The Possiblility of the Deposit Blockage in Japan

Do you remember that I said "Japan will face the hyper inflation in the future"? Well, this statement is becoming more real than ever nowadays. The actually high inflation which the government and the Bank of Japan (BoJ) seem to manipulate to make the announced inflation rate lower than. 

The high price inflation together with the substantially low central bank interest rate, the Japanese Yen (JPY) value has steadily been plunging since the first quarter of this year 2022 in the Foreign Exchange (FX) market.  This will eventually depreciates the value of the Japanese sovereign bonds (government debts) in the international financial market. 

The major holders of Japanese sovereign bonds are the BoJ and the major private banks in Japan. When the bond value goes down, the portfolio of these Japanese private banks will be depreciated. Combining the poor business performance of Japanese banks with the JPY value plunge, the havoc of their depositors attempting to withdraw their JPY amount from their saving account. 

Following this logics, it is quite plausible that the deposit blockage will be likely to take place. This is why some economists have already forecasted the considerable Japanese economic downfall as well as the reasonably high possibility of these banks blocking these saving account from their money withdrawal.  

Perhaps, they might not block their customers' account but may face bankruptcy, the recapitalisation by government, or furthermore annexations to a bigger private bank. This infers the risk of relying on saving income in the JPY saving account and holding the assets with their value based on JPY in the near future. The real value of JPY is steadily falling so it is wise to start splitting the risk from now on. 

The Cloud Types, the VPC, the public and private subnet, and the DMZ

 

In terms of the on-premises computing environment, the ownership of the physical computer device belongs to the user. However, an antinomy of the on-premises computer is not necessarily the could computing. There are two spectrums: The one determines where the device ownership belongs to, and the other determines where this device actually located in.

The ownership of the rental server belongs to the provider even though it is leased to be located inside the user's property. The clouds are distinguished between the private cloud and the public cloud depending on their ownership: The former belongs to the user whereas the latter belongs to the provider meanwhile both are located on the place distant from where the user is physically at.

The private cloud is established by an individual firm under its own responsibility of its maintenance and security update as well as its own exclusive right of using and modifying it. It also secures its privacy unless it is infiltrated by some wrongdoers with their hacking and virus attack. The disadvantage of owning the private cloud is its cost inefficiency of their maintenance and various updates including the cyber security.

For a relatively small-scale private ownership, the operation inside the on-premises can be achieved with the smaller budget than establishing its own private cloud. The cloud facility requires a bigger scale maintenance and update so that the private cloud may be more suitable for a huge organisation to handle. Nevertheless, even for a huge organisation, it will be more cost efficient to outsource the cloud service to the cloud provide specialising in the cloud computing provision.

On the other hand, even for a small-scale usage, the public cloud is useful because the user does not need to be responsible for the whole physical machinery maintenance unlike the private cloud. The user can simply subscribe the service instead of purchasing the entire package of software and device. Furthermore, instead of incurring the capital investment expenditure, the user can include the usage cost as the variable operation cost so that it is efficient by means of their administration accounting and tax payment. 

To take an advantage of the cloud computing, the public cloud is more likely to be cost efficient than the others due to its scale merit and its capacity. The major public cloud providers in the world are Amazon Web Service (AWS) (33% market share in 1Q2022), Microsoft (MS) Azure (22%), and Google Cloud Platform (GCP) (10%). These providers specialise in the cloud computing provision including specialised customer-support, maintenance, security update, product improvement, and the new product instalment. 

To use the public cloud service, the user selects which region to use. Then, this user is offered to use one or the multiple Availability Zone (AZ). Inside one AZ, the user determines the number of subnets to use where each subnet size is determined by a block of the IP address size determined by the CIDR (Classless Inter-Domain Routing) notation.

While using the public cloud, there is a service securing the privacy and the security of the server instances and the other services as though the user were using them inside her/his own private cloud network in an AZ. This is called the Virtual Private Cloud (VPC). Each subnet can be allocated inside the VPC while these subnets are usually categorised into the two types: the private subnet and the public subnet.

Instead of risking all the subnets facing both the infiltration risk and the overflowing access, it should allocate some subnets specialising in filtering these accesses as well as analysing their characteristics and traffic volume. Therefore, there needs a buffer demilitarised zone (DMZ) between the inbound accesses from outside the VPC and the private subnets inside the VPC so that the public subnet is allocated there between the gateway of the VPC and the private subnets. The public subnet and the Firewalls such as the Network Access Control List of AWS stand there to form the DMZ as the front-line defending the architecture behind. 

