7 ms·

> Japan is in the gutters and has a debt of 230% of GDP (twice of what Greece has) Greece's debt is to foreigners. In a foreign currency. Big, big, BIG differe

by venus 13y ago

> Japan is in the gutters and has a debt of 230% of GDP (twice of what Greece has) Greece's debt is to foreigners. In a foreign currency. Big, big, BIG difference. Japan can erase its debt with a stroke of a pen. So could have Greece, actually, but at least someone would have complained. I mean it's ridiculous really. 230% GDP debt - it's a complete joke. Everyone knows it's unpayable, if it had to actually be repaid, which it doesn't. If you are exposed to that, you deserve what you're going to get, which is nothing. But that's OK, because no-one is exposed, because it's basically the Japanese Govt writing a bunch of cheques to itself, and the only effect will be to devalue the yen, if anyone cares, which they don't. Frankly Japan's debt is turning into a sort of glitch in the matrix where something is obviously wrong but no-one mentions it because to do so would be to prove that none of it is real anyway.

mixmax 13y ago
The bulk of Japanese debt is to large Japanese pension funds, so yes theoretically the government could just declare that the Japanese people wouldn't get their pensions and simply steal them, but somehow I don't think that's going to work... Btw. There's an interesting problem with the Japanese debt - if you look at Japanese demographics the population is aging rapidly. This means that the pension funds that hold the debt will have to sell out because the money needs to be paid out. Who will they sell to? Every major institution in Japan is already stuffed to the gills with bonds, so there are two options: print money or sell to foreign investors. Printing money is balancimg on a knifes edge ( which is what the Bank of Japan is currently doing). Currently Japan pays an interest of less than 1%, and yet they spend 25% of their turnover just on interest payments. If you print money inflation and thus interest rises. When they reach 4% they will spend 100% of their income just paying interest on their loans. They can of course print more money and keep depreciating their currency, but history shows us that that doesn't end well. Alternatively they can try to sell bonds to foreigners, but somehow I doubt that there are any takers unless the interest rate goes up. As a comparison Greece pays around 8%. I'm not saying that Japan will definitely go bankrupt, I'm just saying that there are some pretty big red flags, and maneuvering around them is going to be damn hard. Since there are equally hard problems elsewhere in the world economy (as I hinted at above) there's a real chance that something somewhere goes awfully wrong.
- venus 13y ago
  I don't really disagree with you but you're operating on the assumption that the Japanese Gov't will continue playing "the game". Bear in mind there is absolutely nothing stopping them simply declaring that they have paid back all debts. Hyperinflation happens in countries that were collapsing anyway. Under other circumstances, you could call it "quantitative easing" just like the USA has been doing, or who knows what they will call it, but mark my words, that debt will never be repaid, or if it is, it will be with "new money". If you doubt me, answer this quesrtion - why is anyone still lending to the Japanese Gov't? The answer is of course that it's not real debt. You can't have real debt to an entity that can print the currency the debt is based on. The risk is not that the Gov't cannot repay, the risk is that inflation will reduce the value of the payment, and the 1% interest tells you the assessment of that risk.
- pessimizer 13y ago
  >They can of course print more money and keep depreciating their currency, but history shows us that that doesn't end well. History has shown us no such thing.
InclinedPlane 13y ago
This is a vastly overly facile analysis. Let's look at the mortgage debt crisis in the US through this same lens. It's just the US owing debt to itself, so you could just wipe it off the table with no consequences. And in large part what happened was a lot of people in the US walking away from their debt. Allowing their underwater mortgages to go unpaid, letting their houses be foreclosed. It turned out to not be particularly good for anyone involved. Japan's debt to itself won't go any better if it is written off either. There are people, human beings, on both ends of that debt, snapping the cord will have real-world consequences, it's not just numbers on a balance sheet.
- georgeecollins 13y ago
  The US mortgage market was not owned by the US government, it was securitized and therefore incredibly difficult to figure out who actually held the debt. The financial crisis was bigger than the subprime market. Banks were over leveraged and bond ratings were bogus. If the problem was just sub-prime mortgages, and the actual holders of those sub-prime mortgages were easy to identify, the problem would have been simpler.
  - ddebernardy 13y ago
    Aren't Freddy and Fanny state-owned and de facto holding most securitized mortgages in the US?
    - leg100 13y ago
      At the time of the crisis they were listed on the stock market and then put into 'conservatorship'. They bought mortgages and resold them on as mortgaged-backed securities, presumably to a mix of US and foreign entities.
    - georgeecollins 13y ago
      They hold most 30 year mortgages. Subprime mortgagages, ARMs etc were securitized. If the problem was Freddie or Fannie not getting paid it would be a different problem. Lehman Bros went bankrupt, as would many other financial institutiosn without a bailout because they held a lot of garbage paper (including subprime mortgages) and were very illiquid. Many European and Asian banks had huge US mortgage exposure. The problem was extreme mispricing of risk and illiquidity.
leg100 13y ago
Facile indeed, full of loose talk. > and the only effect will be to devalue the yen, if anyone cares, which they don't. So if the yen is devalued to $0.0000001 they won't care? With what will they pay for imported oil? Japan might prefer a weaker currency; not worthless, but stable. Many japanese entities have foreign denominated debts, and exporters also rely on imports in some form. > Everyone knows it's unpayable, if it had to actually be repaid, which it doesn't. The national debt of any country is not expected to be repaid. Japan is no different. Nor is the Japan the only country writing a bunch of cheques to itself. That's the essence of QE. Japan is heavily in debt. Were they to write off that debt overnight, it would still be heavily in debt because the write-off would show up in the accounts of the bond-holders, many of whom would be made insolvent. Foreign entities would then refuse to trade with Japan. You'd merely be taking from one hand and giving to the other. There's no trickery or matrices, there's nothing unreal about any of this. The accounting practices may be absurd, but there is real value at stake, and destroying it is to be avoided, not posed as a solution.

