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Personal Savings& Incomes

U.S. vs. Japan

• History is Made! US Personal Savings rate goes negative for the first times since the Great Depression!

• Even with NO savings, half a trillion dollars is taken from men taxpayers and handed over to single-mother households.

• Japan continues to save 34% of GDP each year while US saves 15%

• Japan's savings now exceed $25 Trillion

• Of the world's top 52 commercial banks, 17 are Japanese with assets of $5.6 trillion

• US media reports Japanese economy is "on the verge of collapse".  Wrong!!

• Media coverage of this economic disaster is irresponsible!

Asiaweek's "Bottom Line" reports that the U.S. saves 15% of GDP, while Japan saves 34%. The fundamental difference in the long term impact of those savings is:

1. Japan's interest payments on its $1.9 trillion in debts are less than $20 billion per year, so the vast majority of its projected 1998 savings of $2,325 billion will become assets.
2. U.S. interest payments on its $10.4 trillion in debts exceed $1 trillion, not much more than our projected 1998 savings of $1,125 billion

In 1998 alone, Japan will increase its national assets by $2,305 billion in savings plus another $134 billion in its positive balance of trade. The U.S. would have increased its national assets by less than $125 billion had it not been for the projected $300 billion trade deficit. In the last 3 decades, the value of the yen to the dollar increased 3.4 fold, from 400 yen/dollar to 117 yen/dollar. There is no evidence that this trend will not continue or even accelerate over the next 3 decades, which could make the yen worth 34 yen/dollar by 2030.

The article "The Social Contradictions of Japanese Capitalism" by Murray Sayle (http://www.theatlantic.com/issues/98jun/japancap.htm) states:

• Japan's "postal savings ... system now holds, with insurance and pensions, the yen equivalent of $3 trillion".

"Japan Statistical Yearbook, 1998", page 462 reports that the Japanese, in just the year 1996, deposited more than 213 trillion yen (or $1.3 Trillion) in the "postal savings account", and that the Japanese have been saving 23.9% of their incomes for the last 5 decades, "Bottom Line" in Asiaweek reports Japan's savings as 31-34% of GDP during that time. Median Japanese incomes in 1994 were $89,000, so 42 million Japanese workers saved an average of $29,370 each, which is $1,233 Billion in savings in 1994 alone. Edward W. Desmond reports that Japan's total personal savings are $13 Trillion (see http://www2.crosswinds.net/san-diego/~manifesto/j1.htm). Testimony of Martin A. Armstrong before US Congressional House Way & Means Committee reports Japan's total Postal Savings Accounts at $10 Trillion (see http://www2.crosswinds.net/san-diego/~manifesto/j3.htm). The United Nations "Statistical Summary" reports the balance in their Postal Savings Account to be $22 Trillion.

References B) & F) below report:

1) Total Deposits in Domestically
   Licensed Banks                       477 trillion yen
   (Private Deposits grew from 37.5
   trillion in 1970 to 402 trillion
   in 1996--10% compounded annually)
2) Credit Associations                  113 trillion yen
   (grew from 24 trillion yen in 1975
   to 113.3 trillion yen in 1996--6%
   compounded annually)
3) Private Commercial Banks             700 trillion yen
4) Trust Banks                          251 trillion yen
5) Shankin                              107 trillion yen
6) Foreign Banks                          4 trillion yen
7) Postal Savings Accounts            1,200 trillion yen

     Total in yen                     2,852 trillion yen
     Total in dollars at 117 yen/$    $24.4 trillion

Murray Sayle writes:

• "The Finance Ministry has confessed that Japanese banks hold bad loans worth a confidence-crushing 76.7 trillion yen ($614 billion), proportionally ten times as much as America's savings-and-loan failures cost."