Placing only one network Firewall eases the infiltration of the intruders as well as the sudden access traffic overflow undermining the entire architecture configured inside the public cloud. The first line Firewall is set in front of the public subnet. The second line Firewall is set between this public subnet and each private subnet. The DMZ is the zone between two Firewalls where the public subnet bisecting these two Firewalls.

In AWS for example, there are the Load Balancers (LBs) with different task for each different duty. These LBs are in chage of equalising the divided traffic volume to each of the server instance to prevent them from receiving the excess volume undermining their performance. The Application Load Balancer (ALB) is often placed in the public subset distributing the access traffics to lead them to each destination connected to the private subnet areas. The Network Load Balancer (NLB) is often placed in the private subnet distributing the access traffics to lead them to each server instance depending on the traffic volume of these accesses to each instance. 

Because these LBs do their multitasking of not only balancing the traffic volume to each instance but also the health check of each instance to detect whether or not is capable to receive the access.  Therefore, the division of labour among these LBs becomes necessary to protect the entire architecture inside this network from the asymmetric or malfunctioning access traffic to this network.

In conclusion, it seems to be the trend of shifting the ownership of the computing system. Big organisations such as not only major private corporations but also government institutes have also started being more reliant on the public cloud. Small enterprises also take an advantage of this trend: By switching their main computing environment to the public cloud, they no longer need to deal with preparing for the spare, the physical devices, the cost payment for them, and the uncertainty of the future cost and benefit estimates. This is because the outsourcing of the autoscaling capacity as well as the physical and security maintenance to the specialist provider solve these issue. Hence, it is predicted that the public cloud provision will be popular more and more as the time passes.

Networking, Protocols, and Domain Name Service (DNS)

 

The letter "HTTP" found on the URL (Uniform Resource Locator) while surfing the internet is the abbreviation of the Hyper Text Transfer Protocol. There is a term "IP address" required for the internet access, and the IP is short for the Internet Protocol. These are the protocol of transferring data via the network connection: the IP is for the internet layer and the HTTP is for the application layer. There are also the other various networking protocols. The layer structure description here mainly follows the OSI Reference Model.

 

The protocols for the application layer are not only the HTTP but also the FTP for the data transfer to the file server, the POP3 for E-mail, and SSL/TLS for the data transfer with encryption for example. The AWS network architecture provides the ostensible sample. The Application Load Balancer (ALB) deals with the internet-facing side of the traffic with the HTTP to the public subnet directly connected to the internet to distribute the traffic access volume to those inside the public subnet. The Network Load Balancer (NLB) deals with the internal side of the traffic with the SSL/TLS to distribute the traffic access volume coming from those in the public subnet to those inside the private subnet. 

 

The SSL/TLS is the protocol also used for the transport layer connecting between the application layer (via the session layer and the presentation layer) and the network layer. The network layer represents the inside network of the on-premises environment connecting the physical layer via the data link layer. The network layer requires its protocol for its data transfer among these physical devices by linking their data together. The network layer is the gateway to outside the on-premises via either the internet connection or the Direct Connect via the transport layer, and this requires the protocol too.

 

 

As shown in the the URL, the HTTP is followed by the domain such as "art-blue-liberalism.blogspot.com".  This is addressing the website with the name which humans are accustomed with while computers are not. Computers understand and process various tasks by means of numbers so they address the website by the number such as the IP address. 

 

Therefore, the networking needs the domain name service (DNS) resolving a name to numbers.  The DNS resolves the domain name such as "art-blue-liberalism.blogspot.com" to the IP address such as 192.0.2.1 in IPv4, and 2001:db8:0:1234:0:567:8:1 in IPv6 (Ref. Wikipedia).

 

There is the DNS allocated in order to transform to manage the domains and the IP addresses among these access connections.  It is similar to the phone book while looking for a telephone number by searching the name of a person or an organisation in the index.

 

The DNS server checks its own cache memory to find an IP address for the domain name when it receives the query. If not found there, then, this query is sent to the root servers, the root of the DNS hierarchy, which are operated by a number of the organization and evenly allocated in the world. But, instead of directly providing the DNS server with the IP address, the root server requests the Top Domain Server (TDS) to instruct the DNS server to find how and where to look for the IP address matching with the queried domain name.

