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Forum Post: ¥1,086,000,000,000,000 (Quadrillion) In Debt And Rising /// WhyThe ¥ Will Soon Be A $$$: /// "A Lost Decade... Or Two"

Posted 11 years ago on Jan. 26, 2012, 12:39 p.m. EST by MonetizingDiscontent (1257)
This content is user submitted and not an official statement

¥1,086,000,000,000,000 (Quadrillion) In Debt And Rising,

And WhyThe ¥ Will Soon Be A $: "A Lost Decade... Or Two"



Yesterday the Japanese Finance Ministry made a whopper of an announcement: in the year ending March 2013, total Japanese debt will surpass one quadrillion yen, or ¥1,086,000,000,000,000. This is roughly in line with the Zero Hedge expectations... http://www.zerohedge.com/article/japan-resumes-hyprintspeed-part-2-here-comes-one-quadrillion ...that by this March total Japanese debt would surpass one quadrillion yen. In USD terms, at today's exchange rate, this is precisely $14 trillion. And while smaller than America's $15.4 trillion (net of all post debt ceiling breach auctions), which was $14 trillion about a year ago, the GDP backing this notional amount of debt, which just so happens is greater than the GDP of the entire Euro area, is a modest ¥481 trillion, so by the end of the next fiscal year, Japan will have a Debt to GDP ratio of 225%. And that's not counting all the household and financial debt.

So prepare to add quadrillion to the vernacular. At this exponential rate of increase quintillion will appear some time in 2015 and so on. Yet the scariest conclusion is that as Bloomberg economist Joseph Brusuelas points out, America is not only next, it already is Japan.

Actually scratch that, America is worse than Japan, which at least generated a real housing bubble in the years just preceding the onset of its multi-decade credit crunch, something not even America could do in comparable terms. More importantly, "the debt-to-GDP ratio of the U.S. recently surpassed 100 percent, and it did so in the four years after the onset of the recession, compared with the six years it took the Japanese debt-to-GDP ratio to do so." The Japanese may be better than America in most things, but when it comes to destroying its economy, the US has no equal. Brusuelas' conclusion: "If below trend growth is the most probable scenario in the U.S., the most likely alternative is that the U.S. economy is headed for a lost decade… or two."

So... go all in?

U.S. & Japan Direction Of Long Term Yields - Graph:

US & Japan Housing Price Comparison - Graph:

From Bloomberg's Brusuelas:

The Long Malaise: Similarities Between Japan And The US

Slowly and surely, comparisons between the long malaise in Japan and the historically weak expansion in the U.S. are growing more valid.

These similarities primarily relate to the unique problems following the piercing of a debt-financed asset bubble that left many households, banks and firms with liabilities that exceeded assets following the bursting of a residential asset bubble. Unless policy is put in place soon or unless home prices are allowed to adjust to equilibrium clear-ing levels, it is growing more likely that the U.S. economy will continue to underperform in a fashion eerily similar to that of Japan over the past two decades. While differences between the U.S. and Japanese economies are many – the conspicuous consumption practiced by American consumers versus the thriftier Japanese public, for example – the similarities between the two economies are many. The direction of long-term yields and of the housing sector, as well as the increasingly leveraged U.S. balance sheet, look all too similar to Japan following the piercing of that country’s housing and equity market bubbles.

Peak to trough, home prices are down 33 percent. The Japanese housing market did not experience appreciable pricing gains during the first two decades of recovery, not exactly a comforting thought for either home owners or policy makers. A comparison between Japan and the U.S. housing markets in the four years following the bursting of their respective housing bubbles shows the two markets headed down the same listless path.

From the viewpoint of policy makers, the floundering housing market is blocking the process through which accommodative financial conditions stoke economic growth. This is likely why the Fed is considering purchasing mortgage-backed securities. It is also why PresidentObama, in his State of the Union address, expressed the desire to create a refinancing program that would support even the refinancing of mortgages not owned or guaranteed by Fannie Mae and Freddie Mac.

Meanwhile, the debt-to-GDP ratio of the U.S. recently surpassed 100 percent, and it did so in the four years after the onset of the recession, compared with the six years it took the Japanese debt-to-GDP ratio to do so. This makes it difficult for policy makers to push forward fiscal solutions to the housing problem, especially given private investor concern over the sovereign debt crisis in the euro zone.

