Japanamania!

Japan is often referenced when talking about their "Lost Decade" in the 1990s, a time when growth stagnated and economic activity flatlined. For ten years. And after that, the ruling party was STILL in power. So when the opposition party actually captures control of the government in the Land of the Rising Sun, it's a big deal.

Japan's opposition swept to a historic victory in elections Sunday, crushing the ruling conservative party that has run the country for most of the postwar era and assuming the daunting task of pulling the economy out of its worst slump since World War II.

A grim-looking Prime Minister Taro Aso conceded defeat just a couple hours after polls had closed, suggesting he would quit as president of the Liberal Democratic Party, which has ruled Japan for all but 11 months since 1955.

"The results are very severe," Aso said. "There has been a deep dissatisfaction with our party."

Unemployment and deflation — and an aging, shrinking population — have left families fearful of what the future holds.

Fed up with the LDP, voters turned overwhelmingly to the opposition Democratic Party of Japan, which ran a populist-leaning platform with plans for cash handouts to families with children and expanding the social safety net.

"This is a victory for the people," said Yukio Hatoyama, leader of the Democrats and almost certainly Japan's next prime minister. "We want to build a new government that hears the voices of the nation."

The new party plans for real economic stimulus and appears to be far more interested in reversing the effects of climate change. It looks like the Democratic agenda includes practically everything but the kitchen sink, so there are bound to be disappointments. But they actually have a two-thirds majority needed in their lower House to pass bills (I'm thinking about Japan's perpetual economic troubles, and the similarity to California, based mainly on that process obstacle).

Meanwhile, here's a look at Japan's health care system, among the best in the world (though lifestyle plays a big role in that).

...interesting op-ed from the likely new Prime Minister Yukio Hatoyama, arguing for a new progressive economic structure and not "unrestrained market fundamentalism and financial capitalism, that are void of morals or moderation, in order to protect the finances and livelihoods of our citizens."

You're Allowed To Do That?

Banks received TARP money in exchange for agreements with the federal government to offer back dividends, among other things. And now, some banks are flat-out not paying them anymore.

At least three small, cash-strapped banks have stopped paying the U.S. government dividends that they owe because they got $315.4 million in capital infusions under the Troubled Asset Relief Program [...]

Treasury spokeswoman Meg Reilly said Monday that "a number of banks" that got taxpayer-funded capital under TARP are no longer paying dividends to the government. "Treasury respects the contractual rights of [TARP recipients] to make decisions about dividend distributions, and that banks are best positioned to decide how to manage their own capital base."

The moves are a sign of the deepening misery for large swaths of the U.S. banking industry, suffering under bad loans and the recession even as large firms such as J.P. Morgan Chase & Co. and Goldman Sachs Group Inc. rebound from the crisis, including by repaying their TARP funds last week.

Remember that whole "sanctity of contracts" that the United States cannot abrogate, during the AIG bonus debate? I guess that's no longer operative.

Yves Smith writes:

Plenty of folks, including yours truly, were skeptical of Treasury's claim, made often with a straight face. that the government was exercising care on who got TARP funding (as in it was not just handing out dough willy-nilly, but did have an eye to getting taxpayer dough back). That of course presupposes that the banks getting the money were just a little bit bad off, as opposed to in Serious Trouble (belied by the aggregate size of the effort) [...]

Given that there are no formal penalties for suspending TARP dividends, save a negative reaction in the markets, which would affect stock prices and borrowing rates, there consequences of missing payments may be de minimus. While three small banks missing payments is in theory no biggie, the action does point up the disconnect between the PR of TARP (protect the taxpayer) and practice (protect the banks). Even if the result of pressure to bolster capital levels, this precedent may encourage others to follow.

OK, if you still think the banks are solvent, let's just for one day pull the plug on all the special vehicles that the Federal Reserve and the Treasury Department and the FDIC have been offering these firms, and watch the entire financial system absolutely melt. What this means for the future is that we're propping up a sick system, just as Japan did in the 1990s, and their experience shows a lost decade with little or no economic growth, because the money dumped into the black hole of the banking system does nothing for the larger economy. That's why we're going to see 10 percent unemployment soon, that's why the so-called "real" economy is cause for such concern, and that's why those of us hearing about these "green shoots" are not impressed.

And I have to agree with Atrios- what exactly is recovering in this recovery if everyone is broke and out of work and the numbers for everything except Government Goldman Sachs bonuses are down? I understand that unemployment is a lagging indicator, so please don’t spam the comments with that (it is an insight so trite it ranks up there with “correlation does not equal causation.” Thanks. I had intro to stats as an undergrad, too.).

