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OPEC Reports First Output Deal Results: 890,000 Bpd Cut

OPEC cut its crude oil production by 890,000 bpd from December to average 32.14 million bpd in January, the cartel said in its Monthly Oil Market Report on Monday, with figures suggesting that members are largely sticking to the supply-cut deal so far. OPEC’s secondary sources figures are close to those of the International Energy Agency (IEA), which said last week that the deal achieved a record initial compliance rate of 90 percent and OPEC’s crude oil production was 32.1 million bpd in January. As per the November 30 agreement, OPEC…

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OPEC Reports First Output Deal Results: 890000 Bpd Cut

OPEC cut its crude oil production by 890,000 bpd from December to average 32.14 million bpd in January, the cartel said in its Monthly Oil Market …The post OPEC Reports First Output Deal Results: 890000 Bpd Cut appeared first on crude-oil.news.

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Watch Attempts To Plug Oroville Dam Hole Using Rocks In Race Against Time As New Storm Forecast

After discovering a hole in Oroville Dam’s emergency spillway, officials said late Sunday that they will attempt to plug it using sandbags and rocks. But, as the LA Times notes, they stressed the situation remains dangerous and urged thousands of residents downstream to evacuate to higher ground. Video from television helicopters Sunday evening showed water flowing into a parking lot next to the dam, with large flows going down both the damaged main spillway and the emergency spillway.

They also showed lines of cars getting out of downtown Oroville. An evacuation center was set up at the Silver Dollar Fairgrounds in Chico.

Officials feared a failure of the emergency spillway could cause huge amounts of water to flow into the Feather River, which runs through downtown Oroville, and other waterways. The result could be flooding and levee failures for miles south of the dam, depending on how much water is released.

So to limit the potential damage and flooding, the primary plan of action currently in place is to plug a hole in the emergency spillway, including using helicopters dropping bags of rock into the crevasse to prevent any further erosion. Here’s the loud, chaotic scene as the choppers prepare for the rock drop via @judywbrandt on Twitter.

These sandbags full of aggregate are to be dropped into crevice below #OrovilleDam emergency spillway pic.twitter.com/HdrrkGJ3ST

— Dale Kasler (@dakasler) February 13, 2017

Work is ongoing to prepare bags of boulders to drop onto the weakened #OrovilleDam auxiliary spillway by helicopter pic.twitter.com/D1QPKM6wMv

— Tom Miller (@KCRAMiller) February 13, 2017

#MetroFire has staffed and deployed #Copter1 to Butte Co. in support of the #OrovilleSpillway incident in addition to CA Swift Water TF9. pic.twitter.com/cHIXjEzQeg

— MetroFire Sacramento (@metrofirepio) February 13, 2017

#OrovilleDam #OrovilleSpillway pic.twitter.com/WgetgoFauj

— Judy Brandt (@judywbrandt) February 13, 2017

#OrovilleDam #OrovilleSpillway pic.twitter.com/8Yl1yI30At

— Judy Brandt (@judywbrandt) February 13, 2017

#OrovilleSpillway #OrovilleDam pic.twitter.com/l1m6hUE4GD

— Judy Brandt (@judywbrandt) February 13, 2017

#OrovilleSpillway #OrovilleDam pic.twitter.com/O7jqURWOa2

— Judy Brandt (@judywbrandt) February 13, 2017

#OrovilleSpillway #OrovilleDam pic.twitter.com/qUghUENqkT

— Judy Brandt (@judywbrandt) February 13, 2017

#OrovilleDam #OrovilleSpillway pic.twitter.com/8vNyjS6K4F

— Judy Brandt (@judywbrandt) February 13, 2017

Meanwhile, as the LA Times also adds, the California National Guard is on standby and ready to assist with the Oroville Dam emergency, Adjutant General David Baldwin said during Sunday night’s press conference. The California National Guard put out an alert to all 23,000 of its soldiers and airmen telling them to be “ready to go if needed,” Baldwin said. The last time officials sent out such a broad notification was during the 1992 riots in Los Angeles, he said. The California National Guard would deploy eight helicopters to assist with spillway reconstruction; military police would also be deployed to Yuba County, Baldwin said.

* * *

Finally, the reason for the scramble to fix the dam is because a new storm system is forecast for later this week put water officials on a race against time. Bill Croyle, the acting director of the state Department of Water Resources, said they planned to continue discharging flows at a rate of 100,000 cubic feet per second, with the hope of lowering the reservoir level by 50 feet.

