I do not pretend to have any expertise on this question, but I think we should consider it.
In 1989 the Japanese property market effectively collapsed. Having been fueled by very easy credit, property prices had become extremely inflated. Inevitably, they crashed to earth.
Normally, someone would have had to take a loss. The value of outstanding mortgage debt vastly exceeded the value of the property that had been pledged as collateral.
But, the banking system was overflowing with bad debts, so default would have brought it down, thus producing a Great Depression. Instead, the Japanese government chose a somewhat milder, far more prolonged depressive state. The correct psychiatric term is dysthymia, so let’s say that Japan has been suffering from a Great Dysthymia.
The Daily Telegraph described the situation in Japan:
Throughout the past 30 years, Japan has been a testing ground both for problems and their possible solutions that have appeared later in the West. It experienced a bubble economy in the late 1980s and then experienced the pain of a long drawn-out balance sheet recession, brought on by the collapse of asset prices and the drying up of credit.
It also went through a slow dragging deflation of consumer prices before anyone in the West thought that this was an issue. And for some time now it has faced the problems caused by an ageing and falling population.
The Telegraph continued:
The scale of the problem is staggering. Japan’s net government debt is about 140pc of GDP. This is way ahead of the US, which is on 87pc, and not that far below Greece. What’s more, it is easy to see the ratio increasing further. The IMF expects net debt to rise to 148pc of GDP over the next five years. In fact, if the economy performs badly, inflation remains low or borrowing costs rise, debt could easily follow an explosive path, with the ratio quickly rising towards 300pc of GDP.
So what to do? If Japan followed anything like this path, then some form of default would eventually become inevitable. Accordingly, why not cut the whole process short and get the thing over and done with by defaulting now?
… Japan suffers from another major obstacle, namely that its debt is overwhelmingly held by Japanese financial institutions, including banks. A default would land the financial sector with massive losses and could cause a catastrophic financial crisis.
Doesn't this sound familiar? In America in 2008 some were calling for a quick default, the better to clean out the financial system and begin the rebuilding process. Others said that default was unthinkable….
Japan has muddled through, thanks in large part to the huge amount of savings that the Japanese public has squirreled away. Yet, there comes a time….
The Telegraph explained:
As a share of GDP, government debt has been growing since the early 1990s. This is the result of the long-running weakness of economic growth, repeated fiscal stimulus packages and a long period in which the overall price level has stagnated or fallen. Japan has managed to muddle through, but it now looks as though it is close to a tipping point.
The burgeoning Japanese debt has not merely stifled economic growth. It has produced a wave of dysthymia in Japanese young people. Seeing no hope for their mortgaged future, they have largely given up.
Joel Kotkin suggested that Japanese youth have morphed from carnivores into herbivores. They no longer compete or strive or struggle to work hard and to compete. They are content to ruminate and to chew their cud. Seeing that their future earnings have already been spend, they are acting like they are old, retired people. They show no interest in dating, marriage or even sex.
In his words:
Just such a diminished world view has already taken root in Japan, particularly among that country’s younger males. Growing up in a period of tepid economic growth, a declining labor market, and a loss of overall competitiveness, Japan’s male “herbivores” are more interested in comics, computer games, and Internet socializing than building a career or even the opposite sex. Marriage and family have increasingly little appeal to them, sentiments they share with most women their age.
Of course, it’s always possible to manufacture sexual desire. You can do it by sexualizing the culture but you can also do it by becoming more violent. Desperate people can do desperate things.
For people suffering from dysthymia it may be the best they can do. It will feel like desire without being desire.
Obviously, American millennials have not all turned into herbivores, even if that seems to be the fondest wish of many members of the green movement. At the least, Japan shows us one possible future. Surely, it's worth the effort to think about the psychological consequences to public policy decisions.