Bacon's Rebellion

Democracy Thrives in Sunlight

Boomergeddon Watch: Japanese Debt Downgraded

—

by

James A. Bacon
in

Land of the Setting Sun

From today’s Wall Street Journal: Fitch Ratings delivered a surprise announcement yesterday, downgrading Japan’s sovereign debt rating to A+, a far cry from AAA status. That puts the debt of Japan on a par with Estonia and Malta. Fitch cited Japan’s lack of progress in bringing its massive deficit under control.

“With 93% of the bonds held domestically, there is little chance of a crisis sparked by a flight of international capital as has been seen in countries such as Greece and Spain,” notes the Journal. Moreover, Japan remains the world’s largest creditor nation.

However, Japan’s saving rate has plummeted as its population has aged. Also, investors are willing to accept extraordinarily low interest rates. But foreign investors, to whom the government eventually will have to turn, may not. The national debt has shot way past 225% as a percentage of GDP — twice that of Greece. If interest rates went higher, that debt could quickly become unsustainable. And if the Japanese began liquidating overseas assets, such as their $1 trillion in U.S. Treasuries, their problems could become our problems in a big hurry.

Boomergeddon’s coming. It’s gonna get ugly. Only those who plan ahead will survive intact.

— JAB

Share this article

ADVERTISEMENT

(comments below)

ADVERTISEMENT

(comments below)

Comments

  1. larryg Avatar
    larryg

    How do places like Singapore and Hong Kong provide Social Security and Universal Health Care without getting into the problems that other countries do?

    Simple. They have individual mandates that require on the order of a 25% payroll tax to fund.

    Now.. we’re told by the Heritage/Cato/like-minded folks that this is a BAD thing.. that it really hurts the economic ability of a nation but these two places seem to excel at economic performance and at the same time have the social insurance issues under fiscal control.

    So how can Singapore and Hong Kong get the job done and not other countries?

    Oh.. and Sweden.. the #1 ranked country for social spending .. has a balanced budget…

    so why all of this ” you’re doomed no matter what” blather?

  2. Peter Galuszka Avatar
    Peter Galuszka

    “Boomergeddon’s Coming!”

    Sort of like Elmer Gantry stealing a base for Jesus.

  3. DJRippert Avatar
    DJRippert

    LarryG:

    I am looking at hiring some Swedes for programming work in Europe. I’d have to pay 22.19% of the person’s salary as long as I don’t have a fixed location (i.e. office) within Sweden. If I do establish an office in Sweden I pay 31.42%.

    Here’s shocking news – I haven’t hired any Swedes as support engineers in Europe.

    On the good news side, the pay for the Swede is about $53,000 per year for the position while I’d have to pay an American about $80,000.

    So, LarryG – who is really better off?

    1. James A. Bacon Avatar
      James A. Bacon

      Question: When you say that you’d have to “pay 22.19% of the person’s salary,” what are you referring to? Is that some kind of additional tax or surcharge to fund social safety net benefits?

      1. DJRippert Avatar
        DJRippert

        It’s the full basket of safety net benefits – unemployment, retirement … I think there is even funeral benefits.

  4. larryg Avatar
    larryg

    payroll tax for pension/health care I suspect but await DJ’s answer.

    One reason the 53K is less than the 80K is that the employer does not “do” health care nor pensions and health care is about 1/2 the cost of here.

    Jim’s basic premise seems to be that we cannot allow Govt to be involved in pensions and health care because they are incapable of fiscal responsibility.

    But there are more than a few countries that do it “right” and basically the way they do it is with a payroll tax that adequately funds the benefits.

    Australia and New Zealand are two more countries that have fiscally constrained social programs.

    It’s not impossible and it’s no more a “trick” that not spending more for Defense than you can afford either.

  5. larryg Avatar
    larryg

    and while we are at it.. we might as well slay another noxious beast:

    ” Government outlays rising at slowest pace since 1950s”

    ” Over Obama’s four budget years, federal spending is on track to rise from $3.52 trillion to $3.58 trillion, an annualized increase of just 0.4%.