The biggest concern was that a hillside that keeps water in Lake Oroville — California’s second largest reservoir — would suddenly crumble Sunday afternoon, threatening the lives of thousands of people by flooding communities downstream. With Lake Oroville filled to the brim, such a collapse could have caused a “30-foot wall of water coming out of the lake,” Cal-Fire incident commander Kevin Lawson said at a Sunday night press conference. Luckily, so far this scenario has not played out.

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Apple Stock Soars Above Record Closing High

Despite declining earnings expectations, AAPL’s share price just broke above its record closing high (from Feb 2015).

As WSJ notes, the tech giant’s shares–among the most widely held and actively traded in the world–hit $133.42 moments ago, trading above their record close of $133 from February 2015. And they’re inches away from their all-time intraday high of $134.54, set in April 2015.

Shares of the $700 billion company are up about 41% in the past 12 months, and more than 9% since Apple pulled back the curtain on its latest earnings report on Jan. 31 to reveal an end to a three-quarter streak of declining revenue.

As the stock prices has soared, volume has slid…

Monday’s trading is the capstone of a recovery in the shares after a prolonged downturn from July 2015 to May 2016, when the stock fell 30% as investor concern mounted over the pace of iPhone sales, soft demand from China, and speculation about whether the company will ever again come up with a product with even a fraction of the impact of the iPhone. In that span, the Apple Watch failed to catch on as quickly as some had hoped, and sales of the company’s iPad tablet swooned.

Near the end of that stretch, Apple momentarily lost its crown as the world’s largest company by market capitalization to Google’s parent company, Alphabet.

Apple regained the mantle, and the gap between the two began to widen again when Warren Buffett’s Berkshire Hathaway revealed that it had taken a stake worth nearly $1 billion in Apple.

But earnings expectations have done anything but rise…


But don’t let that worry you…

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Fed Study: Fake News drives Fake Markets

Thanks Bloomberg, for another useless piece of regurgitated info we’ve known for years; fake news drives the fake markets which are artificially inflated.  Actually thanks to the Fed for doing the academic research on this topic to confirm what we’ve known for years – the markets are rigged and one way they are manipulated is by the mainstream news.  As we explain in our book Splitting Pennies – the markets are artifically inflated and manipulated by remote control (yes – that remote control.  It’s a metaphor!)  TV watchers have a ‘remote control’ and so does the CIA.  They press ‘play’ and markets move as they want.  Just as TV viewers change the channel the CIA changes the ‘mood’ of the country with a few clicks of the remote.  They even have a pause button! From Bloomberg:

Buy the news and sell the soft data.  That’s the conclusion drawn from a paper by the Federal Reserve Bank of San Francisco, which suggests that financial news holds predictive power when it comes to a slew of economic data. Stories about the U.S. economy can even outperform more traditional measures such as surveys of consumer sentiment when it comes to gauging ‘‘animal spirits’’ and forecasting future activity, it found.  While trust in news sources among the general American population has fallen to historic lows amid accusations of fake news lobbed during the U.S. presidential elections, the Fed research throws cold water on the notion that the mainstream media is far removed from Main Street, if headline economic indicators are anything to go by.

“Specifically, we have shown that sentiment extracted from newspaper articles correlates with both contemporaneous and future key business cycle indicators,” economists Adam Hale Shapiro and Daniel Wilson of the San Francisco Fed concluded in a report co-written last month with Moritz Sudhof, of data analytics firm Kanjoya. “In a head-to-head comparison, these news sentiment measures perform better than both the University of Michigan and Conference board measures of consumer sentiment.”

You can read the Study here “Measuring News Sentiment” at Global Intel Hub’s library.

The paper is very well documented, an A+.  Great job.  We by no means mean to detract from the great work accomplished here by paraphrasing the paper as ‘fake news drives fake markets’ – it simply serves as a great example of yet another proof how markets are manipulated, even if as the paper suggests – indirectly.  

To add some real Alpha to your portfolio, checkout www.alphazadvisors.com For a pocket guide designed to make you a market Genius – Checkout Splitting Pennies Understanding Forex @ www.splittingpennies.com and get a free robot – too!