And I’m being serious. What exactly are we basing these claims of green shoots and recovery on other than pixie dust?

The root cause of this is the dysfunctional financial system, and that system is not being fixed. So the public suffers the consequences.

Yay, My Friend Is A Pawn In An Intercontinental Ballistic Missile Game

I'm beginning to understand why my friend Euna Lee and her colleague were taken into custody by the North Koreans last week. Obviously they are being used as bargaining chips, but apparently that leverage will be put to immediate use:

North Korea has placed a long-range missile on a launch pad before a test that the United States, Japan and South Korea said would violate a United Nations Security Council resolution, a news report said Thursday.

Spy satellites detected what looked to be a Taepodong-2 missile in place Tuesday at the Musudan-ri launch site near North Korea’s northeastern coast, said Chosun Ilbo, South Korea’s leading daily, quoting an unidentified diplomatic source.
Once the rocket is installed on the pad, missile experts said, the North Koreans can technically launch it within three or four days — the time needed for the fueling of a three-stage rocket.

North Korea has said it would launch a rocket over Japan and the Pacific between April 4 and 8 to deliver an experimental communications satellite into orbit. But Washington, Tokyo and Seoul have said the launch is a cover for testing its Taepodong-2 ballistic missile. Both missions — the satellite and the ballistic missile — use the same rocket technology.

Obviously the American reaction to this is bound to be tempered by the fact that Pyongyang has two American journalists in their custody. While the Secretary of State has called for sanctions if the missile launch goes forward, and Japan has put interceptor missiles on alert and dispatched warships toward the peninsula, with Lee and Ling captured, the opposition is bound to be toothless.

This just makes me feel great on a Friday!

World Report

Been a while since I got into this.

• Iraq: The speaker of the Parliament has been officially ousted in a move that doesn't seem to bother anyone, not even the speaker, who was kind of a loose cannon. But if anything, it's a symbol of the political power plays that have gripped the country for the past six months, leading into provincial elections. The Prime Minister is surely consolidating power, using a narrow amount of goodwill engendered by security gains to muscle his competition for power. Maliki wants a strong central government because he's at the head of it, while the Sunni and Kurdish factions want their own authority and independence.

“Maliki is monopolizing all the political, security and economic decisions,” said Omar Abdul Sattar, a Sunni member of Parliament. He listed political parties that he said were turning against the prime minister, including a powerful Shiite party, the Islamic Supreme Council of Iraq, which is fighting Mr. Maliki’s drive to centralize power in Baghdad and pushing to give more to the provinces — where the party has important power bases, particularly in the south. “It’s simply the story of the transformation from a democratic prime minister into a dictator,” he said.

Given Iraq's history with dictatorships, and the fractious nature of ethnic and sectarian divides in the country, this is a natural state of affairs, which is why the hopeful talk of democratic transformation in the heart of the Middle East was always such rubbish. We invaded Iraq to remove a dictator so they could eventually install another one, this time with a more overtly religious cast. Not that Iraq was a threat to the United States beforehand, but it's hard to see how this made our country any safer, especially when factoring in the human and financial costs.

• Israel: I'm very worried that full-scale fighting is about to break out between Israel and Hamas in Gaza. Hamas ended its cease-fire last week, and has been lobbing dozens of rockets into Israeli territory. Since Hamas' electoral victory, Israel has sealed off the Gaza strip, turning it into essentially a large prison. Egypt, which has been offering aid and assistance to the Palestinians in Gaza, wants to mediate a truce, but I don't think it's likely. There is a faction in Israel that sees crushing Hamas as part of the road to peace - and that's the LESS hawkish faction! This is going to explode in the next several days. Very worrying.

• Japan: The Pacific Rim nation is mired in another deep recession, as industrial output cratered and deflation appeared imminent. Japan was growing largely on the back of American consumption of their goods the past few years, and so this was inevitable. As America's rise back to prominence is tied to stimulating a home-grown industrial base, it's hard to see how Asian nations like this improve unless we give up and try to return to an unsustainable consumption model again.

• Somalia: The President of the transitional (read: powerless) government is resigning. By next year, I gather that you will see the Islamic Courts Union back in power here. Ethiopia will pull all their forces out in the next few weeks, and there is little to stop the ICU. And so a US-sponsored war will have produced nothing but more bloodshed and the rise of a powerful cadre of pirates, who reduced global economic trade through thievery. It was a shortsighted solution lacking a regional context, and it failed totally.