 

Is Monetarism/Neoliberalism bad? Not at all!

Neoliberalism and its mainstream macroeconomic theory Monetarism are not bad theories like these old-fashioned Socialist and the other Left-wingers condemn at all! These theories teach very important socioeconomic lessons for all the individuals to live as long as the monetary economy where individuals use fiat-money for their intermediary of exchange in their daily life thrives to exist. 

Those who are against Neoliberalism tend to blame these theories as the severe survivalist Capitalist political theories leading the majority individuals to deprivation. However, it is the same nonsense as blaming Marxism and the other socialist theories for the disastrous mistakes of the United Soviet Socialist Republic (USSR). Both Marxism and Neoliberalism contain the non-negligible elements to study the political affairs and the human history. 

- The monetary policy channel instead of the fiscal policy

Focusing on Monetarism as he major base macroeconomic policy of Neoliberalism, the key element of this theory is analysing the nature of the fiat-money flowing into economy as the intermediary of exchange. In the long run, the money value is neutral to the other substances distributed in the world. By contrast, it regards that the change in the money supply volume affects the economic activities and productivity level in the short-medium run. 

Monetarism regards highly of the value of the fiat-money supplied by the central bank which should be supported by its credibility and its market demand. Therefore, it is sensitive to adjust the money supply level to the aggregate production level of this economy in order to avoid the value depreciation. 

It encourages the private sector based economy functioned by the spontaneous order of individual economic agents voluntarily deciding the aggregate production volume according to their needs and wants on spot. It discourages the excess reliance on the fiscal policy cutting tax and increasing the government expenditure while incurring national debts leaving their responsibility of repayment with the inevitably increasing future taxation and cutting the future government expenditure in the long run. Instead, it tackles with the temporary economic downturn by temporary pumping the extra money supply filling the temporary emerging negative output gap. 

- High-Powered Money as the antidote against the deflationary recession

In order to enable the fiat-money to stimulate economy, the velocity power of this money supply which is its value and credibility in both domestic and international market, is required. When individual economic agents appreciate its value and credibility, they find its extra supply as valuable and trustable to use as their intermediary of exchange in both domestic and international market. They may either spend for their exchange or save in their banks using the extra money from their saving account as the extra investment resource for increasing their profit. This is called High-Powered Money theory. 

According to Monetarism, the deflation inducing the recession, the negative output gap, is caused by an error of scaling the optimum market aggregate production level or a false information delivered to economic agents. Thus, the deflationary recession is caused by the stuck money circulation which means the money supply level is not balanced with the aggregate productivity level. In this scenario, the money supply as the High-Powered Money can be increased to directly inject it to economy to equalise it to match with the aggregate productivity level. 

- Killing inflation is more important!

On the other hand, Monetarism regards of Stagflation (the output stagnation + the price inflation) as the excess money supply unmatching with the aggregate productivity level.  Then, the decreasing output caused by Stagflation is considered as the long-term phenomenon which should be solved by cutting the cots including wages of the production even if it means to discourage their business activity level at least for a short run.

The reason to sacrifice the output to suppress the inflation is to maintain the money value as useful to be implemented as the High-Powered Money. Even to protect the employment by maintaining the wage distribution, the real value of their wage/income is consequently reduced when the price inflation, the money value depreciation, is perpetuated. Monetarism is actually a humanitarian political theory against depreciating their income/wage level to avoid consequently treating these employees as the quasi-slave labour. 

Monetarism antagonises the perpetuated inflation even for diverting the negative output gap is bad for economy overall. Even though the extra money supply is injected into the real good and service market to push the output level up, the value depreciation negatively affects the capital market. 

Most of the capital asset value is based on the base money so that the money value depreciation implies the capital asset value depreciation in the international financial market. Almost all the firms producing goods and services are invested by banks and shareholders through the capital market.

In addition, firms in the good and service market also face the import cost up under Stagflation as the excess money supply perpetuating Stagflation. Because all the regions of this world are interdependent on each other so that the relative value decline of the fiat-money used in one regional economy causes the purchasing power depreciation of this regional economy. 

- Monetarist, Consequentialist Ethical Philosophy

Overall, Monetarism supports the gradual and natural economic recovery encouraged by private individuals and firms under the stable market economy propped up by the balanced money supply adjusted to the aggregate productivity level. This ethical policy is what Neoliberalism shares with and aspires to achieve so that Monetarism is the core macroeconomic policy of Neoliberalism.