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Here Are The Best Hedges Against A Le Pen Victory

On Friday, after it emerged that as part of Marine Le Pen’s strategic vision for France, should she win, is a return to the French franc as well as redenomination of some €1.7 billion in French (non-international law) bonds, both rating agencies and economists sounded the alarm, warning it would “amount to the largest sovereign default on record, nearly 10 times larger than the €200bn Greek debt restructuring in 2012, threatening chaos to the world financial system on top of the collapse of the single currency.”

This morning, Bank of France Governor Francois Villeroy de Galhau doubled down on the warning and cautioned French voters about the costs of withdrawing from the euro, noting that local interest rates are already rising on concerns about this year’s presidential election. “The recent increase in French rates – which I believe is temporary – corresponds to a certain worry about the exit from the euro,” Villeroy de Galhau said Monday on France Inter radio.

As of Monday, Le Pen has the support of about 26% of the electorate for the first round of voting in April, compared with 20.5% for independent Emmanuel Macron and 17.5 percent for Republican Francois Fillon, according to the latest Ifop daily rolling poll. Yet while according to polls, both Macron and Fillon would defeat Le Pen in the second round vote, nervousness about poll accuracy – especially after Brexit and Trump – persists.

Meanwhile, the National Front candidate has continued to hammer home her message on euro exit. Speaking Sunday she said that the single currency was a political instrument that limits French sovereignty. “I can’t implement my promises of intelligent protectionism and industrial policy with the single currency,” Le Pen said. “It’s a brake on the economy, it’s an obstacle to the recovery. The euro isn’t a currency, it’s a political tool.”

To counterbalance Le Pen, Villeroy estimates that leaving the euro would increase the cost of debt service for the French government by about 30 billion euros ($32 billion) a year. “That might seem a bit  abstract to listeners, but 30 billion euros, to be very concrete, is equivalent to France’s annual defense budget,” he said. He added that France would also have a harder time defending itself on the global economic stage.

In any case, with concerns about a Le Pen victory clearly troubling European investors, and especially French bondholders as the spread on French bonds to both German and Spanish paper drifts to multi-year wides, closely tracking Le Pen’s victory odds…

…  analysts at Bank of America Merrill have laid out several scenarios on how to hedge for a Le Pen exit. They expect that, as noted above, the newly reminted franc would depreciate significantly in value against the euro on account of the unprecedented uncertainty unleashed on the continent. It would also raise the prospect of the newly independent French treasury and Banque de France engaging in a blitz of “debt monetisation” – where the central bank would directly finance Ms Le Pen’s ambitious spending plans to help revive the country’s moribund industrial heartlands.

They then look at what are the best ways to hedge increased risks of a potential Eurosceptic win in the upcoming French election. Here is what they find:

We take a look at what we believe are the best ways to hedge increased risks of a potential Eurosceptic win in the upcoming French election, favouring 10y peripheral spread wideners in Spain vs France, longs in 5y5y Germany and 5y Dutch sovereign CDS. In the options space, we recommend going long vol with a hybrid 6m10y strangle. In inflation, we like 5y5y French CPI v HICP widener and a long 30y OATei breakeven vs inflation swap.

Some further details, first on a potential blow out in French-Spanish yields:

First, BofA sees “Good risk-reward on long 10y France vs Spain”

On a Eurosceptic win redenomination risk to drive peripheral underperformance: While the conjunctive likelihood of these set of events is an interesting question unlikely to be univocally answered, we think the markets’ reaction on a surprise election result would follow the 2011-2012 blueprint and focus on redenomination risk. This argues for an underperformance of peripherals and a spike in demand for safe haven assets which are currently a scarce good in the Eurozone. Higher uncertainty around Greek EU/IMF reviews could be another factor fuelling Eurozone breakup risks in that scenario.


Once (if) OAT risk abates, attention focuses on ECB QE tapering and periphery: On the alternative election outcome, we see OAT-Bund spread tightening 50bp from here (reaching 30bp) while periphery outperformance, we think, should lag behind as attention shifts to the potential for ECB QE tapering; fuelled by our forecast of a 2% EA HICP inflation print available by the time of the second round of the vote. As we have said previously 1) negative correlation between Bund yields and peripheral spreads, 2) the limited underperformance of periphery vs France in January, and 3) wide periphery CDS basis suggest that, currently, the end of ECB QE is far from being fully priced in. Hence, we think the market will likely substitute political risks with monetary policy risk when considering Eurozone periphery were the French elections to prove a non-event. 


