Using Japan as a bad example for excessive public debt is like using Denmark to illustrate the dangers of excessive socialism. Yes, each would be better off without that foible, but they have so much else going for them that they do well nonetheless. They are smart, disciplined, and culturally homogeneous. It's hard to prove the stupidity in question because otherwise they have their shit together. Conversely, decent living standards, high educational achievement, and low crime in these places are not proof that the US should become more socialist or that the government should take on more debt.
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Japan Spirals into Bankruptcy?
- Thread starter observer67
- Start date
(underlining is mine) Keynesian economics applied to recessions has been shown to work well in many instances, but of course one must not expect to neglect common sense reforms and obtain equally good results.The point of the article was to show that Keynesian type spending doesn't work when common sense reforms are ignored
The Austrian vs. Keynesian economics debate was settled a long time ago in favor of Keynes. Even Hayek eventually recognized that belt tightening in times of recession is harmful.
the strange thing that what you call Keynesianism is more like Socialism or even Communism - all is preplaned it must be 2% inflation, 3% growth, not a single major financial enterprise is allowed to fail and overall nobody knows what costs what as price discovery killed and price levels of all major assets are also determined by central banks
the one thing is different that Cronyism within current system is bigger part of the system than it was in Socialist systems before
the one thing is different that Cronyism within current system is bigger part of the system than it was in Socialist systems before
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Using Japan as a bad example for excessive public debt is like using Denmark to illustrate the dangers of excessive socialism. Yes, each would be better off without that foible, but they have so much else going for them that they do well nonetheless. They are smart, disciplined, and culturally homogeneous. It's hard to prove the stupidity in question because otherwise they have their shit together. Conversely, decent living standards, high educational achievement, and low crime in these places are not proof that the US should become more socialist or that the government should take on more debt.
Your positivity and optimism are all nice and good, but it doesn't really address the issue:
Is there any level at which you think Japan's government debt becomes a massive problem, measured in either (1) government debt to GDP or (2) interest payments as a percentage of tax revenue? For example, will you think Japan can reach 1000% government debt to GDP, and/or interest payments at 99% of tax revenue, without a big adjustment?
Or do you believe that the country can continue to increase its debt burden into perpetuity, while its population of working age residents declines, and that pace of decline is set to increase?
Your positivity and optimism are all nice and good, but it doesn't really address the issue:
Is there any level at which you think Japan's government debt becomes a massive problem, measured in either (1) government debt to GDP or (2) interest payments as a percentage of tax revenue? For example, will you think Japan can reach 1000% government debt to GDP, and/or interest payments at 99% of tax revenue, without a big adjustment?
Or do you believe that the country can continue to increase its debt burden into perpetuity, while its population of working age residents declines, and that pace of decline is set to increase?
All BoJ buying is forever. How much they got now? almost 100% of GDP and in the process pushed yields below zerow without causing any inflation - basically free lunch
Given foreign reserves I would say Japan is debt free now.
Government debt is sorta irrelevant in the Japanese context. It's all about a few basic, but difficult choices that Japanese society as a whole has to make. One such choice is whether to permit much more immigration. The other is whether to "pull the plug on Grandma", so to speak. The former is a choice about revenues, while the latter is about expenditure. It's the latter that is so very important, since the majority of government deficit comes from social and welfare spending.Your positivity and optimism are all nice and good, but it doesn't really address the issue:
Is there any level at which you think Japan's government debt becomes a massive problem, measured in either (1) government debt to GDP or (2) interest payments as a percentage of tax revenue? For example, will you think Japan can reach 1000% government debt to GDP, and/or interest payments at 99% of tax revenue, without a big adjustment?
Or do you believe that the country can continue to increase its debt burden into perpetuity, while its population of working age residents declines, and that pace of decline is set to increase?
All BoJ buying is forever. How much they got now? almost 100% of GDP and in the process pushed yields below zerow without causing any inflation - basically free lunch
Given foreign reserves I would say Japan is debt free now.
If the BoJ buying is free of negative consequences (such as inflation), then why bother collecting a single JPY of taxation revenue? You could just get the BoJ to purchase 100% of the government's outstanding debt, as well as 100% of the government's future issuance. (Imagine how popular one would be as a politician proposing zero taxes!) This would be a silly proposition.
I doubt your "basically free lunch" assertion. Is there any amount of BoJ purchases that you believe will cause a significant depreciation in the JPY? Or do you believe the "basically free lunch" exists for any amount of BoJ purchases?
Government debt is sorta irrelevant in the Japanese context. It's all about a few basic, but difficult choices that Japanese society as a whole has to make. One such choice is whether to permit much more immigration. The other is whether to "pull the plug on Grandma", so to speak. The former is a choice about revenues, while the latter is about expenditure. It's the latter that is so very important, since the majority of government deficit comes from social and welfare spending.
My view is that they will leave immigration policy unchanged, or in a best-case scenario, increase immigration intake but by only a small amount that makes a negligible positive impact on the economy. With regards to "pulling the plug on Grandma", I doubt any politician will make the large changes required to make a material reduction in social/welfare spending.
Do you agree with my views in the preceding paragraph? Or do you think that in the coming years that government budgets will improve significantly due to revenue and/or expenditure measures?
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Thing is, Japan is special and different. The structure of society is such that what we in the West perceive as utterly unimaginable is only a little bit crazy. Thus, while I agree with you about the extreme case, there's no reason to expect that the free lunch runs out any time soon. After all, it has frustrated oodles of "extremely clever" Western macro mavens for well nigh two decades, so no particular reason it should stop now.My view is that they will leave immigration policy unchanged, or in a best-case scenario, increase immigration intake but by only a small amount that makes a negligible positive impact on the economy. With regards to "pulling the plug on Grandma", I doubt any politician will make the large changes required to make a material reduction in social/welfare spending.
Do you agree with my views in the preceding paragraph? Or do you think that in the coming years that government budgets will improve significantly due to revenue and/or expenditure measures?
.
I have heard that the Japanese slowly but surely are getting to the point where they increasingly appreciate their predicament. So, anecdotally, there have definitely been some mild increases in immigration. In terms of Grandma, it's not explicit, but there have been increasing efforts to cap social spending (specifically, elderly care).
Which way it all goes from here is anyone's guess...