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Ferraris for the Rich and Bupkis for Everyone Else

Abenomics in 14 Words

by MIKE WHITNEY

Ferrari sales are going gangbusters in Japan, but beer sales have started to fizzle. That’s all you really need to know about Abenomics.

According to Bloomberg: “Ferrari said sales in Japan will rise by 30 percent this year….(Sales have already) increased 28 percent in the first six months. Lamborghini sales are also soaring. According to “Lamborghini SpA Chief Executive Officer Stephan Winkelmann…. the automaker is very happy with Japan. “It’s coming back big time,”….Deliveries of Lamborghini in Japan increased 13 percent to 142 units in the first nine months, according to Japan Automobile Importers Association.” (“Ferrari Says Sales in Japan to Rise 30% as Abe Revives Spending“, Bloomberg)

In contrast, Beer shipments dropped by nearly 3 percent “in August to their lowest level for the month since comparable data became available in 1992, figures from major brewers show….Asahi Breweries Ltd. and Kirin Brewery Co. logged declines, chiefly due to weak beer sales.” (Beer, near-beer shipments fall 2.8%“, Japan Times)

How do you like that?

So, Abenomics works much like Bernankenomics, Draghinomics (EU), Harpernomics (Canada), Cameronomics (UK), and now Abbottnomics (Australia). In every case, looser monetary policies and tighter fiscal policies have generated more wealth for the 1 percenters while working stiffs take it in the stern sheets. You can call it QE or Abenomics or LTRO or monetary easing or quantitative jabberwocky. It doesn’t really matter what you call it, because it all amounts to the same thing: Ferraris for the rich fu**ers and bupkis for everyone else. Get it?

In the US, the Federal Reserve has provided “unlimited” low cost funding for the big Wall Street banks while pumping up financial markets by more than $3 trillion. So, naturally, conditions have improved dramatically for wealthy speculators. As for the other 99 percent? Not so much. They’re still struggling with high unemployment, droopy wages, falling incomes, sizable household debt, dwindling disposable income, and a stimulus-starved economy that’s still sputtering along at half speed. Other than that, things are just groovy.

Five years into the so called “recovery” and the Feds funds rate is still locked at zero, which means that economy is still so weak that the Fed can’t raise rates by even 1 measly percentage point without fear that the whole house of cards will come crashing to earth. By every standard of measurement, QE has been a failure. It has, however, turbo-charged stock prices, pushed bank and corporate profits to record highs, greatly exacerbated inequality, and made some very rich people richer still. In other words, the policy is working just fine, thank you very much.

In Japan, the results are basically the same though you wouldn’t know it by reading the papers. The media characterizes Abenomics as a smashing success which has raised GDP, boosted exports, sent stock prices skyrocketing and slashed the value of the yen. It’s true, too, to some extent. Like Bernanke’s QE, Abenomics has made some very rich people even richer. Unfortunately, the view from below is quite a bit different. Retirees, savers and working people have seen conditions steadily deteriorate due to stagnant or falling wages, higher inflation, zero interest gains on their investments, and higher taxes. You read that right, Abe actually raised the sales tax to 8 percent, putting the economy at risk of another slump just to placate the IMF and to reward his right-wing corporate base. Japan’s top earners wanted proof that Abe was committed to shifting more of the nation’s prodigious debtload onto the shoulders of working people, which cheerily he did by jacking up the sales tax. Here’s the story from Bloomberg:

“Japanese Prime Minister Shinzo Abe proceeded with an April sales-tax increase….The levy will rise to 8 percent from 5 percent now, Abe, 59, said in Tokyo today, the first increase since 1997. …

With households already hit by a rising cost of living and declines in pay, proceeding with the higher levy enacted by the previous government poses the biggest risk yet to Abe’s efforts to end two decades of Japanese stagnation. …

The economy will contract an annualized 4.5 percent in the three months after the sales tax is increased in April before returning to growth, according to the median calculation of economists surveyed by Bloomberg News. For the 2014 calendar year, the expansion is seen slowing to 1.6 percent from 1.9 percent this year, the median estimates show.” (“Abe Orders Japan’s First Sales-Tax Increase Since ’97: Economy“, Bloomberg)

What does it tell you when the country’s top policymaker is willing to raise taxes even though he knows the cost of living is already going up, wages are still going down, and the economy is set to contract (by 4.5 percent) as soon as the tax goes into effect? Does that sound like a leader who is genuinely interested in growing the economy and ending deflation? Or does it sound like another chiseling phony using his office to skim bigger profits for his parasite banker friends?

Wages are going down in Japan. DOWN. How do you build a recovery on crappy wages that are progressively getting crappier? You can’t, which is why Abenomics is all smoke and mirrors. Take a look at this:

“Wages in Japan decreased to 407.34 JPY THO in July of 2013 from 531.11 JPY THO in June of 2013. Wages in Japan is reported by the Ministry of Health, Labour and Welfare, Japan. Japan Wages averaged 317.62 JPY THO from 1970 until 2013, reaching an all time high of 883.79 JPY THO in December of 1997 and a record low of 52.91 JPY THO in February of 1970.” (“Japan Wages“, Trading Economics)

This is the official data, not some gibberish you read in the mainstream media where Abenomics is celebrated as the second coming of Daruma. When wages drift lower, people spend less, consumption dwindles and the economy shrinks. Everyone knows this, which is why the clever Abe frontloaded his economic recovery program with $100 billion in plain old fiscal stimulus, mainly infrastructure spending. The idea was to give the economy a big freaking jolt that the media would attribute to the Bank of Japan’s madcap money printing. But money printing is not the cause. Fiscal stimulus is the cause. And when the stimulus runs out (next year), the economy will tank. Because QE doesn’t increase production, boost GDP, reduce unemployment, raise inflation, or create a strong, sustainable recovery. It pushes up stock prices, inflates asset bubbles and, most important, makes some very rich MF’s richer still. That’s what it does everywhere it has been implemented, and that’s what it is doing now in Japan.

