-Caveat Lector-
....And the Numismatic Beast rages and roars, its eyes
rolling wildly, tongue a'loll, mouth foaming copiously and
dripping; in preparation for the greatest feast of its
life. Even now, in the capitols and television stations its
minions shuffle and scurry about, confused, programmed to do
its bidding through maneuverings of its very existance. So
the Beast continues to rage, bending the bars of its cage,
awaiting that first high-pitched squeal signalling a crack
in the metal of its prison gate. Then shall it emerge and
no desert magic, which has vainly attempted to harness the
power of this beast, will be able to control it then. The
beast hungers. It has not fed for quite some time. But it
ALWAYS feeds. Always.
flw wrote:
>
> -Caveat Lector-
>
> Historically, every major stock market crash is preceeded by a huge
> debt bubble to go along with the stock market bubble.
>
> Japan is now approaching a historical Debt Bubble to match
> its Asset Bubble from the 1980's. The US is the mirror image of
> Japan. Lower government debt but huge personal / corporate debt.
>
> Yes, we live in interesting times.
> flw
>
> NY TIMES
> September 1, 1999
> Japan as No.1? In Debt, Maybe, at the Rate Things Have Been Going
>
> By SHERYL WuDUNN and NICHOLAS D. KRISTOF
> TOKYO -- One of the striking paradoxes of Japan is that this is a country
> with the greatest savers in the industrialized world, and yet everywhere
> one looks there is debt.
>
> Japanese savers are famous for their ability to salt away money for the
> future, but as a nation, this country has some of the worst accounts in the
> industrialized world, and its debt trajectory increasingly looks like that
> of a third world country like Tanzania.
>
> Much of the public debt, which totals about $5.4 trillion, was taken on at
> the urging of the United States to stimulate growth.
>
> But Japan's debt situation is now so precarious that as talk of new
> stimulus plans heats up this fall, there are growing doubts about how long
> Prime Minister Keizo Obuchi can continue to spend furiously in hopes of
> reviving the economy.
>
> "It's like trying to adjust the fire carefully so that you don't ruin the
> fish," said Sadakazu Tanigaki, a Vice Minister of Finance. "The weight of
> the debt is extremely large. It is obvious that we can't leave the current
> situation as it is."
>
> The dangers are difficult to gauge, and if Japan's incipient recovery gains
> momentum, profits may flow in around the country and the nation's debt
> problems could diminish. Indeed, despite gloom-and-doom talk from some
> economists in the 1980's, the United States has transformed a budget
> deficit in those days into a surplus today, while enjoying spectacular
> economic growth now.
>
> So the Clinton Administration, while concerned about Tokyo's debt, has
> urged Japan to keep spending on the bet that doing so may revive the
> economy and generate the cash to pay back later.
>
> Still, Japan's debt is not only tarnishing the Government's reputation as
> prudent proprietor of the world's second-largest economy. It is also
> raising troubling questions that extend far beyond Japan.
>
> "There is no end in sight to the buildup of debt," said Vincent J. Truglia,
> managing director at Moody's Investors Service, which has downgraded
> Japan's formerly pristine credit rating, an important sign of diminished
> foreign confidence in its financial stamina.
>
> "We're just concerned that Japan has already entered the highest levels of
> debt of an industrialized country," Truglia said, "and soon will be
> entering unprecedented levels."
>
> Perhaps more important, rising debt levels will tend to lead to higher
> long-term interest rates in Japan. The effects of those higher rates may
> nudge up lending rates around the world, possibly threatening the economies
> of Asia that are trying to climb out of a financial crisis that is now two
> years old.
>
> Higher lending rates could also ripple across the Pacific to raise business
> costs in California and mortgage rates in Florida, undermining the American
> economy.
>
> "If Japan goes through a period of fiscal paralysis or outright crisis,
> then it's going to have a very negative impact on global financial
> stability," said David L. Asher, a specialist on Japan at the Massachusetts
> Institute of Technology. "They've already broken a lot of world records for
> debt management in postwar history."