Since the onset of the recession in the U.S., the economy has grown above the long-term trend of 2.7 percent in only three of 16 quarters, averaging a scant 0.16 percent rate of growth. This is very similar to the 0.5 percent average level of growth in Japan between 1991-2000. If below trend growth is the most probable scenario in the U.S., the most likely alternative is that the U.S. economy is headed for a lost decade… or two. Until a solution is put forward that addresses the shadow inventory of homes and permits prices to adjust, policy makers are just spinning their wheels, engaging in stop-gap measures that will probably prove insufficient to solve the most vexing of problems.

(((View this article Here))) http://www.zerohedge.com/news/%C2%A51086000000000000-quadrillion-debt-and-rising-and-whythe-%C2%A5-will-soon-be-lost-decade-or-two



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[-] 2 points by beautifulworld (23740) 11 years ago

Really interesting and sobering.

[-] 2 points by FawkesNews (1290) 11 years ago

You have taught me things I never wanted to know. I simply want to thank you for your postings, That is all.

[-] 1 points by MonetizingDiscontent (1257) 11 years ago

we're all students here. thanks for the nod.

[-] 2 points by ohmygoodness (158) 11 years ago

Quadrillion is many many millions

Fourteen fifteen trillions are less than quintillions

Debtdrops fall drip drip drip

[-] 1 points by MonetizingDiscontent (1257) 11 years ago

...administering an intravenous feed directly into our debt-viens...

[-] 1 points by nucleus (3291) 11 years ago

Let's keep up the illusion that the value of money should be determined by the "free market". What would all those poor bankers do if we didn't?

[-] 1 points by MonetizingDiscontent (1257) 11 years ago

They will continue to do what they are already doing, only with increased intensity: Determining the value of money, themselves. (because its -not- a free market.)

In a free market, "TooBigToFails" Fail. They are not rewarded with taxpayer trophy's of excellence. They Fail.

Bailouts and monetary interventions harm free markets. What the banks are doing is destroying all remaining traces of a free market.

If capitalism is the problem in someones mind; then cheer the TooBigToFail banks On, because what they are destroying whats left (if anything) of a free market FOR them. We need not lift a finger to decry capitalism, the establishment's status quo is doing all it can to manipualte it on the whole.

We wouldn't recognize one if we had it, at this point.

A free market doesn't prop up bondholders stock prices of insolvent institutions on the backs of taxpayers, with interest.

A 40% devaluation will come in some form of Quantitative Easing. http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm

Ben Bernanke 2002: "Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today (2002), it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation."

[-] 1 points by grapes (5232) 11 years ago

Japan was NOT gutsy enough to let Capitalism's "creative destruction" run its course quickly so it created huge amount of flight capital with its zero-interest policy. Its government had LONG lost control of its finance because it did NOT want to face the economic failure. Does the U.S. seem like deja vu with its not recognizing the big losses in the housing market and its 0-0.25% interest policy? The U.S. was applying band-aids just like Europe had been doing with its PIGS countries. Even Germany's Chancellor Merkel admitted recently the supremacy of the financial markets. The sad truth is that governments created so much liquidity that they had essentially reduced their central banks to Lilliputians relative to the liquidity sloshing around (i.e., central banks have been rendered "impotent and obsolete" quoting Ronald Reagan). Let us take the following Biblical teachings seriously: From http://en.wikipedia.org/wiki/Matthew_5:37: But let your ‘Yes’ be ‘Yes’ and your ‘No’ be ‘No.’ Whatever is more than these is of the evil one. Gramm-Leach-Bliley Act which undid Glass-Steagall Act MIXed commercial banking with investment banking and eventually led to the financial near-death experience. Fannie Mae and Freddie Mac MIXed implicit government guarantee with private corporate greed and led to long enduring housing market bust that still runs in slow motion. But federal government bailout of GM worked well. GM recently regained the position of the number-one automobile producer in the world. Why did this MIXing of public and private interests WORK? There was a controlled BANKRUPTCY - a form of "creative destruction." However much I hate to see the irresponsible or ignorant be rewarded, we need to write down principals on underwater mortgages to get the malaise behind us. If not, our economy will stay in the doldrums for a very long time. Yes, we will be fine after that but is it really necessary to suffer for the long duration needed for the mortgages to be paid off or foreclosed?

[-] 1 points by MonetizingDiscontent (1257) 11 years ago

Its corporatism now, not capitalism.

Capitalism ~lets~ Insolvent institutions, corporations Fail, period.

