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Turkeys think they have a great life right up until Thanksgiving. While I’ll readily concede that Japan has surprised everyone, at some point in time the sheer

by MR4D 6y ago

Turkeys think they have a great life right up until Thanksgiving. While I’ll readily concede that Japan has surprised everyone, at some point in time the sheer magnitude will overcome the lenders’ belief. Their ability to repay, and then it all goes downhill very fast. That’s the thing - hyperinflation happens fast. You usually don’t see inflation, high inflation, higher inflation, and then hyperinflation. Instead you see slow deterioration and then a huge jump in a short period of time. It’s like falling off a cliff in its suddenness.

jedharris 6y ago
As Noah says in the article. The question he's addressing is how to know when we are approaching the cliff. We all agree it is out there but we can have a much better society if we know how far. If we fall off the cliff of course that is bad. Conversely if we cripple our opportunities because we are afraid, but the cliff is really many many trillions of dollars further away, that is also bad.
- Diggsey 6y ago
  That seems akin to predicting the stock mocket... If you, as a lender, could predict before everyone else when the cliff was approaching, then you would stop lending sooner. If everyone does that, then the cliff moves closer, and your algorithm loses all predictive power.
throw0101a 6y ago
UK debt-GDP has hit 250% during the Napoleonic Wars and 240% after WW2: * https://en.wikipedia.org/wiki/File:UK_GDP.png https://en.wikipedia.org/wiki/File:UK_GDP.png * https://en.wikipedia.org/wiki/United_Kingdom_national_debt#History https://en.wikipedia.org/wiki/United_Kingdom_national_debt#H... The UK is still rolling forward that debt: * https://www.theguardian.com/business/2014/oct/31/uk-first-world-war-bonds-redeemed https://www.theguardian.com/business/2014/oct/31/uk-first-wo... Japan peaked at 180%. The US can always revert the Trump tax cuts (for the rich), as they didn't seem to do anything useful and get some extra revenue. That should help.
- MR4D 6y ago
  Japan has been well above 180% for years. [0] [0] - https://www.statista.com/statistics/267226/japans-national-debt-in-relation-to-gross-domestic-product-gdp/ https://www.statista.com/statistics/267226/japans-national-d...
qnt 6y ago
> sheer magnitude will overcome the lenders’ belief Japan lends to itself. The BoJ owns so much of the government bond market that there are days where the benchmark bond simply doesn't trade [1]. Under absolutely no circumstance will Japan have any issue repaying Yen denominated debt when they have a monopoly on the Yen. They're theoretically not far away from just retiring the whole bond market and just running an overdraft at the BoJ for all government borrowing requirements. Can you provide evidence to your point on hyperinflation happening all of a sudden too? I think all instances in history (except maybe Zimbabwe, but I've lost the details) involve external obligations that are unable to be met (War repatriations payable in gold for Germany, extreme dependance on imports for Venezuela since the economy was so misbalanced, high USD denominated debt burdens for Argentina ... etc). I [1]: https://www.wsj.com/articles/nobodys-trading-10-year-japanese-government-bonds-1521113501 https://www.wsj.com/articles/nobodys-trading-10-year-japanes...
- MR4D 6y ago
  Take a look at this page on Investopedia. [0]. All the examples are less than 24 months. Also, WEForum has some stats from 2019, where Venezuela has been in hyperinflation for a longer period of time. [1] and of course, Lebanon is probably the most current example. [2] I’ve saved the best for last, though. Nicholas Kraus is probably the leading expert on hyperinflation, and has a great list here. [3] [0] - https://www.investopedia.com/articles/personal-finance/122915/worst-hyperinflations-history.asp https://www.investopedia.com/articles/personal-finance/12291... [1] - https://www.weforum.org/agenda/2019/08/inflation-deflation-venezuela-global/ https://www.weforum.org/agenda/2019/08/inflation-deflation-v... [2] - https://www.reuters.com/article/us-emerging-inflation-graphic/lebanon-follows-venezuela-into-hyperinflation-wilderness-idUSKCN24O20J https://www.reuters.com/article/us-emerging-inflation-graphi... [3] - https://www.cato.org/sites/cato.org/files/pubs/pdf/hanke-krus-hyperinflation-table-may-2013.pdf https://www.cato.org/sites/cato.org/files/pubs/pdf/hanke-kru...
- MR4D 6y ago
  > Japan lends to itself I meant to address this point separately. What you say is technically true, but if they just retired the debt, Japan would simultaneously become a much poorer country. Remember, the owner of the debt gets to mark it as an asset, so while the debt would be canceled out, the assets would drop in an equal amount [0]. [0] the Accounting equation is Assets = owners equity + liabilities, so a reduction in liabilities must cause a corresponding reduction in assets. And yes, it’s that insidious, but it is spun by people who have an interest in people not understanding this.

by MR4D 6y ago

jedharris 6y ago

As Noah says in the article. The question he's addressing is how to know when we are approaching the cliff. We all agree it is out there but we can have a much better society if we know how far. If we fall off the cliff of course that is bad. Conversely if we cripple our opportunities because we are afraid, but the cliff is really many many trillions of dollars further away, that is also bad.

