Japan Catastrophe Pressures Deadbeat Debtors

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Johnny Oxygen's picture
Johnny Oxygen
Status: Diamond Member (Offline)
Joined: Sep 9 2009
Posts: 1441
Japan Catastrophe Pressures Deadbeat Debtors

By Jeff Nielson

http://www.bullionbullscanada.com/index.php?option=com_content&view=article&id=17569:japan-catastrophe-pressures-deadbeat-debtors&catid=48:gold-commentary&Itemid=131

The sequence of catastrophes which has afflicted Japan can only fill us with empathy for the Japanese people. However, Western deadbeat debtors cannot afford to concern themselves only with expressing their official condolences to Japan. Rather, they need to be focusing upon their own financial survival.

With Japan’s era of near-zero interest rates now stretching into decades, Japanese citizens were forced (by their own government) to invest outside the country. Countless trillions of yen flowed into the economies of other nations (and were converted into those local currencies). With Japan facing a massive reconstruction effort, those trillions of yen are now required at home  – to attempt to mend the domestic economy, and the nation of Japan itself.

...The size of Japan’s already-huge deficits can only soar higher. This effectively cuts Japan off from international debt markets, as Japan’s ability to even service these higher debt-loads is seriously in question. Longer term, debt-default now seems a virtual certainty for Japan. Thus, the only way Japan could engage in any foreign borrowing is through much higher interest rates (to compensate lenders for greatly increased risk). However this would drive-up the costs of servicing Japan’s existing debt by such an extreme amount that arguably any and every dollar which Japan could borrow would simply be consumed in rising interest payments.

Effectively, Japan can do nothing but print money by the trillions (the “Bernanke solution”), while its economy sinks further and further into debt. This is now a scenario which could quickly and easily degenerate into a hyperinflation spiral, as it now becomes very similar to that of Weimar Germany.

...If ordinary citizens were previously oblivious to this slow-but-perilous descent toward the economic Armageddon of hyperinflation, they will not remain so for much longer. The “Titanic” known as the Japanese economy has now clearly struck an iceberg – and will take on water rapidly. It is only a matter of months (perhaps weeks?) before Western citizens realize their own economies are no more “seaworthy” than that of Japan. On that day, the countdown to hyperinflation begins.

 

Carl Veritas's picture
Carl Veritas
Status: Gold Member (Offline)
Joined: Oct 23 2008
Posts: 294
Japan has $885.9 Billion of

Japan has $885.9 Billion of U.S. Treasury debt,   maybe they'll sell it in the global markets and cash out.   

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