[CTRL] D Bomb Threatens Japan
-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
Re: [CTRL] D Bomb Threatens Japan
-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