Monetarism and Neoliberalism are often regarded with a bitter cold attitude towards those suffering from economic downturns by these antagonists. However, it is really a prejudice to accuse them as such because these theories take account of the majority individual citizens such as their about preventing their real income depreciation caused by the monetary value depreciation.

Monetarism and Neoliberalism may be categorised into the Consequentialist ethical philosophy which attempts to maximise the overall net benefits by maximising the sum of the gross benefits while minimising the sum of the various cots as a total at the end. Monetarism criticises the big government policy directly caring their citizens by incurring a massive debt and the non-stoppable inflation depreciating their income and the market value of financial assets in the international market. Monetarism counts on the rationality of each individual's free will and the spontaneous order based on these free wills to recover their economy with the minimum assistance by the small government. 

It does not mean that both Monetarism and Neoliberalism neglect the public support with government assistances. They simply suggest the minimum required assistances. Furthermore, the High-Powered Money of Monetarism maintains the real value of the assistances provided by government and the procurement power of this government gathering the resources for their provision. This is why the European countries implementing Social Democratic socioeconomic policies adopt Monetarism for their core macroeconomic policy.

- Monetarism in Europe

The weight on each different macroeconomic theory which Neoliberalists adopt to follow depends on each Neoliberalist. Some of them mildly adopt Keynesian theory meanwhile the devote Neoliberalists base their thoughts and plans purely on Monetarism. As a matter of fact, the European Central Bank (ECB) and the central banks of Scandinavian countries, whose countries are famous for their Social Democratic socioeconomic policy, follow the monetarist macroeconomic policies especially for their tight prudent money supply policy. This proves that Monetarism is worth referring to not only the economic Right-wing but also the relatively more centralist counterparts. 

Social Democracy is actually the friendly version of Liberal Democracy (Capitalism) (※) and not technically Socialism. Therefore, it makes sense that these Social Democratic European countries are happy to install Monetarism as the principle macroeconomic theory of handling their market economy. Their socially minded intervention is not stimulated by the proactive positive macroeconomic intervention by a central government expenditure or the extravagant money supply from a liberal central bank which Keynesian economic theory often uses. 

    ※ Liberal Democracy and Liberalism by means of this comparison are treated as the synonym of Capitalism, the market economy, because Neoliberalism is mentioned to explain in this essay. Liberal Democracy is therefore the synonym of Neoliberalism here. Then, Social Democracy is the derivation of Neoliberalism rather than Socialism. 

The level of tax and expenditure rarely changes flexibly unlike those adopting Keynesian theory as their core principle macroeconomic policy. Their costs for the socially minded public intervention of these European countries are covered by the tax revenue from the progressive taxation levied on individuals and firms their steadily growing market economy. These European countries especially since 1997 (The European Monetary Union conducted by the ECB was introduced then) have been actually reluctant to artificially stimulate their economy.

It is because their macroeconomic tradition, especially of Germanic and Nordic, puts high priority on prudence over expansion. Their Social Democracy sustains the diverse income distribution allowing the slow but steady human capital development. Therefore, Monetarism matches with their prudent attitude towards economy to slowly but steadily raising their economy backed up by the human capital development requiring the steady continuous public investment in the long run.

- Conclusion: Monetarism and Neoliberalism are good!

In conclusion, having re-evaluated Monetarism and its ethics basing Neoliberalism, it is actually an ethically good functional socioeconomic political philosophy. Their characteristic is simply different and unique from the other political economic theories.  Their quality depends on how, where, and when it is implemented in real.

    To my admiring economists, Irving Fisher and Milton Friedman

Japan The End (Friendly investment advice)

 Many immigrant workers are now leaving Japan because of the current income decline on the top of the excessively hard-working environment. As a matter of fact, Thai wage is so higher than Japanese counterpart that it is not beneficial for these South-Eastern Asians to pay various high costs for their relocation to Japan. This phenomenon represents the end of Japan as an economic power house.

As having mentioned by means of the astrological analysis, Japan will be transformed to be something like the one in the Edo period during the coming two decades. This means that Japan will be furthermore socio-economically and culturally isolated from the rest of the world. The currently ongoing phenomenon caused by the economic power decline can be see as the prelude of the end of Japan!

As having mentioned several times, the Japanese government are reluctant to implement any countermeasure against Japan's socio-economic collapse at all. Well, this is also the responsibility of Japanese nationals electing the same incompetent government perpetuating the multiple decade long recession. These Japanese national citizens are also reluctant to rationally evaluate their own political actions.

