Things not looking good for Japan

David Stockman chronicles the Keynesian folly engaged in by Japan in the 1990s:

the Keynesian disease insinuated itself, and it came naturally to a ruling party—the LDP—-that had presided over Japan’s state-driven development model of the post-war years. The machinery of Japan’s politics was all about distribution of construction, credit and corruption among the LDP’s constituencies.

After 40 years of boom and the final BOJ bubble, Japan had reached a condition of “peak debt”. Already by 1990, total credit market debt—public and private—-exceeded 350% of GDP, and by now it has soared to in excess of 500%.

Yet prodded by mainstream economists in the US government and international institutions, Japan had dismantled its tax base in one effort after another to stimulate short-term investment. Its nominal revenues consequently fell continuously for nearly two decades. There is nothing like it in developed world experience.

This untimely collapse of the savings rate will prove especially destructive for the retirement colony that comprises Japan’s demographic future. Saddled with towering public debts and rapidly shrinking work force, Japan will swiftly consume its accumulated savings as its retirement rolls soar. A decade or two down the road it will become an international pauper.

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