• Guinea: I'm not going to lie and say that I am perfectly well-versed about Guinea (not to be confused with Guinea-Bissau or Papua New Guinea), but they've had a coup by a military junta, which is the 10,834th of the military-led coups in Africa since, oh, last week. The latest in Guinea followed the death of a longtime dictator, Lansana Conte. The cycle of coups and state-sponsored repression is so commonplace on the continent, that it's hard to find a glimmer of hope. The African Union is simply not a strong enough institution to deter the practice.

• Europe: European leaders are talking about accepting some Guantanamo detainees as a gesture of goodwill toward the new President. Obama is going to have a global honeymoon period where he can really get a lot accomplished, and closing Gitmo should be at the top of that list as pertaining to foreign policy. One possible red flag is the persistence of Robert Gates at the helm of the Defense Department. He is being sued by Guantanamo detainee lawyers for signing a false affidavit that allowed him to sidestep disclosure of torture. That will not help any charm offensive. Pro Publica has a good roundup of the year in Gitmo here.

McCain vs. Obama on The Economy

I don't think I'm breaking any news by claiming that the United States is either on the verge of a recession or deeply embedded inside one. Ian Welsh says that this could be a replay of the Japanese "Bright Depression," where a real-estate bubble's popping led to a long period of slow to no growth, and a virutal stasis in the financial system, with the rich getting richer and the poor remaining poor. This is the type of "soft landing" that people like John McCain's economic team would die for. They want to massively cut taxes on the super-wealthy, and when pressed, simply cannot explain how to avoid deficits given that tax imbalance.

SCARBOROUGH: You’re saying we can afford, just a yes or no, we can afford to extend George W. Bush’s tax cuts?

HOLTZ-EAKIN: Yes.

SCARBOROUGH: Ok. But in 2001, when Sen. McCain voted against George Bush’s tax cuts, he said we couldn’t afford it because it would create a deficit. In 2001, we had a 155 billion dollar surplus. This year, in 2008, when he now supports the tax cuts, as you know, we are moving towards a 300 billion dollar deficit. How can we afford tax cuts in 2008 with 300 billion dollar deficit that John McCain said we couldn’t afford in 2001 when we had 155 billion dollar surplus?

The reason Holtz-Eakin refused to explain how McCain would “balance the budget” while extending and enhancing the Bush tax cuts is simple: He can’t do it.

It's a cliche, but McCain really does represent more of the same. He'll continue to bail out those who can most afford the risk and leave those at the edges of society without a safety. To those without power or connections, McCain says let them have eBay, which is not the basis for a sound and responsible economy.

On the other hand, Barack Obama moves the debate back into the mainstream. He wants to renew American competitiveness through a variety of innovations and reforms, leveling the playing field for global trade, making massive investments in renewable energy. He's put education at the top of this agenda, and that's a refreshing change considering that it's focused on giving young people the opportunity to learn through tax credits and financial aid, instead of this treadmill of "measurement" and "accountability" that seeks only to turn our kids into robots more concerned with filling in a bubble than thinking independently. This all points to a new strategy for the global economy that has a different set of values than the failed conservative ideas of the past. But Obama needs to go further.

What America needs is a clear strategy to sustain its middle class in a global economy that has just integrated over 2 billion workers in China, India and the former Soviet Union. Neither the Bush administration nor Arizona Sen. John McCain shows any sign of having ever thought seriously about this fundamental challenge to U.S. security. McCain seems satisfied to prate about the benefits of free trade, and accuse Obama of believing America can't compete.

This week in Flint, Mich., Obama called for the U.S. to develop its own national economic strategy, and began by putting forth elements of a "competitiveness agenda" for the U.S. He vowed to raise taxes on the wealthy, capture some of the money now being squandered in Iraq, and invest in a concerted drive for energy independence, seeking leadership in the green industries of the future; in education and training, from pre-school to affordable college; in a world-class modern infrastructure from broadband to fast trains; in research and development to keep the U.S. the world leader in science and invention. While conservatives were grousing about "tax and spend," sensible observers might be more worried about whether his commitments were commensurate with the size of the challenge. ($10 billion a year in an investment bank for infrastructure won't build many bridges, much less seed modern transit.) [...]

How can America benefit from the expanded trade and opportunity of a global economy, while avoiding a race to the bottom that erodes the American middle class that is the pride and the foundation of our democracy? How do we balance our relationship with China, even while engaging that country to join in the effort to address global warming? These are far more fundamental challenges to our security than the threat posed by the scattered extremists of al Qaeda.

While McCain is simply out of touch, Obama has put forth essential elements of a different course. He's called for the U.S. to get serious about developing a national strategy for the new global economy. But that can't be done without a much more candid debate about the big gorilla in the room —China, whose communist governors are happily lending us the rope to hang ourselves with.

