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> It's literally impossible for Japan to default on their debts, which are almost completely in Japanese currency. False. Many countries have defaulted on deb
by nandemo 12y ago
> It's literally impossible for Japan to default on their debts, which are almost completely in Japanese currency.
False.
Many countries have defaulted on debt denominated in local currency. E.g. Brazil in 1990 and Russia in '98.
In Brazil's case, part of the debt was indexed to inflation, so inflating away the debt wasn't easy.
AFAIK most of Japan's debt isn't inflation-linked. Still, a high enough rate of inflation isn't substantially different from partial default.
PS: See the table on page 30. http://www.cass.city.ac.uk/__data/assets/pdf_file/0009/219978/120.-Jeanneret-v2.pdf http://www.cass.city.ac.uk/__data/assets/pdf_file/0009/21997...
- hnnewguy 12y ago>False. I think you're both right. When you can print your own currency it is literally impossible to default on your debts, unless you choose to. Often times defaulting has benefits to the debtor, like the Russians escaping from ridiculous fixed exchange rates in 1998.
- Tyr42 12y agoI'd take another look, didn't he say that there exists inflation adjusted debt, which I don't think you can print money to get out of debt.
- hnnewguy 12y ago>there exists inflation adjusted debt Because they decided to issue it, mainly to instill confidence in a currency with a history of big inflation. But this isn't the norm. It doesn't change the argument that it is impossible to be unable to "pay back" something that you have an infinite supply of.