JAPANESE BANKING REFORM -- R.I.P.: Last week I talked about how the Japanese are incapable of radical reform of their financial sector, but I said we needed to wait a week. A week later, the radical reform proposals are officially dead.

This is bad news for pretty much everyone. Until those reforms take place, Japan is in no position to return to any level of healthy growth. This represents an unfortunate theme -- America's allies seem politically incapable of microeconomic reform and demographically are fated to lose even their middle-power status within the next 50 years.