Diggsey 6y ago
That seems akin to predicting the stock mocket... If you, as a lender, could predict before everyone else when the cliff was approaching, then you would stop lending sooner. If everyone does that, then the cliff moves closer, and your algorithm loses all predictive power.

throw0101a 6y ago

UK debt-GDP has hit 250% during the Napoleonic Wars and 240% after WW2: * https://en.wikipedia.org/wiki/File:UK_GDP.png https://en.wikipedia.org/wiki/File:UK_GDP.png * https://en.wikipedia.org/wiki/United_Kingdom_national_debt#History https://en.wikipedia.org/wiki/United_Kingdom_national_debt#H... The UK is still rolling forward that debt: * https://www.theguardian.com/business/2014/oct/31/uk-first-world-war-bonds-redeemed https://www.theguardian.com/business/2014/oct/31/uk-first-wo... Japan peaked at 180%. The US can always revert the Trump tax cuts (for the rich), as they didn't seem to do anything useful and get some extra revenue. That should help.

MR4D 6y ago
Japan has been well above 180% for years. [0] [0] - https://www.statista.com/statistics/267226/japans-national-debt-in-relation-to-gross-domestic-product-gdp/ https://www.statista.com/statistics/267226/japans-national-d...

qnt 6y ago

> sheer magnitude will overcome the lenders’ belief Japan lends to itself. The BoJ owns so much of the government bond market that there are days where the benchmark bond simply doesn't trade [1]. Under absolutely no circumstance will Japan have any issue repaying Yen denominated debt when they have a monopoly on the Yen. They're theoretically not far away from just retiring the whole bond market and just running an overdraft at the BoJ for all government borrowing requirements. Can you provide evidence to your point on hyperinflation happening all of a sudden too? I think all instances in history (except maybe Zimbabwe, but I've lost the details) involve external obligations that are unable to be met (War repatriations payable in gold for Germany, extreme dependance on imports for Venezuela since the economy was so misbalanced, high USD denominated debt burdens for Argentina ... etc). I [1]: https://www.wsj.com/articles/nobodys-trading-10-year-japanese-government-bonds-1521113501 https://www.wsj.com/articles/nobodys-trading-10-year-japanes...

MR4D 6y ago
Take a look at this page on Investopedia. [0]. All the examples are less than 24 months. Also, WEForum has some stats from 2019, where Venezuela has been in hyperinflation for a longer period of time. [1] and of course, Lebanon is probably the most current example. [2] I’ve saved the best for last, though. Nicholas Kraus is probably the leading expert on hyperinflation, and has a great list here. [3] [0] - https://www.investopedia.com/articles/personal-finance/122915/worst-hyperinflations-history.asp https://www.investopedia.com/articles/personal-finance/12291... [1] - https://www.weforum.org/agenda/2019/08/inflation-deflation-venezuela-global/ https://www.weforum.org/agenda/2019/08/inflation-deflation-v... [2] - https://www.reuters.com/article/us-emerging-inflation-graphic/lebanon-follows-venezuela-into-hyperinflation-wilderness-idUSKCN24O20J https://www.reuters.com/article/us-emerging-inflation-graphi... [3] - https://www.cato.org/sites/cato.org/files/pubs/pdf/hanke-krus-hyperinflation-table-may-2013.pdf https://www.cato.org/sites/cato.org/files/pubs/pdf/hanke-kru...
MR4D 6y ago
> Japan lends to itself I meant to address this point separately. What you say is technically true, but if they just retired the debt, Japan would simultaneously become a much poorer country. Remember, the owner of the debt gets to mark it as an asset, so while the debt would be canceled out, the assets would drop in an equal amount [0]. [0] the Accounting equation is Assets = owners equity + liabilities, so a reduction in liabilities must cause a corresponding reduction in assets. And yes, it’s that insidious, but it is spun by people who have an interest in people not understanding this.