, before.

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Specifically, it would move just before the /ES – S&P futures – moved, and the correlation between the two was almost lock-step.

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I had mentally blocked out the worst of the possibilities until last night, when it was said right up front by a user who had lunch with a banker in Australia: The dollar has become a carry-trade funding currency; he was executing an increasing number of these trades with the dollar.

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We are following Japan’s script almost exactly, but our trip down this road will be far worse than it was for them, because as a nation we are monstrous net importers and in tremendous debt, both as consumers and as a government, where Japan is a net exporter and their population is full of savers.

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Tuesday I wrote about the dollar decline powering this latest ramp job in equities, but this development, if it has become or is widespread, is a major problem for The United States, and opens the yawning maw of a trap that we will find it tremendously difficult to escape from.

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Yes, this is the dread ‘carry trade’ and it operates best when some places, often much smaller economies like Iceland or New Zealand, have much higher interest rates than the world’s biggest economies like Japan and now, the US.  The US dollar is the world’s fiat currency.  The US has, by far, the world’s smallest FOREX holdings.  The US also has, even today, by far, the world’s biggest trade deficit.  The US dollar is weakening against the yen and since August, 2007, has often dropped against the yen.  This, in turn, is killing the unbalanced trade with the US.  Japan wants a strong US dollar and for that, needs the US interest rate to be at least 300 bp above their constant ZIRP rate.

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Instead, the US is also ZIRP.  This is a most unusual situation.  Throughout history, the interest rates have moved in this massive curve between poles.  During the gold basis era, the rates moved between 2-6% with the ‘golden mean’ being around 3%.  When Japan went to 0%, this was astonishing. When Japan sat on this for a decade, this was literally unprecedented and I said more than once, extremely dangerous.  Now, the US is stuck in the same tar pit and can’t escape, either.  Japan depends on us to pull them out.  We depend on the Japanese carry trade to fund our spending and that is gone.  If we are now the ‘carry trade’ this will violently unwind the US/Japan balance of trade power.

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Libra is at work here: since the US and Japan refused to balance trade one way or the other, She will do it by becoming a counter force that is unstoppable.  Greater historical forces are at work here: China is now rapidly displacing both the US and Japan in world trade as well as global finances and this will boomerang on this older bipolar business arrangement.

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Here are some Australian videos about Japan’s social life:

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YouTube – Ageing Economy – Japan

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The numbers of Japan’s elderly is shooting upwards rapidly as the baby dearth is now over 20 years and going on, relentlessly. All depressions cause drops in birthrates in industrialized nations.  Japan has a dual economy.  While the entire middle and working classes suffered nearly 20 years of depression, the industrial giant’s owner class enjoyed record profits.  For 15 years, they thrived while the rest of Japan took a nose dive.  Japanese industrialists saw their global reach grow greater and greater.  The working and middle class saw their domestic status drop like a rock.

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Japanese industrialists moved a great deal of their production offshore for two reasons: cheaper workforces in Asia and to keep the US from passing protectionist laws.  Toyota, for example, gives heavily to our Congress which is totally corrupted by now.  None of this rebounds in a positive fashion in Japanese society.  Japan has been ravaged by offshoring jobs just as badly as the US.

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This means, the families that once had well-paid workers supporting not only a wife and children, but the elderly parents, has collapsed.  The elderly in Japan can’t call on the children for care.  For example, in old Japan, the man was most anxious to have a wife because she took care of his own mother.  All women wished for sons so they could do this for them.  The son didn’t take care of her, his WIFE did that.

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As wages fall, sons don’t get married.  And since everyone has to earn money in order to survive, women have flooded into the workforce.  These daughters all get similar incomes compared to the sons and this is due to the compression of wages which we see here in the US.  When all jobs pay nearly the same while the rich get much, much richer, we get an entire society that is depressed. This is why the statistics in the US showing Goldman Sachs and JP Morgan top dogs getting filthy rich while secretaries working for them as well as industrial workers end up with the same low, miserable wages, this should set off alarm bells.

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Instead, it was celebrated as a great thing: greed is good.  Wide income gaps are due to the top dogs being super-smart supermen and all the other people are stupid or ‘sheeple’.  Instead of spreading socialism which forces a realignment of incomes so the bottom doesn’t fall off the cliff, our culture celebrates inequality.  In Japan, a historic and amazing social change has crept in on cat’s paws, silently: daughters are staying with their mothers and their mothers don’t want them to marry.  And sons are staying with mothers who have no daughters and instead of being productive, are hiding out and refusing to even leave home, literally, at all.