But at least consumer confidence is rising, right? Isn’t that what the pundits in the media keep telling us?

Wrong. Confidence is eroding, because people are making less which makes it harder to stretch their paychecks due to rising inflation. Check this out:

“Japanese consumer confidence worsened from three months ago for the first time in three quarters as more people reported their income shrank from a year earlier, according to the results of the Bank of Japan’s quarterly survey released on Wednesday. The data also showed that more people said prices had risen from a year earlier, indicating that higher utility charges and food prices may be decreasing the average household’s disposable income while base wages remain depressed….

More people expect their income will fall in the next 12 months…

The average household spending fell a real 1.6% on year in August, marking the first y/y drop in two months after a 0.1% gain in July. The average real income of salaried workers’ households fell a real 0.9% on year in August, the first fall in six months while their disposable income also posted the first drop in six months, down 1.4%.” (“BOJ Poll: Japan Consumer Confidence Slips on Lower Income”, MNI Market News)

The Bank of Japan’s (BoJ) crackpot governor, Haruhiko Kuroda, is on track to double the money supply in next two years in an effort to reach his inflation target of 2 percent. Unfortunately, higher inflation does not guarantee more activity or growth unless wages rise too. Which they aren’t. Wages are falling in Japan, so the plan is ridiculous. Check this out from Financial News:

“There is no evidence that inflation will help consumption. Growth requires higher household incomes or lower savings. Inflation tends to push up prices faster than wages and thus depresses household real incomes. Savings rates have been falling steadily as inflation has turned to deflation. …

It is also argued that inflation will reduce the burden of the national debt, by increasing the rate of growth of nominal GDP. This would be true if we were looking at hyper-inflation. However, as the bond market’s response shows, moderate inflation may well make matters worse, not better, by pushing up bond yields’ rates even faster than inflation.” (“Abenomics should take aim at structural reform”, Financial News)

Fed chairman Ben Bernanke has encountered the same problem in the US. Five years of zero rates and $3 trillion of asset purchases (QE) have not brought him any closer to hitting his inflation target of 2 percent. Thus, it would be reasonable to assume that QE doesn’t raise inflation and that stuffing the banks with excess reserves and juicing stock prices really won’t achieve the intended objective. Unless, of course, the real objective is to make rich speculators even richer, which it appears to be doing quite well.

Abenomics has shown some progress in spurring credit growth and personal consumption. But, once again, these positive signs are mainly attributable to the one-time-only $100 billion burst of fiscal stimulus. When that runs out in mid 2014, we’ll see that boosting base money does not lead to more spending, a broader credit expansion, or greater business investment. Instead, it leads to stock buybacks, excessive margin debt, asset bubbles, and other misallocations into thoroughly unproductive areas of yield-seeking speculation. Kuroda and pal Bernanke are, in effect, pumping petrol directly into the car’s carburetor expecting the vehicle to run smoothly. After 5 years of applying the same flawed theory, we can surmise that their confidence is misplaced.

Like QE, Abenomics is a public relations moniker that conceals the way the policy really works. “Check kiting” would probably be a more accurate designation, since the two central banks are in fact engaged in a form of fraud in which funds are drawn from an overdrawn account. Naturally, the losses from this paper hanging exercise will eventually be passed along to unwitting taxpayers in the form of inflation.

But Abenomics is not merely monetary flim-flam disguised as economic policy. It is also a straightforward attack on worker protections, progressive institutions and vital safetynet programs. For example, Abe is also pushing for “special economic zones” where he can test his theories on radical deregulation. In the words of the far-right Economist magazine, the zones would allow “Big companies… to have more freedom to fire full-time workers, which is almost impossible in Japan….(and) “to create a giant special agricultural zone on the island of Hokkaido, where firms would be allowed to own farmland.”

How is “greater freedom to fire workers” good for the economy? Personal consumption is weak already. Will it improve by hiring more low wage workers?

No, of course not. And what about the “special agricultural zones”? Does anyone really believe that you can strengthen a recovery by allowing the behemoth multinational agribusinesses to run roughshod over Japan’s many mom and pop farmers who are fighting for survival?

No, again. The idea is laughable. Needless to say, none of Abe’s “reforms” are directed at the many overbloated and underwater “zombie” financial institutions that are responsible for the lion’s share of the bulging national debt. Regulation does not apply to these bloodsuckers who own the system and whose money puts flunkies like Abe in power.

Abe’s other “reforms” include lowering corporate taxes, bigger out-of-pocket medical payments, a rise in the retirement age, and “the largest-ever cut to welfare benefits.” The common thread in Abe’s so called reforms is not hard to sort out; It’s tax breaks and subsidies for the rich, and austerity for everyone else.

And that’s why Ferrari sales are red-hot, but beer sales are in the dumps.

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. Whitney’s story on declining wages for working class Americans appears in the June issue of CounterPunch magazine. He can be reached at fergiewhitney@msn.com.