    There has been no huge increase in spending under the current president, ”

    http://www.marketwatch.com/story/obama-spending-binge-never-happened-2012-05-22?pagenumber=1

    ” Barack Obama has lowest spending record of any recent president”

    ” Obama did oversee the lowest annual increases in spending of any president in 60 years.”

    PolitiFact = Mostly True

    http://www.politifact.com/truth-o-meter/statements/2012/may/23/facebook-posts/viral-facebook-post-says-barack-obama-has-lowest-s/

    1. DJRippert Avatar
      DJRippert

      LarryG –

      You have been conned by the libtard media.

      The “one time” TARP payment of $700B was signed into law on Oct 3,2008. Thus, it DRAMATICALLY increased federal spending that year (FY09). This was the last year of the Bush Administration.

      So, what happened? Was the “one time” TARP splurge really a “one time” crisis avoidance payment?

      Of course not!!! Under Obama, every year is a crisis and every year needs another near trillion dollar excess spend. The spending after FY09’s TARP never went down under OBama!!! Instead, the spendthrift actually increased the government above the FY09 normal spend + TARP.

      You’d better hope that stupid statistic dies out quickly because all it really proves is that ODumbo has spent another TARP each and every year he has been president.

  6. larryg Avatar
    larryg

    Your comment is awaiting moderation.
    and while we are at it.. we might as well slay another noxious beast:

    ” Government outlays rising at slowest pace since 1950s”

    ” Over Obama’s four budget years, federal spending is on track to rise from $3.52 trillion to $3.58 trillion, an annualized increase of just 0.4%.

    There has been no huge increase in spending under the current president, ”

    http://www.marketwatch.com/story/obama-spending-binge-never-happened-2012-05-22?pagenumber=1

    ” Barack Obama has lowest spending record of any recent president”

    ” Obama did oversee the lowest annual increases in spending of any president in 60 years.”

    PolitiFact = Mostly True

    www][dot]politifact.com/truth-o-meter/statements/2012/may/23/facebook-posts/viral-facebook-post-says-barack-obama-has-lowest-s/

  7. larryg Avatar
    larryg

    ” So, what happened? Was the “one time” TARP splurge really a “one time” crisis avoidance payment?”

    It was no less nor no more than the 2008 Congress voted for.

    “Of course not!!! Under Obama, every year is a crisis and every year needs another near trillion dollar excess spend. The spending after FY09′s TARP never went down under OBama!!! Instead, the spendthrift actually increased the government above the FY09 normal spend + TARP.”

    DJ..just how GULLIBLE are you? Who do you think APPROVED any of that spending? Do you think Obama can appropriate money without the approval of Congress?

    “You’d better hope that stupid statistic dies out quickly because all it really proves is that ODumbo has spent another TARP each and every year he has been president.”

    Obama had NOTHING to do with APPROVAL of the TARP. He DID spend it but the money was approved by Congress not Obama.

    Here’s exactly the timeline guy:

    http://en.wikipedia.org/wiki/File:CBO_Forecast_Changes_for_2009-2012.png

    spending DOES occur UNDER a Presidents term but the President does not approve the spending – Congress does.

    The structural deficit AND the debt were not created by Obama. They were created by the Congress that approved the spending and most of it was prior to him being Prez.

  8. DJRippert Avatar
    DJRippert

    First, LarryG lauds Obama for his frugality in only increasing Federal spending by 1+% per year:

    “” Barack Obama has lowest spending record of any recent president”

    ” Obama did oversee the lowest annual increases in spending of any president in 60 years.”

    Then, he writes:

    “Who do you think APPROVED any of that spending? Do you think Obama can appropriate money without the approval of Congress?”.

    I’m lost here, LarryG – does Obama get credit / blame for the budget or not?

  9. larryg Avatar
    larryg

    Well.. NO Prez can spend money without first being approved by Congress.

    2nd, if the previous Congress approves spending that goes on year after year, it can cause a deficit that goes on year after year and into the next Presidency who then “presides” over the deficit and debt but had not a thing to do with it.

    So when the Congress under Bush approved increases in DOD/National Defense spending – on a permanent basis that then contributed to the deficit and debt – that spending goes on into the next Presidency who did not have anything to do with that increased spending.

    moral of the story – know the facts.

Leave a Reply

Read More