This is incorrect, in addition to misleading. It is a miniscule problem by contrast to the mountain of money in Japanese Postal Savings Accounts alone. The article is factually in error when it states that a bank loss of perhaps 2-3% of their savings is "proportionally ten times as much as America's savings-and-loan failures cost." The cost of our S&L scandal was about the same size in absolute dollars, but a $614 billion bank loss to the U.S. is "proportionately" 28 TIMES the amount of our official Personal Savings of $28 billion, compared to only 3% of Japan's savings.

He compounds this error:

• "'If the Nikkei [the Tokyo stock index] drops below twelve thousand, the world economy goes bust.' I checked the papers: the Nikkei, which touched 38,915 on December 29, 1989, was yo-yoing between 14,000 and 15,000. (It is since up.) New York in 1929 felt edgy and nervous, old-timers say, just as Japan does in the spring of 1998."

This is abundant evidence that the average Japanese score on the TIMSS math test (a score of 605 compared to the US score of 500) is very relevant to today's economic and education crisis. The Japanese, but evidently few Americans, understand that the Nikkei average is almost irrelevant to the average Japanese family or worker. The Japanese intimately understand the low probability of a good return on personal stock investing, so they don't do much of it. "Japan Statistical Yearbook 1998" shows their total personal investment in stocks to be 9 billion yen--$75 million--less than 0.003% of their savings.

Between August-October 1998, the value of Japan's savings on the world market increased by $6.25 trillion ($25 trillion x 25%), JUST because the value of the yen increased from 147 to 117.6 in only the last two months. While the media is replete with stories about the "Japanese Economic Crisis, Japan's GDP has not declined by any credible source:

                              1994   1995   1996  1997  1998

Europa World Yearbook 1998    483    487    505   n.a.  n.a.
(GNP trillions yen)

UN Statistical Yearbook 42nd  475    479    505*  n.a.  n.a.
(GDP trillions yen)

Asiaweek                             479    505   542   626
(GDP trillions yen)

*The Statistical Yearbook of the United Nations, Forty Second Issue, pg. 167 reports Japan's 1995 GDP to be $5,217 billion. The yen was as high as 80 yen to the dollar in 1995, but to get 505 trillion yen they had to use 96.8 yen to the dollar to estimate Japan's 1995 GDP in dollars.

When Asiaweek estimated GDP per Capita in Japan in March 1998, the value of the yen to the dollar was 147. Thus, their 626 trillion yen was a GDP of only $4.3 trillion. Now that the yen to the dollar is 117.6, this 626 trillion yen is actually $5.3 trillion--one trillion dollars more. If the yen continues on to 80 yen to the dollar before the end of the year, this 626 trillion yen will actually be $7.8 trillion, whichy would be a GDP per Capita twice that of the US.

Add to this the fact that our net worth declined by $7.8 trillion at the same time that Japan's increased by $22.4 trillion, and this question must be answered: "Which economy is the one really in trouble, Japan or USA?"

The US Personal Savings rate has never been stellar. But it is notable that Gross Personal Savings declined from its all-time high in 1970 of 1.44 billion ounces of gold to .89 ounces in 1996. This is a 38.2% decline which occurred at the same time that Japan increased its total Savings (including Postal Savings Accounts) to $25 trillion. The average American family has $4,000 in Personal Savings, $90,000 in Public Debt, and $18,750 in Consumer and Home Loan Debt, which is pocket change to that Japanese family. Chart 2 at: http://www.economist.com/editorial/freeforall/current/index_sf1139.html is misleading. It suggests that Japanese government debt is 140% of GDP, but http://www2.crosswinds.net/san-diego/~manifesto/j5.htm shows Japan's Public Debt to be $1.7 Trillion, or 29% of GDP.