[-] 1 points by grapes (5232) 11 years ago

Well said. What we have now in our economy is the symptom of NOT following through on the true path of Capitalism. I understand why we veered away but our government should simply prevent systemic collapse and let Capitalism take its toll on the losers in controlled bankruptcies. What had made the U.S. truly great economically was our bankruptcy laws - a second, third, fourth, etc. chance. It came from our pioneering days to the West where settlers can often go bust but not necessarily out. Many will go broke but there are bound to be some who become wildly successful and their successes benefit many other people.

[-] 1 points by MonetizingDiscontent (1257) 11 years ago

:::::::::::::::::::::::::::Presenting The Interactive "Wiggle-Room Index":::::::::::::::::::::::::::::

:::::::::::Or, Which Countries Will Be Forced To Bail Out The Developed World::::::::::::

((Article))) http://www.zerohedge.com/news/presenting-interactive-wiggle-room-index-or-which-countries-will-be-forced-bail-out-developed-w

(((The Interactive WiggleRoom Index))) http://www.economist.com/sites/default/files/media/2012InfoG/Interactives/Wiggle_20120124/wiggle.swf


While it is best to pray that NASA will find some very rich and not so intelligent life on Mars so it can bail out the world as it sinks deeper and deeper into a untenable debt hole (which somehow can be "filled" only by issuing more debt at least according to tenured economists at ivy league institutions), a strategy of planning for a realistic outcome may not be a bad idea. The question then is who in the world has some/any spare leverage capacity to incur even more debt and use the proceeds to fund a Eurozone-American-Chinese collapse.

Enter the Economist's "wiggle-room index." The publication, best known for recently introducing the "shoe thrower index"... http://www.zerohedge.com/article/step-aside-big-mac-indexmeet-shoe-thrower-index ...(remember the Arab Spring and how Fed induced runaway inflation generated a "democratic" revolution across MENA?) has compiled a list of those developing world countries which still have capacity to provide credible global bailout capital (in fiat form of course - after all that is the only thing that the Ponzi understands) or as the Economist says, the "emerging economies that have the most monetary and fiscal firepower."

So if you are on this list (ahem China, Indonesia and Saudi Arabia) - our condolences - you are about to be dragged into the epic slow-motion ongoing collapse of the developed world, kicking and screaming, with some 44 caliber persuasion if needed, but you will be there, before it all falls apart. The time to repay all favors to Uncle Sam is coming.

(((Continue Reading this article Here))) http://www.zerohedge.com/news/presenting-interactive-wiggle-room-index-or-which-countries-will-be-forced-bail-out-developed-w

:::::: Chart of the Day: Central Bank Balance Sheet as Percent of GDP: Fed, ECB, BOJ, BOE ::::::


-January 26, 2012-

Here is an interesting chart by Peter Garnry, an Equity Strategist at Saxo Bank in Denmark...

...The race is on to see which central bank can load up its balance sheet with the most garbage the fastest. The key question is "when does everyone realize the jig is up?"

[-] 1 points by MonetizingDiscontent (1257) 11 years ago

::::::::: European Bailout Infographic: Presenting The Truckloads Of ::::::::::

:::::::::::::::::::::: Cash Needed To Rescue The Insolvent PIIGS ::::::::::::::::::::::



...No, literally truckloads. Our friends at demonocracy.info have been kind enough to put together an infographic that explains the European bailout in simple, visual terms, that even the most innocent of FTL truckers can grasp without much exertion, for the simple reason that it shows all the bailouts amounts in terms of trucks of cash. And here is the kicker: one would need a 13 lane highway, filled with trucks bumper to bumper, stretching for about 3 kilometers to represent the €2.91 trillion in total amounts owed by the PIIGS and their citizens (whether voluntarily or not... actually make that involuntarily) to Europe's largest banks.

What is most frightening is what is not shown: just how it is that the world's central banks are keeping all of these banks propped up. Because sooner or later all this money will be discovered to have been fatally misallocated. Then the real bailout cost will become all too evident, and just like in the US, it will be in the double digit trillions. Which means the metaphorical highway of trucks full of cash will stretch on for kilometers and kilometers and so on (or miles, for the naive US-based truckers). But since that day is in the future, there is no reason to worry about it.

(((European Bailout Infographic))) http://demonocracy.info/infographics/eu/debt_piigs/images/demonocracy.info-who_loaned_piigs_the_money-watermark-large.jpg


[-] 0 points by technoviking (484) 11 years ago

i really do hope the yen collapses.

i mean seriously, US$45 for a plate of 6 sushi? $15 for a small bowl of rice?

$120 for a train ride? you got to be kidding me.