It's very clear that the McCain strategy on the economy is to lie about Obama's plans, using a willing media that doesn't know the difference when it comes to facts and figures to muddy the waters. McCain's minions will say, and the media will repeat, that that Obama wants to raise taxes on 21 million small businesses. In actuality, the number is less by a factor of 42, only those who make over $250,000. McCain's minions will say, and the media will repeat, that individual taxes will increase if you have an IRA or a 401(k). Retirement investment income are taxed at regular rates when distributed, not capital gains. That's the whole point of retirement accounts! McCain's minions will say, and the media will repeat, that Obama wants to raise payroll taxes on the middle class, neglecting the "donut hole" that ensures nothing will change for those making less than $250,000 a year.

They have to lie because they have no vision for the future. Obama may find that his vision is unsuited to the Herculean task. But I believe that, under his Administration, for the first time in eight years reality will be a factor in the decision-making.

World Report

Every so often I look at the world, and make a report. This is that report.

• Zimbabwe is the biggest hell hole on Earth. Inflation is over 100,000% annually. You actually need a wheelbarrow to carry around money. And in a country dependent on international food aid, the ruling party of Robert Mugabe is using food aid as a weapon to force the public to vote for them. "No ZANU Card, No Mealie Meal," as Hilzoy puts it. I'm sickened. Among the many insufferable dictators around the globe, Mugabe may be the worst, and I would have little problem with a humanitarian intervention to force equal distribution of food aid.

• Speaking of dictators and Africa, a leader of the Janjaweed militia is finally admitting what everyone already knew, that he received his orders to rape and murder the Darfurians from the Sudanese government in Khartoum, as well as heavy weaponry. Even though this has been assumed, it's the first time a Janjaweed leader has gone public.

• So desperate to reach any kind of fig leaf of a deal in the Middle East that would signify something resembling a "legacy," the Bush Administration is now talking about allowing Hamas to participate in talks with Israel, using Egypt as an intermediary. This is mainly about negotiating a cease-fire, not some overarching agreement on Palestine. But the softening stance is probably a good thing in the long run.

• Speaking of Bush toning down his arrogant foreign policy, apparently they've discovered that nobody really likes Pervez Musharraf, and are stopping their praise of him, instead trying to cozy up to the opposition parties. Might be a little late for that, but of course we rarely learn out foreign policy lessons.

• So I guess a substantial number of our troops (at least a dozen) have been subject to accidental death by electrocution in Iraq, and Henry Waxman wants to get to the bottom of it. Support the troops, I believe, is the phrase. Man, they must be living in a pit over there, paid for by our tax dollars (funneled to unfeeeling corporations who do shoddy work, that is).

• The Islamists in Somalia, though defeated in last year's war, have not been vanquished, and in fact they beheaded three Somali soldiers, prompting the UN to raise alarms and plead for peace talks. Even the proxy wars Bush fights and wins are never actually won.

• There's some additional news from Tibet, where the authorities have arrested dozens inside the autonomous region and have acknowledged unrest outside the province, in other parts of China. Chinese police have shot Tibetan protesters in Sichuan province, wounding four. So far, the estimate from protests in Lhasa is 13 deaths, which is probably low. Meanwhile, the Dalai Lama sits in exile in India, and relations between India and China may grow strained as a result. It's a bad situation, but pressure must continue to be put on the Chinese government to allow for independence or at least some peaceful solution.

• And finally, Doraemon is a Japanese ambassador. When I went to Bangkok a while ago, we saw this Doraemon piggy bank in the Thai version of a 7-11. The bank was free with a hot dog, and my friend didn't want the hot dog but was willing to pay the price for the bank. The clerk refused to give the bank without the hot dog. It was an amusing cultural misunderstanding that hopefully Doraemon, in his new diplomatic role, will help to prevent.

I Love Japanese Politics

Here's how Prime Minister Shinzo Abe of Japan is dealing with low approval ratings and incompetent cabinet members:

Prime Minister Shinzo Abe sought to overturn sinking approval ratings and calls for his resignation today by forming a new cabinet made up of political veterans [...]

Masahiko Komura, 65, a former foreign and justice minister, was named defense minister. Mr. Abe’s two previous defense ministers had proved to be major embarrassments, including Yuriko Koike, 55, who called herself “Madam Sushi” and became entangled in a painfully protracted and public squabble with her ministry’s leading bureaucrat [...]

Immensely popular less than a year ago, Mr. Abe has increasingly become the object of ridicule in the popular media. He has become the poster boy for someone who is “K.Y.” — a currently popular expression that literally means “can’t read the air” or “clueless.”

Just a nice parallel on this day of turmoil in American politics. I think in "Madam Sushi" we've found someone more embarrassing than Abu Gonzales.