The percent of Japanese managers who are women reached the unprecedented high of 1% of all managers by the mid-1980s, and has since declined to 0.5%. The percent of US managers who are women increased from 19% in 1973 to 44% in 1995, and the economy has never been in worse shape. Personal Savings are the lowest ever, at 0.4% (per the White House), Consumer Credit is higher than ever at $1.2 Trillion, Home Loan Debts are higher than ever at $3.7 Trillion, and there still is no plan to decrease the $5.5 Trillion Public Debt . Personal Savings of 0.4% is $28 Billion, and if 100% of it were used to pay off the debts, it would take 42 years to pay off the $1.2 Trillion Consumer Credit, 132 years to pay off the $3.7 Trillion in Home Loans, and 196 years to pay off the $5.5 Trillion Public Debt--or a total of 370 years. [Standard & Poor's "Current Statistics", July 1995, Vol. 61 #7]. Wouldn't this have been the totally expected outcome of affirmative action?

Japan's $1.7 Trillion Public Debt is less than 8% of its savings, and these savings could pay off Japan's Public Debt and have $23.3 Trillion left over. The Japan Statistical Yearbook 1998 shows that Japan's total Consumer Credit including home mortgages is $178 Billion, giving us more than 27 times as much consumer debt as Japan. Japan could use its Savings to pay off all of its debt in one year, and pay off all of our debts, and still have $12.9 Trillion left over.

In 1973, the US had 4 commercial banks with assets which were larger than any other bank in the world, with twice as many assets as the largest Japanese bank (B of A with $47 Billion vs. Dai-Ichi with $22 Billion). The World Almanac, 1998, pg. 115 shows that in 1996, Japan had 8 commercial banks which were more than twice the size of our largest commercial bank (Bank of Tokyo with $648 Billion vs. Chase Manhattan with $272 Billion). Of the top 52 commercial banks worldwide, 17 are Japanese with assets of $5.6 Trillion, and 3 are US with assets of $709 Billion, one eighth the assets of the top Japanese commercial banks. Even though assets in Japanese commercial banks are 8 times the assets in US commercial banks, this is less than a quarter of the amount Japan has in savings.

For the U.S. with such huge debts and such miniscule savings, to suggest that a nation like Japan with such huge assets and with such low debts, is having a "financial crisis" is the pot calling the kettle black. It proves only one thing--the ability and willingness of our government to lull us into a sense of complete unawareness is like a fine tuned violin.

Which Economy Is In Trouble--Japan or the US?

THE FACTS:

1. During the same period of time that the U.S. lost $7.5 trillion in national assets, Japan gained $23 trillion.
2. The US has never had a higher Public Debt, a higher Consumer Debt, nor a lower level of Personal Savings than it now has.
3. The real purchasing power of today's two-income families are literally one third of what one-income families' were in 1973.
4. The US hasn't had an after-inflation GDP growth rate in the last 30 years equivalent to the average after-inflation growth rate of Japan for 48 of the last 50 years.
5. The "low unemployment rate" the media touts is, according to every economist on record, a prognosis for dismal future economic competitiveness and progress.

References:

a) Japan Statistical Yearbook, 1998, Statistics Bureau, Management & Coordination Agency, Government of Japan, pgs. 458.

b) The Europa World Yearbook, 1996 Volume 1, 37th Edition, banks.

c) Current Statistics, Standard & Poor's, July 1995, Vol. 61 #7.

d) Journal of Japanese Studies, "How Postal Savings and Public Pensions Support High Rates of Household Savings in Japan", Stephen J. Anderson, pg. 88.

e) Testimony before Congress of Martin A. Armstrong which reports that Japan's Postal Savings Accounts contain $10 Trillion (http://www2.crosswinds.net/san-diego/~manifesto/j3.htm)

f) International Monetary Fund, "Saving Behavior & the Asset 'Bubble' in Japan", Occasional paper 124, Ulrich Baumgartner, April 1995.

g) OECD, working paper #73, "The Savings Behavior of Japanese Households", Kenichi Kawasaki, January 1990.

h) National Bureau of Economic Research, Working Paper No. 3690, "Japan's High Savings Rate Reaffirmed", Robert Dekle, Lawrence Summers, April 1991, Table 1(a).

i) United Nations Statistical Yearbook, 1997

j) Calculations