Importing Japan's 1990s Miseries

Those who have not learned from history are doomed to relive the past, especially if they believe in some mythology about the past which imprints all the wrong lessons upon their minds.

One of the great examples of a mythology leading men astray is that of the Great Depression in which the demi-god Franklin D. Roosevelt gave Americans the confidence they lacked to rebuild the economy with his fireside chats and his determined pragmatic experimentation with social welfare programs. In fact, FDR greatly prolonged a recession and turned it into a deep depression and then when the economy began to improve, turned it into a second depression. The back to back depressions became the Great Depression and were not brought to an end until after the war, though wartime activity in some respects made it seem as though the depression ended when war production got well underway. FDR had an uncanny knack for creating maximal investment uncertainty and this kept private investors on the sidelines until after the war. The story is well told in The Forgotten Man: A New History of the Great Depression by Amity Shlaes and in Jim Powell's FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression.

There is a more recent case of history from which we could learn. In the entire decade of the 1990s, Japan suffered an economic meltdown due to a boom in stock prices and real estate prices brought on by a flood of easy money supplied by the Japanese government in the 1980s through 1990. Benjamin Powell has written an excellent commentary on this called Avoid Japan's Mistakes in the 8 March 2009 Washington Times. Powell points out that the Nikkei stock market index fell about 70% and real-estate prices fell by 80%. This was a significantly more severe downturn than our present travails are.

Between 1992 and 1995, the Japanese had six stimulus bills providing an average yearly stimulus equal to 3% of the Japanese GDP. In 1998, the Japanese stimulus programs were 8.5% of the GDP. Even this huge stimulus had little effect upon Japan's plight. Our present $787 billion stimulus bill is 6% of the American GDP. By the mid-1990s, Japan had a very low central bank interest rate like ours now. Japan turned to big bank bailouts and to nationalization of the banks in 1998 and 1999, only to make matters still worse. Japan also provided huge sums of government funds for construction projects to no effect.

The real-estate booms in both Japan and the U.S. caused too much money, too many capital goods, and too many people to enter the construction industry. Powell says, "Bank bailouts and fiscal stimulus bills don't work because they strive to maintain the status quo. But the status quo is the problem and exactly what needs to be corrected. ..... "Stimulus" bills that emphasize public works and infrastructure merely prop up the over-expanded construction industries."

Returning to my own viewpoint: This is true, but it is also the case that the financial industry itself was on a bubble and had too many people in it. The masses of people refinancing mortgages and dealing in the financial derivatives markets were excessive and now need to be pared back substantially. The market will take care of this and also of the bankruptcy of General Motors and perhaps Chrysler as well, if only the government will get out of the way. The huge sums of bailout monies are saddling our children and grandchildren with pointless debt. The derivatives financial institutions, many real estate firms, GM, some banks, and some construction companies are way beyond saving. Let them fail and let wiser heads take over their physical assets and hire and manage the people who used to work for these loser companies. There is surely no point in wasting more money on foolish bailout schemes.

Not only is the money being wasted, but the very uncertain and surprising ways in which the government is spending it is causing private investors to take their money out of the market and wait on the sidelines. Every time Obama sneers at the "investor class" he makes them more uneasy and more passive. Obama has frozen the energy of the most dynamic and creative economic forces. The ineffectiveness of the whole effort is causing people who had signed on as part of Obama's economic team to back away from government jobs in the Treasury Department so they will not be stained by association with such a losing effort. The banks and financial institutions who took the Federal money nearly forced upon them, marked themselves as losers. GM and Chrysler also put on targets as losers when they took bailout money. Interestingly, so did the United Auto Workers Union. The image of what they did to the American automotive companies in the competition with the Japanese, Korean, and European auto makers, may be enough to defeat the union card check bill killing secret ballots to decide the issue of union representation.

The concerted efforts of the Obama - Pelosi - Reid Axis Powers to do all of the following in a massive and rapid push designed to cripple the private sector and to build the socialist government-dominated society of their choice:

• the takeover of medical services with tighter controls and rationing of medical services by means of the newly created computer record system
• the move to control medical insurance
• the elimination of a doctor's right to refuse all Medicare funding, thereby making him completely subservient to the government
  
• the threat to force increased unionization upon small businesses
• the creation of massive government debt with crippling future interest payments
  
• the coming high inflation
• the meddling with the management of banking and other financial institutions, including forcing them to continue making risky, yet low interest rate loans
  
• the transfer of money from the private sector to the ever-obstructive and meddling government sector
• the promised higher taxes on investment profits
• the vendetta against the "investor class"
  
• the higher income and Social Security taxes on higher income families
• the ban against drilling for oil in the Gulf of Mexico and still more restrictions against drilling for oil and gas on the excessively extensive Federal lands
• the killing of funds to relocate spent nuclear fuel rods to Yucca Mountain thereby killing nuclear power in the near future
• the promised Federally orchestrated bankruptcy of the coal-fired electric power plants, which produce 50% of all U.S. electricity
• the punishing taxes or fees to be leveled on the oil and gas industries
• the restrictions of energy use and the greatly increased costs of energy use to fall on every American
• the huge stock market losses which will make many Baby Boomers more dependent upon government for retirement and health care
• the funding of more civil service organizations to remove workers from productive work in the private sector and make them cheap labor for the politicians
• the flooding of still more money into universities where most professors will use it to advocate more socialism in America and an ever-diminished role for the individual while college education costs continue to skyrocket
  
• masses of more government-chosen winners, who will be rewarded at the expense of hardworking and responsible taxpayers
• increased restrictions on trade with other countries
• increased submission to the so-called international law of the dictator and socialist government-dominated United Nations
• increased expenses for business mandated by governments as a way to keep bribes to voters off Federal and state expense accounts
  

All of which ought to cause a massive and sustained Second Great Depression. The Obama Axis Powers will be happy to use the continuing crisis as a means to push for still more government power as a means to solve the problems they have themselves caused. Of course, they will continue to blame everything on George Bush and perhaps Rush Limbaugh. Meanwhile, bewildered Americans will more and more frequently read Ayn Rand's Atlas Shrugged in order to really understand the root of all the evil which has overtaken them. Will the sign of the dollar and decals asking "Who is John Galt?" become commonplace on Depression era cars?

If you have any hope of thinking for yourself, choosing your own values, and managing your own life in accordance with those values, you are under a massive and brutal attack. It is way past time for every American who has any understanding of his right to life, liberty, property, and the pursuit of happiness to stand sure in his insistence upon preserving this essence of his individual life. Without it, there is no joy in living. We must stand united and individually in rebellion against this statist takeover of our lives.

This is much, much worse than anything King George III ever conceived of. In comparison to Obama, the king was a hero of freedom. Let us hope Americans can recover some measure of the concern they once had for individual freedoms before they lose everything.