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The mother/daughter survival pair is very powerful inside of disintegrating social systems. We see this in the black communities in America, too.  Mothers, grandmothers and daughters all live together.  And to provide new daughters, the women have children out of wedlock.  More than 40% of all babies born in this community are out of wedlock.  So the black community continues to grow despite the total collapse of the ‘family’ as the males are slowly made more and more irrelevant.

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The black culture has embraced this and can’t seem to escape it.  Obama tries to verbally change this course, trying to get black men involved in the children who are born in this new social system.  But the men have no potential economic base for participation inside of a family and far from wishing for sons, the women want more daughters, just like in Japan.  And Japan is imitating the black population here.  For example, the vast bulk of prisoners in our own system are black males.  And many a cast-off male who have no mothers to care for them, end up wanting to go to prison as they age, for they get a roof over the head and food this way:

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YouTube – Japan’s elderly prison population – 02 Mar 08

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In China and India, the women all want sons and this is because daughters leave the family unit and serve their husbands and their mothers, not the mothers of the girls.  So women want sons, who stay at home.  Naturally, there are more sons than daughters being born.  But surprisingly, there are more daughters than sons in Japan.  A lot more daughters.  This confirms my belief that any industrial system that goes into a depression, mothers and daughters band together and the young males are cast aside, and they all go off to live in the streets or group homes or leave the country, entirely.  We see this all across Europe, especially in the dying former Soviet systems.

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YouTube – The Lost Generation – Japan

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YouTube – School Bullies – Japan

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Below is an anime made back at the very start of the Japanese depression.  It is most interesting to watch.  The heroine’s family is under tremendous economic pressure and literally disintegrates.  Only in this case, the mother/daughter bond doesn’t form.  The heroine marries a very rich kid, instead, and escapes this economic vortex.  Only, her new mother-in-law hates her.  If this anime were to continue to the bitter end, it would show the heroine divorcing her husband and living with her mother.

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YouTube – hana yori dango ep 1-1

YouTube – hana yori dango ep 1-2

hana yori dango ep.1 3-3

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This news story shows that Japanese women who are now holding jobs, instead of building families, are going off to ape the males who work long hours and then refuse to go home but instead, party.  All the women doing this are living with their mothers instead of forming families or buying their own homes.  They drink and carouse rather than do sensible things.  When I was 24 years old, I had my first child and by 28, was a property owner and was very involved in community politics and working full time.  While raising children.

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This sort of dynamism, the building of a family, is hyper-important for any economic system.  I couldn’t live anywhere near my own parents, so I had tremendous incentive to build my own family. These Japanese working women are wasting their time, energy and money, on male drones who have no intention of building any family. Instead, they are lapdogs for women who want ‘romance’ without the natural resolution of this happiness in the form of creating a family.

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YouTube – Gigolo’s – Japan

YouTube – Women On Top – Japan

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Marriage is an economic unit.  The word ‘economy’ comes from the Greek words for a marriage state of being of a family.  Socialist systems try to replace the need for family units by having the state play the role of the father.  But capitalist systems are NO BETTER.  They have the exact same result: families are debased as the top financial powers expand their share while starving the bottom.

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Animators put this whole business into a show which, incidentally, ends with the heroine marrying a rich boy:

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YouTube – Ouran HSHC – 1 – Starting Today, You Are a Host!

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Eventually, as human populations become too great, we will see the Japanese model more and more: women living with daughters, sons turned into drones, a refusal to not only not have babies but not even relationships.  In the West, women still want to be married.  But as we move down the social ladder, this desire to be married vanishes. And it is moving upwards.  Note that our latest GOP VP candidate, Palin, has this dynamic at work inside of her own family.

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Her daughter had sex and a child while never leaving home and will be there for years.  All the talk about marriage has collapsed.  She may yet get married but only if she gets a good education (she is a HS drop out) and then, lands a good job.  I had to work most of my child-bearing years because I wasn’t at the top of the economic pyramid.  But then, I notice that rich women don’t want to have children, either.  Childbearing is dangerous and difficult and makes a woman look ‘ugly’ afterwards.

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There has been a fad to collect children in Hollywood.  Some actresses go through pregnancies. But often, they simply adopt.  This fad moves down the pipeline to children like Palin’s daughter.  But the Hollywood actresses all have good incomes and marry and divorce at a very high rate.  While poorer women simply never get married, in the first place.

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This social force is economical in nature.  And fixing it is a problem.  Many natural and human forces are at work, pushing everyone down this road.  Parts of the earth where women have few civil rights and no political or economic power is where the birthrate is highest.  Places that are industrialized, whether capitalist or socialist, are seeing greater women’s rights but also a collapse of marriage and birthrates.  This is the ZIRP system at its most powerful level.  Internal growth collapses.

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