by venus 13y ago

mixmax 13y ago

The bulk of Japanese debt is to large Japanese pension funds, so yes theoretically the government could just declare that the Japanese people wouldn't get their pensions and simply steal them, but somehow I don't think that's going to work... Btw. There's an interesting problem with the Japanese debt - if you look at Japanese demographics the population is aging rapidly. This means that the pension funds that hold the debt will have to sell out because the money needs to be paid out. Who will they sell to? Every major institution in Japan is already stuffed to the gills with bonds, so there are two options: print money or sell to foreign investors. Printing money is balancimg on a knifes edge ( which is what the Bank of Japan is currently doing). Currently Japan pays an interest of less than 1%, and yet they spend 25% of their turnover just on interest payments. If you print money inflation and thus interest rises. When they reach 4% they will spend 100% of their income just paying interest on their loans. They can of course print more money and keep depreciating their currency, but history shows us that that doesn't end well. Alternatively they can try to sell bonds to foreigners, but somehow I doubt that there are any takers unless the interest rate goes up. As a comparison Greece pays around 8%. I'm not saying that Japan will definitely go bankrupt, I'm just saying that there are some pretty big red flags, and maneuvering around them is going to be damn hard. Since there are equally hard problems elsewhere in the world economy (as I hinted at above) there's a real chance that something somewhere goes awfully wrong.

venus 13y ago
I don't really disagree with you but you're operating on the assumption that the Japanese Gov't will continue playing "the game". Bear in mind there is absolutely nothing stopping them simply declaring that they have paid back all debts. Hyperinflation happens in countries that were collapsing anyway. Under other circumstances, you could call it "quantitative easing" just like the USA has been doing, or who knows what they will call it, but mark my words, that debt will never be repaid, or if it is, it will be with "new money". If you doubt me, answer this quesrtion - why is anyone still lending to the Japanese Gov't? The answer is of course that it's not real debt. You can't have real debt to an entity that can print the currency the debt is based on. The risk is not that the Gov't cannot repay, the risk is that inflation will reduce the value of the payment, and the 1% interest tells you the assessment of that risk.
pessimizer 13y ago
>They can of course print more money and keep depreciating their currency, but history shows us that that doesn't end well. History has shown us no such thing.

InclinedPlane 13y ago

This is a vastly overly facile analysis. Let's look at the mortgage debt crisis in the US through this same lens. It's just the US owing debt to itself, so you could just wipe it off the table with no consequences. And in large part what happened was a lot of people in the US walking away from their debt. Allowing their underwater mortgages to go unpaid, letting their houses be foreclosed. It turned out to not be particularly good for anyone involved. Japan's debt to itself won't go any better if it is written off either. There are people, human beings, on both ends of that debt, snapping the cord will have real-world consequences, it's not just numbers on a balance sheet.

georgeecollins 13y ago
The US mortgage market was not owned by the US government, it was securitized and therefore incredibly difficult to figure out who actually held the debt. The financial crisis was bigger than the subprime market. Banks were over leveraged and bond ratings were bogus. If the problem was just sub-prime mortgages, and the actual holders of those sub-prime mortgages were easy to identify, the problem would have been simpler.
- ddebernardy 13y ago
  Aren't Freddy and Fanny state-owned and de facto holding most securitized mortgages in the US?
  - leg100 13y ago
    At the time of the crisis they were listed on the stock market and then put into 'conservatorship'. They bought mortgages and resold them on as mortgaged-backed securities, presumably to a mix of US and foreign entities.
  - georgeecollins 13y ago
    They hold most 30 year mortgages. Subprime mortgagages, ARMs etc were securitized. If the problem was Freddie or Fannie not getting paid it would be a different problem. Lehman Bros went bankrupt, as would many other financial institutiosn without a bailout because they held a lot of garbage paper (including subprime mortgages) and were very illiquid. Many European and Asian banks had huge US mortgage exposure. The problem was extreme mispricing of risk and illiquidity.

leg100 13y ago

Facile indeed, full of loose talk. > and the only effect will be to devalue the yen, if anyone cares, which they don't. So if the yen is devalued to $0.0000001 they won't care? With what will they pay for imported oil? Japan might prefer a weaker currency; not worthless, but stable. Many japanese entities have foreign denominated debts, and exporters also rely on imports in some form. > Everyone knows it's unpayable, if it had to actually be repaid, which it doesn't. The national debt of any country is not expected to be repaid. Japan is no different. Nor is the Japan the only country writing a bunch of cheques to itself. That's the essence of QE. Japan is heavily in debt. Were they to write off that debt overnight, it would still be heavily in debt because the write-off would show up in the accounts of the bond-holders, many of whom would be made insolvent. Foreign entities would then refuse to trade with Japan. You'd merely be taking from one hand and giving to the other. There's no trickery or matrices, there's nothing unreal about any of this. The accounting practices may be absurd, but there is real value at stake, and destroying it is to be avoided, not posed as a solution.