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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

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.
enko 13y ago
> it's not just numbers on a balance sheet I think you will find that it is, actually. The only thing stopping some deux ex machina reaching down and writing new numbers is a desire to not mess with "the system". But what happens when the situation is such that its very existence calls "the system" into question? Japan's debt is such a situation - and the USA's, too, actually. Let's put it another way. There is no risky debt issued at 1% interest, ever. So why is this debt issued at 1%, hm? Are all parties involved simply stupid? Of course not. The whole thing is a sham. It is simply covert, deferred, inflation. The only way a government can have in-country, in-currency debt is if it chooses to. The Japanese debt will never be repaid. The USA's debt will never be repaid, for that matter. What do you think would happen if the USG tomorrow issued a statement that it was defaulting on all its debts, immediately and irrevocably? I'll tell you what would happen: nothing. At this level, debt is no longer about money, it is about fealty.

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.

enko 13y ago

> it's not just numbers on a balance sheet I think you will find that it is, actually. The only thing stopping some deux ex machina reaching down and writing new numbers is a desire to not mess with "the system". But what happens when the situation is such that its very existence calls "the system" into question? Japan's debt is such a situation - and the USA's, too, actually. Let's put it another way. There is no risky debt issued at 1% interest, ever. So why is this debt issued at 1%, hm? Are all parties involved simply stupid? Of course not. The whole thing is a sham. It is simply covert, deferred, inflation. The only way a government can have in-country, in-currency debt is if it chooses to. The Japanese debt will never be repaid. The USA's debt will never be repaid, for that matter. What do you think would happen if the USG tomorrow issued a statement that it was defaulting on all its debts, immediately and irrevocably? I'll tell you what would happen: nothing. At this level, debt is no longer about money, it is about fealty.