Risk-reward looks attractive for Spain-France 10y spread widening: Given that positioning of Japanese life and pension in the French long-end likely remains long and given the directionality of peripheral curves, we like to express a long position in France vs the periphery in the 10y maturity. We choose Spain to express our short peripheral position due to the large outperformance of the 10y SPGB-Bund relative to its traditional relationship versus other country spreads to Germany (see Chart 2). Also, with the market’s attention being almost fully dedicated to Trump and the French elections, we think the idiosyncratic political risk of a Catalonian referendum on independence by September (although currently unconstitutional) seems under-priced at this point.


We thus like to position for a widening in peripheral spreads, going long France versus short Spain in the 10y at 63bp with target at 120bp and 30bp stop. The risk to the trade is the redenomination risk remaining contained to France.

Another trade BofA recommends is to position for safe haven demand through a 5y5y long in Germany

On a Eurosceptic win, we think Bunds would test the negative yields in the 10y maturity. As we have already shown, EUR based investors have very limited supply of high quality collateral relative to the size of their market (Chart 5), therefore we think a resurgence of safe haven demand would likely see German govies as the main beneficiary within EGB space. Given the already rich valuations in the very front-end and the fact that, by April, the average maturity of ECB QE purchases in Germany may remain in the region of 5-10y, we think being long 5y5y is a good hedge for a Eurosceptic win.

Positioning supports further correction in German 5y5y


We think that an outright 5y5y long through German bonds, rather than swaps, offers the best risk-reward because 1) although rates positioning looks cleaner after January, EUR rates bear-steepeners and short positions in Bund futures remain crowded trades which have the potential to be heavily unwound on an outlook change 2) on a bear steepening trade resumption, 10s30s may move more than 5s10s 3) on a risk-off scenario, some of the January corporate issuers may decide to hedge unswapped bonds by receiving rates (typically in the 5-10y sector) 4) the reaction in swaps is uncertain given its dependence on moves in bank credit risk and 5) 5y OBL ASW trades close to the widest on record.


For a French election risk hedge, we like a 5y5y Bunds long, at 1.1%: The risk running into the second round of the French election on 7 May for this position is the German curve being dragged higher by renewed steepening in the US. Also, a market friendly election result may shift attention to ECB QE tapering which could fuel further bear steepening.



BofA also has a trade proposal for derivatives traders: “To hedge French election risks, we suggest positioning for a narrowing in the spread between the OATei 2047 breakeven (now 174bp) and 30y EUR inflation swap (now 196bp) from 25bp with an upside to -5bp and a downside to 40bp.”

On the topic of whether a “Frexit” would lead to a collapse of the Eurozone, BofA’s Mark Capleton writes that “we do not wish to complicate the issue here with a debate about whether the Eurozone would remain intact should France adopt its own currency – although that is clearly important – and we will assume for the purposes of the two trades proposed here that it does. Allowing some flexibility of interpretation on this should not be adverse for the trades. Indeed, in a scenario where concern grew over a “domino effect” with other Eurozone departures perceived as more likely, we would see this as most adverse for the periphery and the market could come to regard the currency risk as biased towards a hardening of the euro, with “core” members becoming dominant.”

What does this mean for the new currency?

Although it is by no means clear from economic competitiveness metrics that France’s implicit real exchange rate within the euro area is overvalued, we believe the market assumes that a “new franc” would devalue by a meaningful amount after currency separation for two reasons: the extreme uncertainty that such an event would create and concern over debt monetization (with Front National committed to  using central bank financing of government).

In summary, Capelton notes that “we think the focus on polls is likely to continue from here but, given the precedents, we expect market reaction to be skewed towards pricing higher risk premia than otherwise. The Dutch general election on 15-Mar is the next milestone. While it appears unlikely that a Dutch government could take the country out of the EU post-elections, the market may become increasingly nervous if polls end up underestimating voters’ preference for populist parties.”

Finally, as FT notes, citing Antje Praefcke at Commerzbank, with the potential viability of the single currency project at risk, the German bank expects the European currency haven of choice – the Swiss franc – to come under fresh upward pressure:

It is quite difficult to find the currency that will emerge as the winner from these complex conditions – either short or long term. However, one ultimate safe haven is once again emerging: the Swiss franc. It may be an expensive task to resist the appreciation of the ultimate safe haven in political markets dominated by uncertainty and imponderability.

