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>No matter how you measure it, the Government of Japan is up to its neck in debt, and is still sinking. Japan's debt is a trailing indicator of economic malais

>No matter how you measure it, the Government of Japan is up to its neck in debt, and is still sinking. Japan's debt is a trailing indicator of economic malaise, not a leading indicator. >The only reason it can keep going is because it pays remarkably low interest rates. It ought to be obvious to anybody with an ounce of sense that any country that prints the currency it borrows in can choose its own interest rates. This is precisely what Quantitative Easing does. >But the first "arrow" of Abenomics is to push up inflation, and you can be sure that this arrow will meet its mark because they can always "print" more yen. Yes, this is true. >One of the iron laws of economics is that, when inflation goes up, so do interest rates. This is totally utterly false. As long as QE continues (and so far it has continued), interest rates on Japanese bonds will be held at zero. >Now, to cut a long story short, it looks like the government's going to get out of this bind by directing the Bank of Japan to print even more money to buy it's debt at below-market prices. In fact, if you follow the bond market news, it's clear that this is already happening. And that, my friends, is a recipe for hyperinflation. This is not just false, it is absurdly false. Hyperinflation hyperventilators have been predicting Japanese hyperinflation since 1997 when their debt went over 80% and they continued deficit spending. What happened instead? Deflation. They couldn't have been more wrong then just as you couldn't be more wrong now. Like any economic variable, inflation can be targeted. In Japan, it simply wasn't targeted and it wasn't aimed for during the last 20 years. They just engaged in QE, which swapped bonds that represented Japanese savings earning subinflation interest for cash savings which also earned subinflation interest. And they thought this money was magically going to be spent? For inflation to happen you need spending. PART of what is new about abenomics is that it actually does do a bit of that, but not very much.

Pitarou 12y ago
Less of the "anyone with an ounce of sense" type language, please. Not everyone who disagrees with you is stupid. What you say is correct as far as it goes but ... well ... I could write: > Only a driveling idiot does not understand that a government that prints its own currency doesn't need to borrow money at all. And it would be completely true. They tried that in Zimbabwe, didn't they? I'm wall aware that Japan has a few magic charms (high savings rates, strong balance of trade, and so on) that enabled the government to run up far higher debts than would be possible elsewhere. But it looks to me like those charms are all used up now.
- crdoconnor 12y ago
  >Less of the "anyone with an ounce of sense" type language, please. Not everyone who disagrees with you is stupid. Not stupid, but brainwashed perhaps. The fact remains that these predictions of Japanese hyperinflation using the EXACT same argument as yours have continued for two whole decades. When are the predictions going to cease? How many more decades of zero inflation / deflation are needed before it becomes clear that continued deficit spending DOESN'T inevitably lead to hyperinflation? Three decades? Four decades? A century? At what point do you start to consider your model broken and your predictions useless? >And it would be completely true. They tried that in Zimbabwe, didn't they? ABSOLUTELY WRONG. What they tried in Zimbabwe was borrowing a currency they DIDN'T print (US dollars). They were then reliant upon foreign food imports (because they ruined their farm indsutry) and had no real resources to service their FOREIGN debt. So they printed money and tried to exchange it for USD with predictable consequences. Japan did not borrow USD. It will NEVER borrow USD. It will NEVER end up like Zimbabwe. Not now. Not in ten years with 300% debt. Not even with a trade deficit and 500% debt. NEVER. Weimar was like Zimbabwe (its debts were denominated in Gold). Argentina was like Zimbabwe (it pegged its currency to the USD). Greece was like Zimbabwe (it can't print Euros any more than it can print gold). Japan is NOT like Zimbabwe. It controls its debt. It controls its currency. >I'm wall aware that Japan has a few magic charms Japan has no magic charms and its trade balance is irrelevant to its capacity to borrow. It borrows in its own currency so it can borrow as much as it likes at whatever interest rates it likes. End of story. For it to escape its economic rut this idea that it has to first pay off its huge debt needs to die. It actually needs to ramp up spending on jobs, just like the US did at the end of the great depression. People need to stop seeing sky high Japanese debt as the cause of its stagnation and start seeing it as the result of its stagnation. Cause and effect flows the other way.
  - Pitarou 12y ago
    > Not stupid, but brainwashed perhaps. > ... End of story. End of story indeed. I'm obviously too "brainwashed" to have anything of value to say. But I would like to point out that I never said government debt was the cause of Japan's economic stagnation.

Pitarou 12y ago

Less of the "anyone with an ounce of sense" type language, please. Not everyone who disagrees with you is stupid. What you say is correct as far as it goes but ... well ... I could write: > Only a driveling idiot does not understand that a government that prints its own currency doesn't need to borrow money at all. And it would be completely true. They tried that in Zimbabwe, didn't they? I'm wall aware that Japan has a few magic charms (high savings rates, strong balance of trade, and so on) that enabled the government to run up far higher debts than would be possible elsewhere. But it looks to me like those charms are all used up now.

crdoconnor 12y ago
>Less of the "anyone with an ounce of sense" type language, please. Not everyone who disagrees with you is stupid. Not stupid, but brainwashed perhaps. The fact remains that these predictions of Japanese hyperinflation using the EXACT same argument as yours have continued for two whole decades. When are the predictions going to cease? How many more decades of zero inflation / deflation are needed before it becomes clear that continued deficit spending DOESN'T inevitably lead to hyperinflation? Three decades? Four decades? A century? At what point do you start to consider your model broken and your predictions useless? >And it would be completely true. They tried that in Zimbabwe, didn't they? ABSOLUTELY WRONG. What they tried in Zimbabwe was borrowing a currency they DIDN'T print (US dollars). They were then reliant upon foreign food imports (because they ruined their farm indsutry) and had no real resources to service their FOREIGN debt. So they printed money and tried to exchange it for USD with predictable consequences. Japan did not borrow USD. It will NEVER borrow USD. It will NEVER end up like Zimbabwe. Not now. Not in ten years with 300% debt. Not even with a trade deficit and 500% debt. NEVER. Weimar was like Zimbabwe (its debts were denominated in Gold). Argentina was like Zimbabwe (it pegged its currency to the USD). Greece was like Zimbabwe (it can't print Euros any more than it can print gold). Japan is NOT like Zimbabwe. It controls its debt. It controls its currency. >I'm wall aware that Japan has a few magic charms Japan has no magic charms and its trade balance is irrelevant to its capacity to borrow. It borrows in its own currency so it can borrow as much as it likes at whatever interest rates it likes. End of story. For it to escape its economic rut this idea that it has to first pay off its huge debt needs to die. It actually needs to ramp up spending on jobs, just like the US did at the end of the great depression. People need to stop seeing sky high Japanese debt as the cause of its stagnation and start seeing it as the result of its stagnation. Cause and effect flows the other way.
- Pitarou 12y ago
  > Not stupid, but brainwashed perhaps. > ... End of story. End of story indeed. I'm obviously too "brainwashed" to have anything of value to say. But I would like to point out that I never said government debt was the cause of Japan's economic stagnation.