>
> The risk of a default by the Japanese Government is remote, but there are
> anxieties here that rising debt levels could lead to a confidence crisis,
> provoking a flight of capital and currency turmoil.
>
> Although Japan's troubles have not hurt America so far, a sudden shift to
> safe assets in the United States could send the dollar soaring in value
> against the yen and hurt American exports by making them more expensive.
>
> The debt is an astonishing contrast to Japan's reputation for thriftiness.
> Japanese citizens have amassed a pool of $6.4 trillion in household
> savings, which appears at least on the surface to be more than enough to
> pay off the debt.
>
> One major problem is that the domestic savings and foreign assets held by
> private citizens are exactly that: private. The debt, by contrast, is held
> mostly by the Government, and the Government can hardly seize the savings
> of private citizens to pay it off.
>
> The deterioration in Japan's finances has been amazingly rapid, a result of
> tax cuts and spending increases that have resulted in annual budget
> deficits that now amount to 10 percent of its economy -- or 13 percent, if
> nationalized railroad debts are included. Even the lower figure is the
> highest among the industrialized countries.
>
> As recently as 1992 the Japanese Government's gross debt amounted to just
> 70 percent of its gross domestic product, a ratio only a bit higher than
> that of the United States. This year, Finance Ministry figures show, the
> debt will reach 120 percent, exceeding that of Italy, which for many years
> has been by far the worst among the Group of Seven industrialized
> countries.
>
> The International Monetary Fund estimates that in 2003 the Japanese ratio
> will rise to 138 percent.
>
> Moreover, Moody's estimates that the Government may also have to absorb
> additional debts equivalent to between 30 and 40 percent of gross domestic
> product from the banking system, postal system loans and other areas.
>
> That would take Japan's debt to around 170 or 180 percent of GDP, a figure
> about three times the level of the United States debt in the 1980's, when
> American budget deficits and mounting public debt were the talk of the
> world.
>
> These days in Japan, the central Government's tax money cannot even cover
> the bills for debt service and entitlements like pensions, let alone
> payrolls.
>
> Its debt-to-revenue ratio, which measures potential fiscal problems by
> comparing a nation's debt burden to its annual cash intake, is quickly
> approaching 1,400 percent, far worse than that of other industrial powers.
> That means that Japan must repay 14 yen for every yen it takes in from
> taxpayers.
>
> All this puts Prime Minister Obuchi in a bind. He has managed to restore
> growth to the Japanese economy this year, but only by huge stimulus
> measures that add to the debt. And there is widespread apprehension that
> the economy will run out of momentum when the extra Government spending
> fades this fall.
>
> Already, after raising about $1.4 trillion since 1992 to boost the economy,
> the scorecard shows a massive pile of debt on one side and on the other
> seven years of minuscule annual growth that may not be self-sustaining.
>
> At some point, officials worry, the debt will get so high that the benefit
> of any further stimulus will be outweighed by rising long-term interest
> rates. Already, long-term rates are nearly 60 times the level of short-term
> rates.
>
> Ichizo Ohara, an influential member of Parliament, said he had warned the
> Prime Minister against bowing to pressure from President Clinton for a new
> supplementary budget to stimulate the economy.
>
> "That would raise interest rates and knock stock prices down," Ohara said.
>
> But Obuchi is moving to introduce, probably by autumn, yet another giant
> supplementary stimulus package that could reach $45 billion or more, adding
> to the mountain of debt.
>
> It is not just Japan's central Government that is vastly overextended.
> Debts are emerging everywhere else as well.
>
> The local governments of Japan's top four most populous regions, including
> Tokyo, have declared a fiscal emergency, and to stabilize themselves they
> must lay off large numbers of workers or get a central Government bailout.
> Already, local governments around Japan have amassed $1.6 trillion in debt,
> a staggering sum that is greater than the assets of any bank in the world.
