-
Blog de template1
It is Japan we should be worrying about, not America
The rocketing cost of insuring against the bankruptcy of the Japanese state is telling us that the model has smashed into the buffers. Credit default swaps (CDS) on five-year Japanese debt have risen from 35 to 63 basis points since early September. Japan has suddenly decoupled from Germany (21), France (22), the US (22), and even Britain (47).
Regime-change in Tokyo and the arrival of Yukio Hatoyama’s neophyte Democrats - raising $550bn (£333bn) to help fund their blitz on welfare and the "new social policy" - have concentrated the minds of investors at long last. "Markets are worried that Japan is going to hit a brick wall : the sums are gargantuan," said Albert Edwards, a Japan-veteran at Société Générale.
Simon Johnson, former chief economist of the International Monetary Fund (IMF), told the US Congress last week that the debt path was out of control and raised "a real risk that Japan could end up in a major default".
The IMF expects Japan’s gross public debt to reach 218pc of gross domestic product (GDP) this year, 227pc next year, and 246pc by 2014.
...
"The debt situation is irrecoverable," said Carl Weinberg from High Frequency Economics. "I don’t see any orderly way out of this. They will not be able to fund their deficit. There will be a fiscal shutdown, a pension haircut, and bank failures that will rock the world. It is criminally negligent that rating agencies are not blowing the whistle on this."
Mr Hatoyama inherited a country that was already hurtling into sovereign "Chapter 11". The Great Recession has eaten up 27pc in tax revenues. Industrial output is down 19pc, even after the summer rebound ; exports are down 31pc ; the economy is 10pc smaller today in "nominal" terms than a year ago - and nominal is what matters for debt.
Tokyo’s price index fell 2.4pc in October, the deepest deflation in modern Japanese history. Real interest rates have risen 300 basis points in a year. It reads like a page from Irving Fisher’s 1933 paper, Debt Deflation Causes of Great Depressions.
...
[Japan] wasted its immense fiscal firepower, scattering money for 20 years on half-baked spending projects to keep the economy afloat. QE was too little, too late, and this is the lesson for the West. We must cut borrowing drastically over the next decade, and offset this with ultra-easy monetary policy. Does Downing Street understand this ? Does the White House ? Does the European Central Bank ? Clearly not.
2 commentaires
Mon premier article
Ceci est le premier article de ce blog !
Utilisez la barre d'outils située en haut de la page pour gérer vos rubriques, menus, configuration...etc.
Cliquez sur "Ecrire un article" dans le menu "Actions" pour écrire un nouvel article.
aucun commentaire
Suivre le flux RSS des articles Suivre le flux RSS des commentaires
Haut de page
Actions
Aller à l'accueil
Contact
Chercher un article
Connexion
Créer mon blog
Vous avez reçu un nouveau message !