The myth of Japan’s “lost decade”

One of the ways that bankers, politicians, and media shills support their demands for more austerity on the masses is to claim that without more austerity (i.e. without a deeper and permanent depression), the USA is doomed to have a “lost decade” like Japan.

The “lost decade” myth originated with the Japanese government, which recognized the need to stroke the American ego. During the 1980s, Americans panicked that Japan had such a booming export trade in automobiles and other products. Ridley Scott’s 1982 film “Bladerunner” depicted an America ruled by Japanese financiers. Michael Crichton’s 1992 novel “Rising Sun” (plus the 1993 movie adaptation) did the same.

It was all a lie.  In his 2008 book In the Jaws of the Dragon, Irish author Eamonn Fingleton explains that the Japanese Finance Ministry issued false statistics, saying that Japan was “insolvent,” even though Japanese exports increased by 73% during the “lost decade,” foreign assets increased, and electricity use increased by 30%, a tell-tale indicator of a flourishing industrial sector.  By 2006, Japan”s exports were three times what they were in 1989.

And yet, US bankers, politicians, and media shills continue to exploit Japan’s lie. They also claim falsely that social programs must be eliminated or privatized because America is as “broke” as is Japan.

Endless lies.

Japan (like the USA) issues its own currency. Therefore Japan (like the USA) has no trouble paying its “debts.” Despite having a Debt/GDP ratio of 230%, the worst of any major country in the world, Japan remains the world’s largest creditorcountry, with net foreign assets of $3.19 trillion (the amount of foreign government securities that Japan has purchased).

 In 2010, Japan’s GDP per capita was more than that of France, Germany, the U.K. and Italy. And while China’s economy is now larger than Japan’s, because of China’s population (1.3 billion versus 128 million), China’s $5,414 GDP per capita is only 12 percent of Japan’s $45,920.

What is Japan’s great “secret”?

Answer: Japan creates its own money.

(Incidentally, economist liars falsely claim that a Debt/GDP ratio above 100% means a nation is bankrupt. The Debt/GDP ratio is meaningless. It is another scam. The numerator is a 200-year measure of cumulative T-securities outstanding, while the denominator is a one-year measure of productivity. The two are unrelated. And since the so-called federal “debt” is the total of T-securities outstanding, all federal “debt” easily could be eliminated tomorrow, if the federal government merely credited the bank accounts of T-securities holders. That would require pressing a few computer keys, which would increase the checking accounts of investors, and decrease the T-security accounts of federal creditors. As this would be a simple asset exchange, no new money would be created, and there would be no inflation consequences.)

Despite the USA and Japan being “broke,” both the IMF (controlled by the USA) and Japan continue to pour money into European bailouts of bankers and speculators.

Ellen Brown discusses this…

“In an April 2012 article in Forbes titled ‘If Japan Is Broke, How Is It Bailing Out Europe?,’ Eamonn Fingleton notes that the Japanese government was by far the largest single non-eurozone contributor to the latest Euro rescue effort.  This is “the same government that has been going round pretending to be bankrupt. Japan rescued the IMF system virtually single-handedly at the height of the global panic in 2009. How can a nation whose government is supposedly the most over-borrowed in the advanced world afford such generosity? The answer is that Japan’s true public finances are far stronger than the Western media claims. Clearly the Japanese Ministry of Finance is one of the most opaque in the world.”

COMMENT: The mystery is not the Japanese Ministry of Finance, but the way in which 99.9% of all humans deny the simple fact that monetarily sovereign governments (like Japan’s and America’s) can, in collaboration with bankers, create money from nothing. Hence these governments are not really “in debt.” By contrast, euro-zone nations really are in debt, since they cannot create their own money from nothing.


“Fingleton acknowledged that the Japanese government’s liabilities are large, but he said we also need to look at the asset side of the balance sheet.”