But the simplest possible trade, considering recent trends, may be to simply buy US equities which hit new all time highs no matter the data or potential risks out of Europe.

Then again, maybe all the worrying is for nothing. As Bloomberg showed on Friday, compiling various Wall Street sellsiders, “whatever the outcome of France’s presidential elections, it probably won’t raise the odds of an exit from the euro, most analysts say.” Some excerpts:

Credit Agricole SA

  • The polls suggest that Le Pen will lose at the second round to either Macron or Fillon and this can explain the relative resilience of the euro of late, London-based strategist Valentin Marinov said in e-mailed comments on Feb. 9. “This may be misleading, however, and we advise cautiousness,” he added
  • Still, a victory for Le Pen shouldn’t automatically translate into a French exit from the euro zone. “An exit would be a long and complex process” as it would require a constitutional amendment, Marinov added
  • The bank assigns a 35 percent chance to Le Pen winning in the second round of elections, in line with polls

Barclays Plc

  • The chances of Le Pen winning the second round of the presidential election are “very, very small”, unless Benoit Hamon or Jean-Luc Melenchon qualifies against Le Pen, London-based economist Francois Cabau wrote in e-mailed comments
  • “In any case, her party is extremely unlikely to come remotely close to an absolute majority in the lower house in the June general elections. She would have to accept cohabitation and thus would not be able to govern strictly following her manifesto”
  • Moreover, “exiting Europe means amending the constitution and barriers to get it done are quite high, in terms of the Parliament approval process,” Cabau added

JPMorgan Chase & Co.

  • There is a strong likelihood that Le Pen reaches the second round of the presidential election but she would most likely lose by a decent margin against any opponent, London-based economist Raphael Brun-Aguerre wrote in a note to clients on Feb. 7
  • The odds of Le Pen obtaining a majority in parliament is low and a period of cohabitation would be likely if she wins the presidential election

Commerzbank, however, had a notably more downbeat outlook:

  • Chances of Le Pen winning the second round of election seen at 20%, Frankfurt-based economist Joerg Kraemer wrote in e-mailed comments
  • “A victory of Le Pen in the presidential election would probably lead France to leave the EMU. And without the political and economic heavyweight France, the rest of EMU is unlikely to survive,” the economist added
  • The news of a Le Pen victory would cause massive capital flight not only out of France but also out of the peripheral countries such as Italy. Capital controls and banking holidays would follow, which could be the start of the end of EMU,” he wrote.

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Japan, Inc.: Optimized To 1960, Stumbling In The 21st Century

Submitted by Charles Hugh-Smith via OfTwoMinds blog,

If an ossified, self-serving status quo refuses to adapt, collapse is the only way forward.

When everything’s going great, nobody questions the nation’s core institutions: they must be doing a great job because everything’s going great.

The temptation to extend positive expansion to the moon is ever-present. Take Japan’s “boost phase” of credit, banking and corporate expansion in the mid-to-late 1980s: pundits extended the soaring growth line and declared Japan, Inc. was going to own the world, or at least its most productive elements.

“Experts” fell all over themselves studying the structure and procedures of Japan, Inc., and hurried back to their home countries to copy Japan’s success by copying its corporate structures, managerial culture and quality-control procedures.

Fast-forward 30 years. When one of Japan, Inc.’s leading corporations makes the news, as often as not it’s the result of an accounting scandal in which corporate profits were grossly overstated for years as a matter of policy–a policy intended to mask the stagnation in the company’s sales, product lines, competitive position and profits.

What happened to the often-copied, much-vaunted Japan, Inc.? Many observers see Japan’s core problem as demographics: as its birth rate has fallen below replacement levels, the population of Japan is aging rapidly. Since young people start households and spend money, economic growth depends largely on the spending of young people rather than the declining spending of older people.

While a decline in the youthful demographic certainly impacts growth, this view overlooks the larger problem: Japan, Inc.–its educational system, government, banking and corporate sector–was optimized for the mode of production that existed in the postwar world from the late 1940s to the late 1980s.

Now that the Digital-Industrial Revolution is remaking the way goods and services are produced and distributed, the system that worked wondrously well in 1960 no longer aligns with the needs of this emerging mode of production.

In the 1980s, Japan’s optimized-for-industrial-exports system reached its zenith, and many US pundits built careers predicting that Japan would soon eclipse the US in every economic and financial metric.

