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The author doesn't understand that Japan's debt is denominated in its own sovereign currency -- which it can theoretically devalue -- while Greece's loans are in Euros.

Japan's debt is truly stupendous but we here in the US devalued our old debt by a factor of 3 between 1967 and 1983 thanks to good ol' dollar devaluation. The national debt even went down a bit in real terms thanks to that wacky inflation in the late 70s.

Japan would LOVE to have the yen back up at Y240, where it belongs. Well, maybe not, given that it's still dependent on oil imports and getting all that cheap labor from China must be nice.

As for Japan's debt itself -- 909,000,000,000,000 yen debt . . . that's a lot of debt!

In 2020 there will be 22M men aged 20-50 . . . and the national debt will be around 1,200,000,000,000,000. (That's 1.2 quadrillion yen)

The per-man interest burden alone on this debt (@ 3%) will be Y130,000 per month, that's $1700/month just to meet the interest burden.

Maybe I won't be moving back to Japan this decade. Damn . . .

Now, 90% of this debt is owed to Japanese nationals, so what it really means is that Japan has sold debt instead of taxing its citizens enough.

We have a $14T national debt now, and by 2020 it will probably be $20T -- that's a $750/mo interest burden @ 3% for the ~60M men of working age in 2020.

I think I need to learn Canadian.

Thanks again, Troy. I had a feeling you would comment first. Most of your posts are informative. Let's see who else is interested in this topic. There is another link up there from Krugman at MIT.

I read through this post but I had to go back a bit to dig it up...some good stuff here.
http://patrick.net/?p=27340

cheers.

Debt that can be repaid with currency that you have the ability to print represents a tiny burden compared to debt that must be repaid with currency that you do not have the ability to print.

Kevin says

Debt that can be repaid with currency that you have the ability to print represents a tiny burden compared to debt that must be repaid with currency that you do not have the ability to print.

Troy is correct, Japan is a zero sum game. They borrowed from their citizens instead of taxing them. If America repays it's debt to the rest of the world by printing money there will be severe consequences.

bob2356 says

Kevin says

Debt that can be repaid with currency that you have the ability to print represents a tiny burden compared to debt that must be repaid with currency that you do not have the ability to print.

Troy is correct, Japan is a zero sum game. They borrowed from their citizens instead of taxing them. If America repays it’s debt to the rest of the world by printing money there will be severe consequences.

No. Japan can only repay its debts by:

- Raising taxes
- Printing money
- Cutting spending

The US can only repay its debts by:

- Raising taxes
- printing money
- Cutting spending

Who you owe the money to is irrelevant. What is relevant is how you are forced to repay it.

The vast majority of US debt is also owed to the american people. It is no different owing debt to a US citizen than it is a japanese citizen. It is slightly better to owe it to the social security trust fund or the post office, since you can default on those debts with few repercussions.

Kevin says

It is slightly better to owe it to the social security trust fund or the post office, since you can default on those debts with few repercussions

wat. "Defaulting" on $2.6T of SSTF bonds would have some serious repercussions.

SSA can't print money, it runs a cash business. Losing the ability to exchange its bonds back into the cash it used to buy them would result in total benefit payouts being frozen to current levels and future benefits gradually falling to 80% of present benefits in real terms (nominally, they might go up a bit still).

Plus I would hope the theft of $2.6T from working americans would have some blowback on the streets a la Greece, but perhaps you are right about that.

Actually, checking the numbers I see social security has $60B/mo in outgo vs. $53B in contributions, so without the SSTF savings they'd have to cut benefits 12% across the board right now, and much more as the baby boomers start hitting retirement age en masse this decade.

"Few repercussions"

@Troy

And the % amount Americans contribute to SS has even been recently cut for now, even when it had been in a shortfall before. Great.

American in Japan says

And the % amount Americans contribute to SS has even been recently cut for now, even when it had been in a shortfall before. Great.

The FICA cut is the same thing as a 2% tax cut (up to $2000) on all wage-earners, since they're just going to print up more bonds for the shortfall. Treasury just prints the ~$150B/yr interest the fund earns, same thing.

The net result is going to be another $100B dose of "Quantum Easing" essentially, injected into the economy in $8B/mo doses as people pay less FICA.

It's not a bad policy thing -- it's basically a mini "Helicopter Money Drop" that the economy apparently needs.

SSA has an immense amount of savings -- $2.6T -- built up since 1986. The problem is these assets are liabilities of the Treasury and thus Congress, and Congress has a great number of professional liars, thieves, and imbeciles in its ranks at the moment.

Great news:

http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2011/01/26/national/w152643S26.DTL&type=politics