Japanese Society. Coming to America?

The S&P500 melted up last week–in the face of stunningly bad economic data–to close 1.8% to the upside.  Volume, as usual during up weeks, fell off significantly.  While the VIX (or fear) index fell off as well, it is still well above the low levels reached in the January to April period.

The week’s economic data were dismal.  Personal income and personal spending both came in lower than economists had predicted.  Pending home sales were down 2.6% month-to-month and almost 19% year-over-year.  Initial jobless claims soared to 479,000–a level well above the consensus estimates.  Non-farm payrolls also disappointed badly.  When the effects of the census are stripped away, only 12,000 new jobs (private together with public) were created in July.  Average hourly earnings rose slightly, but only as expected.  The unemployment rate inched down from 9.6% to 9.5%, BUT only because almost 400,000 unemployed people left the workforce–because hiring prospects were so poor.  Had folks like these not given up (over the last three months), the unemployment rate would be closer to 10.5%.

Almost three years after the Great Recession started at the end of 2007, the US economy is NOT recovering.  After $20 trillion in stimulus (direct fiscal, direct monetary and indirect guarantees–combined), the US economy is sputtering; it’s slowing to stall speed and about to nosedive–again.

Technically, the S&P is in an uptrend on the daily charts, but this move is starting to look toppy.  On a weekly basis, the 50 day moving average is still below the 200 day moving average and traders should be alert to resistance levels near the 1,130 level and the 1,150 level, which was the high reached in January.  This level could complete right shoulder, a level that would match the left shoulder formed in January.

Paul Krugman, recently in the New York Times, highlighted a story (in AOL’s Daily Finance) written by Charles Hugh Smith.  In it, Smith describes how 20 years of economic stagnation (the US economy has been stagnating for four years) have begun to destroy Japan’s society. 

He focuses on the younger generation of people who are no longer working hard in school, who are not even attending school, who do not pursue long-term careers at large companies.


Because there is no opportunity for them to attain these jobs.  The same types of jobs that their parents and their grandparents attained.  So Japan is rapidly becoming a society of haves and have-nots, where the younger generation is clearly among the have-nots.

So what are they doing instead?

Faced with unstable employment and low wages, they’re showing signs of quitting, or giving up, in all aspects of life.  They’re not getting married.  They’re not having kids.  They’re not moving out or their parents’ homes.

Smith refers to them as “parasite singles” who, instead of contributing to society through productive work, create a major burden. 

In the most extreme cases, these young people literally isolate themselves in their parents’ homes, not coming out of their rooms for long stretches of time. 

An entire generation in Japan is withering away, all because of a massive balance sheet recession that began in 1990. 

The US is in a balance sheet recession.  It began in 2007.  It’s showing no signs of abating. 

Will the US economy destroy a generation of young people in 10 or 15 years?

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