>
> In the corporate sector, the bad debt problems of the banks are well
> publicized and by some estimates may still amount to hundreds of billions
> of dollars.
>
> But Japan's insurance companies invested in many of the same foolish
> property ventures as the banks, yet the insurance companies so far have
> barely faced up to their problems.
>
> Countless other companies, engaging in construction, real estate and even
> in autos and technology, also are mired in bad debts because Japanese
> companies historically have financed themselves through bank loans. Many of
> the companies have used permissive accounting rules to hide the
> obligations.
>
> Mikuni & Company, Japan's only independent credit rating agency, assesses
> the risks of Japan's top 1,000 bond issuers -- the country's corporate
> equivalent of prime real estate. Even looking at just those elite
> companies, Mikuni rates about two-thirds of them BB -- junk status -- or
> below.
>
> "What's happening is very scary," said Akio Mikuni, who runs the rating
> agency and expects many corporate defaults to come. "So far in Japan, the
> Government has avoided bankruptcies. But this system cannot be continued.
> It is impossible. So the probability of bankruptcies is quite significant."
>
> Ultimately, Mikuni expects those bankruptcies to help strengthen Japan's
> economic efficiency by clearing away weak, money-losing businesses. But a
> more immediate result may be that defaults will ripple through the economic
> system, adding to unemployment and exacerbating the sense of economic
> despair.
>
> Some officials deny that the problem is so serious. They note that Japan's
> "net debt" figures, which take into account the country's social security
> assets, look much better than the gross figures usually cited.
>
> But economists are nearly united in agreeing that the net figures are
> misleading, because social security accounts are themselves in disastrous
> shape. While there is a surplus today, the social security system is
> projected to run out of money by 2010.
>
> Indeed, economists estimate that the public pension system may be severely
> underfunded. Corporations are in the same position, and Goldman Sachs
> (Japan) Ltd. has estimated that pension plans at major corporations are
> underfunded by about $727 billion -- making the corporate problem one of
> roughly the same scale as the banking system debts that have hobbled the
> Japanese economy in recent years.
>
> Then there is the question of what has been done with the funds that come
> from deposits at the Government-run postal savings system. Japanese post
> offices accept cash deposits in a system that if it were counted as a bank
> would be the biggest one in the world -- and perhaps one of the worst-run.
>
> The Government has used those funds, a total of about $3.8 trillion, for
> pumping up the economy by lending to small businesses or for building
> bridges and tunnels. The Government has also used public pension
> contributions and postal life insurance premiums on similar projects.
>
> Many people worry that much of the money has been squandered, though the
> Government denies it. The upshot is that when losses in these areas are
> finally acknowledged, the Government will have to absorb them and its debt
> levels will rocket even higher.
>
> Even though many politicians and officials acknowledge that Japan's
> finances are spinning out of control, they say it will be difficult for the
> political process to correct the problem any time soon.
>
> "That gap essentially must be bridged with taxes," Kaoru Yosano, the
> Minister of International Trade and Industry and a senior member of the
> governing Liberal Democratic Party, said in a somber interview in his
> spacious office. "But the Liberal Democratic Party and all other political
> parties are enormously wary, even frightened, of raising taxes.
> Accordingly, politically speaking, it has become a taboo."
>
> Yosano paused and added, "I think that this can be characterized as a lack
> of courage among the political parties."
>
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DECLARATION & DISCLAIMER
==========
CTRL is a discussion and informational exchange list. Proselyzting propagandic
screeds are not allowed. Substance�not soapboxing! These are sordid matters
and 'conspiracy theory', with its many half-truths, misdirections and outright
frauds is used politically by different groups with major and minor effects
spread throughout the spectrum of time and thought. That being said, CTRL
gives no endorsement to the validity of posts, and always suggests to readers;
be wary of what you read. CTRL gives no credeence to Holocaust denial and
nazi's need not apply.
Let us please be civil and as always, Caveat Lector.
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