First off, what is the real crisis in Greece? In short, it’s that their debt Ponzi has gone bust. 3 months ago they used to be able to float 3 month bonds for 3%. Recently investors were demanding nearly 20% because they lost confidence in the con game. Greece can’t pay out that kind of return on short term debt without wiping out all the businesses and workers. That’s why they needed a bail out.
So now the Japanese PM is saying “our finances could collapse if trust in national bonds is lost and growing national debt is left alone”.
For those that haven’t been following things, Japan is in debt to the tune of about 220% of its GDP. This is far worse than Greece and more than 2x as bad as America. Typically when a 3rd world country goes 130+% of GDP into debt then it begins to fall into default. Japan is the world’s 2nd biggest economy and a manufacturing powerhouse so investors are still buying its debt but how long is that going to last given that Japan’s exports are weakening? The article states that “Japan is on firmer financial footing than Greece because most of its debt is held domestically”. I guess that means that Japanese people are so patriotic that they are willing to let their retirements collapse just as they begin to need them? That is lunacy. At some point Japanese people will flee the collapsing debt and Japanese government debt will be rendered nearly worthless just like Greece. The main difference is that Japan is far too big to bail out.
If you read the article you will also note that the author writes about raising taxes into a declining and aging population in order to pay service on the debt. Suuuuuure they will. How can you tax less people and get more revenue? How can you tax people who are going into retirement and get more revenue? It just doesn’t work like that. Government needs to get smaller but the debt it has taken on ensures that it cannot get smaller without defaulting. Japan is no better than Greece and America is only a little better than Japan.
You want to see the dollar skyrocket? If the Yen starts to plummet on fears of Japanese government default then the Yen will behave just like the Euro has: it will plummet as everyone sells it to buy “safer” dollars. If the dollar gets stronger the stock market is going to plummet. All of the pieces are in place for the markets to tumble to new lows IMO.