COMMENT: There it is again folks, the double-entry bookkeeping. Every dollar’s worth of Treasury bonds sold is entered into the government ledger as both a debt (money owned back to investors) and a credit (money collected from investors). Politicians, central bankers, and media shills want us to look only at the liabilities side of the ledger, so they can say that the nation is “in debt,” and must eliminate social programs, and have a depression. In order to have prosperity, the masses must have permanent poverty.


“The Tokyo Finance Ministry is increasingly ‘borrowing’ from the Japanese public not to finance out-of-control government spending at home, but rather abroad. Besides keeping the IMF in business, Tokyo has long been the lender of last resort to both the U.S. and British governments. Meanwhile Japan borrows 10-year money at an interest rate of just 1.0 percent, the second lowest rate of any borrower in the world after the government of Switzerland.

COMMENT: “Borrowing from the Japanese public” means the Japanese Ministry of Finance is selling Treasury notes, and collecting the cash. “Lender of last resort” means the Japanese Ministry of Finance is buying US and UK Treasury notes, and speculating with the debt, which really is debt in the case of eurozone nations. 


“This is a good deal for big Japanese banks, which it can borrow 10-year money at 1 percent and lend it to the U.S. at 1.6 percent (the going rate on U.S. 10-year bonds), making a tidy spread.

COMMENT: That’s why big banks are no longer lending. Why should they lend when they can make a nice profit via speculation in government securities? Since big banks do not lend, and since politicians want to cut government spending on social programs, the result is a drastic reduction in the supply of credit and currency – i.e. a depression.


“How to explain these anomalies?  Fully 95 percent of Japan’s treasury notes have been purchased by Japanese investors. Twenty percent of these investors include the Japan Post Bank, the Bank of Japan, and other government entities.”

COMMENT: Since the purchasers of government securities include government banks, the government is “in debt” to itself. This “debt” is an accounting fiction. Yet bankers, politicians, and media shills falsely claim that these governments have a “debt crisis.”


“Japan Post is the largest holder of domestic savings in the world, and it returns interest to its Japanese customers.  Although supposedly privatized in 2007, all of its stock is still owned by the government.  The Bank of Japan is 55% government-owned and 100% government-controlled.

Of the remaining treasury bills, over 60% have been purchased by Japanese banks, insurance companies and pension funds.  Another chunk is held by individual Japanese savers.  Only 5% is held by foreigners, mostly central banks.  As noted in a September 2011 article in The New York Times:

The Japanese government is in deep debt, but the rest of Japan has ample money to spare.

COMMENT: The Japanese government is “in debt” to its own people. And yet, the Japanese government sells treasury notes, also collecting money from its people. This entire “debt” discussion is a red herring.


Japan’s debt-to-GDP ratio looks bad, but as economist Hazel Henderson notes, this is just a matter of accounting practice, which is misleading.  Japan leads globally in virtually all areas of high-tech manufacturing, including aerospace.  The debt on the other side of its balance sheet represents the payoffs from all this productivity to the Japanese people.

According to Gary Shilling, writing on Bloomberg in June 2012, more than half of Japanese public spending goes for ‘debt service’ and social security payments.  ‘Debt service’ is paid as interest to Japanese ‘savers.’  Social security and interest on the national debt are not included in GDP, but these are actually the social safety net and the public a highly productive economy.  Dividends end up in the hands of the Japanese masses. These are the real fruits of a nation’s industry. In the USA, most of the GDP consists of money to weapons makers, and to ‘financial products.”

COMMENT: In other words, not all Japanese government money goes to weapons makers, or to oil companies as subsidies, or to bail out bankers and speculators. The Japanese government still has social programs, and still pays interest to ordinary bank customers.


“Shilling writes: ‘Government deficits are supposed to stimulate the economy, yet the composition of Japanese public spending isn’t particularly helpful. Debt service and social-security payments — generally non-stimulative — are expected to consume 53.5 percent of total outlays for 2012.”

