Japan PM Warns of Default if Debt Not Fixed
- Thread starter S2007S
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Sure, it's all relative and subjective... On balance, taking into account the various counter-currents, I would still be mildly more positive about the US's prospects. It's still the best looking horse at the glue factory (to quote one pundit or another).
Japan is screwed. There's no way in hell they can pay back that debt, or even meaningfully reduce it. Their economy has "grown around" massive government deficits for 20 years, and is now structurally dependent on continued government spending. If the deficit-spending is withdrawn, they'd have a severe recession.
Even if the budget could be balanced, the Japanese savings rate is tipping over into negative territory, and they'll soon be forced to get funding from international capital markets. They sure won't get it at 1.5%. I read that if the average interest rate on Japanese debt rose to 4%, debt service alone would consume 100% of tax revenues.
It's going to be quite a fireworks show, that's for sure.
Even if the budget could be balanced, the Japanese savings rate is tipping over into negative territory, and they'll soon be forced to get funding from international capital markets. They sure won't get it at 1.5%. I read that if the average interest rate on Japanese debt rose to 4%, debt service alone would consume 100% of tax revenues.
It's going to be quite a fireworks show, that's for sure.
There's still time for us. Note that compared to something like the Great Depression, we haven't seen anything yet. 2008 was a scary couple of months but then the market doubles and everyone thinks we're fine (except for the unemployed I suppose). But even so, you're already starting to see political demands for deficit reduction, less government spending, fundamental economic and monetary reform etc.
So there's hope, but the clock is definitely ticking.
Finally, an ET poster who wants to look at the root cause of the problem and not just blame everything on Obama. I was starting to think there weren't any more like that.
The root cause of this, in the USA, is overspending on the military. Both Social Security and Medicare have run surpluses to date, so they are not to blame for any of the debt we currently have. I know we need a strong defense to face the challenges of the world. But, when 70-80% of the contracts are overbudget, and when we are spending more than twice as much on the military as we were just a few years ago, there is a lot of fat to be cut while still fighting and winning against our enemies.
Quote from Scataphagos:
It's GREED, pure and simple.
1. By deficit spending, they goose the economy to make it look like "things are rosy"... and the spending part actually is... you just have to ignore the debt part. Deficit appears to be "something for nothing"... for a while... until the debt comes home to roost.
2. By distributing entitlements, support for incumbents is engendered. If taxpayers had to cough up higher taxes for entitlements, they'd bitch. So, politicians overspend via deficits.. the effects are not immediate so more easily swallowed at the time.
It's all political greed.
I'd say it is due to DEMOCRACY.
In democracy, Governments have to PLEASE their citizens for their votes.