It is obvious that Japan will shift to the further decline of its economic and cultural initiative in the world. Because of the declining fertility rate and the reluctance of both the government and the general public for investment to education, the human capital development will be considerably slowed down.This will lead to the further productivity plunging. 

 Moreover, the current Japanese situation also deteriorates its best advantage of seducing consumption and investment which is the service industry. Japan used to be a popular foreign tourist destination because of its once high service quality of its hospitality businesses. By contrast, the declining motivation of Japanese citizens for their daily life as well as business has started to be discouraged.

Only the tradition left in Japan is its highly bureaucratic culture. These Japanese citizens are still loyal to their bureaucratic order even with its notorious inflexibility. The quality of their consistency in office works, factory lines, and corruption prevention in both private and public sector administration will remain as its little left virtue. However, it guarantees that Japan will become a more boring and inflexible place to live for majority autonomic individuals due to the very tight margin of deviation from its rigid social norms and values.

The level of creativity is dropping down in Japan. As seen in the current trend of the subcultural products such as its animation and gaming industries, the brand-new products attracting audiences with a fresh impression is slumping. Instead, most of the well sold products are those of the remakes of the old series whose original ones were created last century. 

Then, it is ostensible to recognise that Japan is not a feasible place to invest your precious financial resources even it has recently become cheaper to buy the assets there due to the current Japanese Yen (JPY) depreciation. The aggregate productivity of Japan will plunge furthermore especially due to the human capital decline. 

The best option to purchase the Japanese assets will be investing to only those which are merged or annexed to the multinational firm. The foreign executives are much more competent to replace the irrational endogenous policies and mentalities of Japanese firms. In addition, majority Japanese are subservient to their authorities regardless of their ethnic origin so that they follow the reformed management policies implemented by these multinational shareholders. Combining the rational management by foreign executives and shareholders and the loyal labour-force is an attractive characteristic for investors.

Only the legitimate and productive purpose of living in Japan for foreigners is having a Japanese significant other i.e., a spouse, a loving partner, a concubine, etc. Japanese tend to have their day-dreaming nostalgic image in foreign worlds and often seek the foreign DNA of these individuals coming from abroad. Therefore, even under the socioeconomic deprivation, living in Japan for these foreigners with a Japanese significant other might enjoy their stay in Japan because their significant other and her/his family and relatives will protect you somehow even in a socioeconomic hardship. 

Overall, it is already Japan the end, and its beginning has already taken place. There will be no such once a major economic superpower nation state called Japan: The remaining there is the empty shell of its unproductive inflexible bureaucratic structure and the hopeless mobs simply as the remnants of this ethnicity barely nesting this archipelago. Because of the coming decades of the macroeconomic winter, the aggregate investment volume in the world is likely to fall so that there will not be enough investment flowing into Japan. Nobody will not notice Japan's existence, the remote edge of the world which only the few will show their interest in the existence of, any more.

Excel File: Ricardian Equivalence Simulator

 

Click https://uranaisearchastrology.files.wordpress.com/2022/07/recardianequivalencetest-1.xlsx to download.

You may simulate how individual economic agents react to keep/change their consumption-saving proportion by means of both the income effect (consumption + saving/borrowing) and the utility function showing their propensity to consume.

The income effect is calculated with the income of each time period (Yt), the interest rate for borrowing and saving (r), the additional interest payment rate of incurring debt (+d), and the wage growth rate (g).

The utility effect is calculated with the quadratic equation opening downward whose maximum is set differently for each different propensity to consume. 

Click https://uranaisearchastrology.files.wordpress.com/2022/07/recardianequivalencetest-1.xlsx to download.

The interesting factor is that the number of the economic agents drastically change their preference of incurring debt to increase consumption over saving only when the inflation rate is significantly higher than the interest rate in terms of this simulator.

By contrast, under the severe recession/depression where the inflation rate and the wage growth rate are negative, the economic agents rather change their attitude to save more than spending and those with the substantially high propensity to consume simply disappear.  The current saved income as well as the future value of the debt borrowed at the past become higher so that they rather change their attitude to save more. 

The propensity to consume is fixed regardless of any situation unless either the high inflation or the severe depression strikes. Therefore, as long as the economic agents behave rationally to their income effect, the Ricardian Equivalence holds.