Japan Spirals into Bankruptcy?

[emg]

the yen been going up against the dollar for years. Because the yen is strong, it would make sense for japan to launch QE. Plus, Japan is the world 2nd powerful economy. The value in japan is substantial high based on education.

 

[Martinghoul]

Here you go

 

[m22au]

Quote from Martinghoul:

Here you go

Thank you for the chart Martinghoul.

From a quick glance it looks like there is fairly strong correlation between the 2 year spread and the USDJPY.

 

[Martinghoul]

It's carry, innit? Interest rate parity and all that jazz...

 

[m22au]

Quote from Martinghoul:

It's carry, innit? Interest rate parity and all that jazz...

Agreed, that is the situation now.

However IF

(1) Japan spirals into bankruptcy AND
(2) that spiral involves bond yields rising faster than US yields

then the correlation may break down.

 

[Martinghoul]

Fo' shizzle... If Japan spirals away, all bets are off.

 

[FerdinandAlx]

If you think that a government can go bankrupt when its liabilities are issued in its own currency then you're clueless. The japanese government can never go bankrupt as they can just print money to pay off all outstanding liabilities. This isn't personal finance, this is government finance. Government checks don't bounce because governments create money as they spent it. Where do you think money comes from?

 

[Martinghoul]

Quote from FerdinandAlx:

If you think that a government can go bankrupt when its liabilities are issued in its own currency then you're clueless. The japanese government can never go bankrupt as they can just print money to pay off all outstanding liabilities. This isn't personal finance, this is government finance. Government checks don't bounce because governments create money as they spent it. Where do you think money comes from?

Is this addressed to me?

 

[FerdinandAlx]

Quote from Martinghoul:

Is this addressed to me?

Not necessarily. The previous post was adressed to anyone who would entertain the notion of the Japanese government going bankrupt. You've made some informed posts where you point out that the yen has been a strong currency and interest rates on JGBs have been moving down, not up. You do seem to lack though the understanding why the answer to the question "Japan spirals into bankruptcy" is not just a no, but a categorical no. By virtue of being a soverign issuer of its own fiat currency Japan will never go bankrupt.

 

[kashirin]

Quote from FerdinandAlx:

If you think that a government can go bankrupt when its liabilities are issued in its own currency then you're clueless. The japanese government can never go bankrupt as they can just print money to pay off all outstanding liabilities. This isn't personal finance, this is government finance. Government checks don't bounce because governments create money as they spent it. Where do you think money comes from?

what's the point to print money to avoid default if it create hyperinflation and depression
bondholders will still get worthless money whcih basically the same as default

default is much easier and healthier for future