Japan has fallen victim to the Keynesian scam
- Thread starter Tsing Tao
- Start date
* Balanced budgets
* "Allow" (deeper) recessions and the subsequent defaults to happen
There are only two problems (actually they're two sides of the same coin) in Japan and it's at the root of all their issues...
Specifically, it's their inability to pull the plug on grandma and/or accept immigrants. That's all there is to it.
Specifically, it's their inability to pull the plug on grandma and/or accept immigrants. That's all there is to it.
There was a thread on ET some time ago on Modern Monetary Theory (MMT) which could explain the situation in Japan. In a closed society like Japan where Government debt is held mostly by its citizens and there is a net export economy, Government printing money will only mean citizens as net savers:
G - T = S - I - NX
where G is government spending, T is taxes, S is savings, I is investment and NX is net exports.
The conclusion that MMT draws from this is that it is only possible for the non government sector to accumulate a surplus if the government runs budget deficits. And in the end it all evens out?
Here is the Wiki version:
https://en.wikipedia.org/wiki/Modern_Monetary_Theory
I am just a mom and pop trader, so I will let you expert economists argue it out.
Cheers.
I have no doubt that the Japanese government can repay its debts in nominal terms.
But, if it runs the printing press to do so, then it's likely that means the JPY will depreciate against other currencies.
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Here is the historical Yen vs U$ chart going back to 1994. Tell me if the Yen is going to hell in a hand basket?
My intuition tells me as long as they run a positive current account balance, their currency will not go down the tube.
Best wishes.
That's a really good post, thanks, I enjoyed reading it.