Executive Summary

• The data that proves Japan is a ticking time bomb
• Why the yen may still fall a lot further from here
• How Japan's contagion can threaten world markets (and yes, the US)
• Why the contagion is now underway, and what you should do about it

If you have not yet read Central Planners Are In A State of Panic available free to all readers, please click here to read it first.

Japan, By The Numbers

I completely understand why the Japanese authorities are freaking out and taking enormous risks.  It's because they have no good choices left.  More fundamentally (and worse) they are in charge of a system that is destined to fail.

Exponential money systems have to eventually fail because all paper money is just a marker for real wealth, it is not real wealth itself, and therefore ever-increasing exponential paper claims being stacked up  against a world of real wealth that is growing much less quickly (and someday reversing entirely) is a mathematical formula for a monetary accident.  Too many claims set against too little real wealth.

Real wealth is tangible goods and real resources, along with real services provided by real people.  

And so it's quite bizarre that Japan, of all places(!), cannot easily detect their own math predicament given their well known and often discussed demographic decline.

Having peaked at 128 million in 2005, Japan now has 127 million inhabitants and is on its way to 90 million by 2050, and 45 million by ~2100.

(Source)

This means that by 2050 a nearly 30% decline in population overall, and a dramatic reduction in the ratio of working to retired persons will occur.

If Mr. Kuroda is willing to bet the ranch that monetary juicing will get Japan back on a robust path of economic and credit expansion, somebody really should be showing him the above chart each day before breakfast, after lunch and as he's heading to bed.

Why?  Because there's really no such thing as 'an economy' that magically pays off a pile of debt.  When we hear the word 'economy' we're hearing about an abstraction, a useful verbal short hand to describe the collective efforts of the people of a nation.