But the excesses of Japan’s banking sector and the rise of new technologies that didn’t lend themselves to gradual improvement and vertically integrated corporations disrupted the predictions of Japan’s global dominance.

If you were able to go back in time to 1987 and tell the believers in Japan, Inc.’s inevitable dominance that by the 21st century Japan was no longer a leader in electronics, mobile phones, software and computers, they would not believe you.

This article on the failings of Japan’s system of higher education is a window into the failings of Japan, Inc.’s culture, mindset and system of governance: Japan Gets Schooled (Foreign Affairs)

“Dismay rippled through Japanese society over the summer after the venerated University of Tokyo lost its number one ranking, falling to number seven, in the Asia university rankings published by the Times Higher Education of London.

The University of Tokyo (known as Todai in Japan) occupies a cultural space akin to Harvard, Princeton, and Yale combined in the United States. It is the launching pad for those who go on to run the country’s elite institutions. After the rankings slip, many Japanese felt that the country itself—not just its university—had taken a tumble.

Todai’s defrocking is emblematic of a broader problem. Japan’s educational system is failing to keep pace with changes taking place in Japan and in the rest of the world. Its drop in the rankings was due to funding cuts, poor research output, and an insufficiently global ‘outlook.’

Optimized for an earlier industrial age, anachronistic educational institutions are struggling to adapt to a globally competitive marketplace for students, faculty, funding, and jobs.

No wonder that in interviews, educators and students use language frighteningly similar to that which a prisoner might use to describe his or her own predicament: ‘trapped,’ ‘suffocating,’ ‘stuck,’ and ‘wanting to escape or sneak out.'”

Whenever I critique any aspect of Japan, people are quick to point out that it is still a wealthy, well-ordered society with many enviable amenities. But where does the wealth come from? It turns out Japan, Inc. earns vast sums of money from its overseas holdings–assets purchased in the heady days of yesteryear.

If we look at the nation’s balance sheet and soaring public debt, it becomes clear that Japan is slowly eating its seed corn to maintain its staggering public spending deficits.

The essay’s description of what’s wrong with Japan’s higher education is also true of Japan, Inc.: a system optimized for the mode of production of 1960 (integrated industrial production for the export market) will inevitably fail as that mode of production is replaced by another, much more demanding mode of production.

Every nation, developed or developing, faces the same core issues: either cling to systems optimized for a mode of production of bygone eras and stagnate, or adapt and optimize one’s productive capacity and society to the new mode of production.

If you seek a data-based grasp of Japan’s fiscal and financial decay, I recommend the following documents: the first is an easy-to-digest series of slides from an OECD study, the next two are detailed official Ministry of Finance reports in English, and the fourth one is an article describing the political resistance of the status quo in Japan to any real, systemic reform:

OECD Revitalizing Japan 2015 (Slideshare)

Japanese Public Finance Fact Sheet

Japan’s Fiscal Condition

Japan’s powerful prime minister still can’t get the economy going

The key takeaway here is that decay can last for decades, enabling the status quo of the state and media to maintain the illusion that superficially all is well. As visitors and pundits never tire of exclaiming, Japan remains a wealthy nation where everything works wonderfully well–public transport, etc.–and the average lifestyle is enviable: long lives, good health, an abundance of consumer goodies, etc.

But this well-being has been maintained at a high cost. Social cohesion is fraying (beneath the surface, of course), birthrates continue to decline (and what does that say about a culture, that young women no longer want children?) and the signs of economic stagnation are visible to anyone who peeks beneath the hood.

Decades of borrowing money in a futile attempt to avoid structural reforms has crippled Japan’s fiscal future. Even at effectively zero rates of bond yields, Japan now spends roughly a quarter of its government budget on debt service–and servicing of existing debt now consumes 41% of all tax revenues.

Tax revenues only cover 64% of spending; 35.6% of the government’s spending is borrowed.

As I explain in my book Why Our Status Quo Failed and Is Beyond Reform, when emergency measures become permanent policies, you know the status quo is on life support.

These are staggeringly unsustainable policies, yet the status quo’s refusal to accept fundamental structural changes dooms Japan to an unchanging trajectory of stagnation. Stagnation is never permanent, of course; eventually, erosion leads to collapse.

If an ossified, self-serving status quo refuses to adapt, collapse is the only way forward.

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