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I’ll conclude my series with a brief study and overview of similar events that have already taken place to an extent in an industrialized country on the other side of the globe. This industrialized country’s population peaked around 1990 whereby its citizens hit a median age of forty. This peak age helped put productivity to an all time high during the reign of this economic powerhouse. For the past 16 years, however, this country’s industrialized economic engine has stagnated and the burden of their socialized system has been growing steadily on their government. This country’s citizens are now beginning to reap what has been sown the past 4 decades. The country I’m writing about is Japan.

A recent headline in the Washington Post via Japan Times read, “Welfare cuts hit Japan’s aged hard” and the article describes the burden of aging seniors on the government. A quote from the article reads:

“A front-page story in the Washington Post said that as Japan, the world’s most rapidly aging country, struggles to cope with exploding health-care costs, it is cutting back on its universal health-care system, pensions and welfare benefits for seniors of all social classes, “but those already living on the margins are being hit the hardest.”

The Post cites the example of Gosuke Kakizaki, 73, a man living alone and entirely dependent on the state, who saw his pension payment slashed from $ 826 to $ 625 a month.

Over the past decade, the number of indigent seniors nationwide skyrocketed by 183 percent to about half a million people, according to welfare ministry statistics.”

Furthermore, a recent study by economist Norihiko Yamano, paints a bleak future for the Japanese economy and its citizens. In his study, Norikiko writes, “The increase of elderly people causes the decrease of savings, resulting in the decline of investment required for production activities. Population decrease also causes the decrease of consumption and shrinks the economy from the demand side.”

Unfortunately for the US, the elderly here have paltry savings accounts so the problem will likely be exacerbated greatly in the US when a similar decline occurs.

Yamano also writes, “As for lighting services at home, the increasing trend of the demand per household is forecasted to last for the time being because the time spent at home will become longer due to the aging of population and the use of electricity will increase also for convenience and safety.” Yamano continues to express his belief that power usage will dwindle as the economy in Japan shrinks and the population thins out. I have doubts that the same will happen in the US for various reasons expressed in Part IV of my series.

It is interesting to note that as the population productivity peaked in 1990 for Japan, the Nikkei experienced an all time high and has been on a subsequent decline for the past 16 years with periodic retracements/rises in between

Japan Stock Exchange

In contrast, the US peak productivity population occurred in 2000 where the median age of the working populous hit age 40. Is this chart the future for the Dow, S&P, & Nasdaq composites?

Another interesting note is the general decline of Japan’s real estate during the 14 year period after the peak. This has been occasionally commented on by some in the media.

Of course, Japan is just a mini version of what may ultimately happen in the United States. There are some key differences however in the scope and breadth of potential issues that will hit the US. For starters, Japan has maintained a savings rate of about 28% where as Americans now have negative savings rates. American’s have largely financed purchases through home equity cash outs and/or credit card debt. The Federal Reserve continues to print money and inject liquidity into an already over “juiced” banking system while at the same time raising the cost of borrowing. The net effect is an artificially created stagflated economy. It is uncertain whether foreign banks will continue to accomodate American spending through Treasury purchases and trade imbalances.

Why there WILL be suffering….

I had a discussion with a friend over some hypothetical situations that included the following scenario: If you woke up tomorrow morning and you found yourself in New York City on the morning of September 10, 2001 knowing full well what was in store for the world tomorrow on September 11, 2001, what would you do?

We tossed around the idea that standing in front of the World Trade Center would be futile. How many people would listen to you screaming at the top of your lungs yelling, “Don’t go in there!” Would you be any more successful if you were calm and logical? What would the police or FBI say if you told them airplanes would crash into the buildings? I don’t have an answer for the scenario. I don’t know what would be effective.
Similary, we find ourselves in this situation. A few people seem to know what we face over the next decade and while a few people sound the alarm, the vast majority of the populous simply goes on with life without any concern for the future. The situation is worsend by the perpetual cheerleades on CNBC and other media outlets whose only purpose in life now seems to be to give people false hope so they can keep the ad revenue rolling.

I hope that by writing I can save at least a few of you……