COMMENT: Wrong! Most economists are total liars. Any money that gets into the hands of the public, by any means, is stimulative, since it means that people have more money to spend. Ellen Brown agrees…

“So says conventional theory, but social security and interest paid to domestic savers actually do stimulate the economy by getting money into the pockets of the people, thereby increasing ‘demand.’  Consumers with money to spend then fill the shopping malls, increasing orders for more products, driving up manufacturing and employment.


“Some of the money for these government expenditures has come directly from money printing by the central bank, also known as ‘quantitative easing.’  For over a decade, the Bank of Japan has been engaged in this practice; yet the hyperinflation that deficit hawks said it would trigger has not occurred.

COMMENT: Bankers, politicians, and media shills use absurd examples to maintain their lies. They say that if the government were to give $1 trillion to each man, woman, and child in the USA, then America would have inflation. Well of course it would! Hence they demand that social programs be cut or privatized. What bullshit! Since 15 Aug 1971, when the USA went off the gold standard, there has been no relationship between federal spending and inflation. As for Japan, it has close to zero inflation.


“As noted by Wolf Richter in a May 9, 2012 article: ‘The Japanese are among the few people in the world enjoying actual price stability, with interchanging periods of minor inflation and minor deflation—as opposed to the 27% inflation per decade that the Fed has conjured up and continues to call, moronically, ‘price stability.’

COMMENT: In Japan, some of the money from quantitative easing ends up with average people. This stimulates demand, which stimulates the production of goods and services, which increases supply. When supply and demand rise together, n balance, prices remain stable. Hence, no inflation. The USA also has low inflation, but for a different reason. Money from quantitative easing goes to the big bankers, who use it to speculate. Therefore the real economy has deflation, while the financial economy has massive inflation, as we see in the multi-quadrillion-dollar derivatives scam.


“The Japanese government has also maintained the façade of complying with international banking regulations by ‘borrowing’ money rather than ‘printing’ it outright.  However the Japanese government borrows money from its own bank (i.e. the government borrows from itself). This is the same as printing money, particularly when the debt is just carried on the books and never paid back.”

COMMENT: So where is the “debt crisis” and the “deficit crisis”?


“All of this has implications for Americans concerned with an ‘out-of-control national debt.’  Properly managed and directed, the debt is nothing to fear.  Like Japan, and unlike Greece and other Eurozone countries, the U.S. is the sovereign issuer of its own currency.  If it wished, Congress could fund its budget without resorting to foreign creditors or private banks.  It could do this either by issuing the money directly, or by borrowing from its own central bank, effectively interest-free, since the Fed rebates its profits to the government after deducting its costs.

A little quantitative easing can be a good thing, if the money winds up with the people, rather than simply in the reserve accounts of banks.  The national debt can also be a good thing.  As Federal Reserve Board Chairman Marriner Eccles testified in hearings before the House Committee on Banking and Currency in 1941, government credit (or debt) ‘is what our money system is.  If there were no debts in our money system, there wouldn’t be any money’.”

COMMENT: When it comes to national finances, the term “debt” confuses the masses. It makes people think that government “debt” is the same as private debt. (It is indeed the same for eurozone nations.) This scam makes the masses submit to needless austerity. The masses are also confused by the term “deficit spending.” Since the US government creates its own money in collaboration with bankers, the US government does not really have a “deficit.” And yet, even the best commentators, like Ellen Brown, retain elements of the brainwashing. Ellen refers to “deficit spending.” Why not just say, “government spending”?


“Properly directed, the national debt becomes the spending money of the people.  It stimulates demand, which stimulates productivity.  To keep the system stable and sustainable, the money just needs to come from the nation’s own government and its own people, and needs to return to the government and people.

COMMENT: But in the USA, all wealth and power flow one way…to the top. Therefore the U.S. masses will continue to fall into poverty. If the bankers ease the pressure, they will retain their godhood over a dystopian and impoverished America. If they do not ease the pressure, then the entire system will break.