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Thread: Japan Plans To Cut Spending, Could Run Out Of Money In A Month

  1. #41
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    Re: Japan Plans To Cut Spending, Could Run Out Of Money In A Month

    Quote Originally Posted by PeteEU View Post
    My mind is always open to new macro-economic ideas.. problem is that "sovereign debt problem" is not new, it is old and when it is combined with kitchen table economics based on ignorance.. then you have a problem

    Person with debt vs GDP of 300+% .. not a problem!
    Country with debt vs GDP of 100%... major problem!

    Explain to me why the first is not a problem.. but the second is?
    Not hard to figure out, once you realize that the term "debt" is being misused. What is really being talked about is credit debt, not total debt.

    Total debt is not only how much to service credit debt, but total expenditures also.

    In the case of individuals, they have their credit debt and then there is such things as insurance, food, clothing and if their home is not part of their credit debt, rent. Put all of that together and that is their total debt. An individuals "GDP" is their net income, or gross income if you want to add taxes to the total debt. An individual can sustain 300+% "GDP" because they do not apply all of their "GDP" to total debt, if they do, then they go bankrupt. An individuals GDP is usually equal to their revenue. I have a house and a car, my only credit debt, approximately 217% of my revenue. I pay $1,500 or approximately 30% of my income to service that debt, leaving me 60% of my revenue for other debt, since my total debt is far below my revenue, less than 50%, I can easily sustain this.

    In the case of a country, first they do not get 100% of the GDP as income. They only get a percentage of it. Their revenue is not equal to GDP. Next, 100% of their revenue is used to service total debt. For example, the US has tax revenue of 26.9% of GDP, that means that our credit debt at 100% of GDP is actually around 400% of revenue. In the case of Japan, their revenue is 28.3% of GDP, so their credit debt of 229% GDP is actually approximately 700% of their revenue (very rough estimate, if you want to do the math, go ahead). 100% of a countries revenue, even without credit debt, is still spent on debt. A country, with 0 credit debt still pays a total debt of 100% of revenue, if not the tax payers are going to scream about paying too much taxes. So a country like the US, which has about 400% credit debt, we pay 5% of our revenue to service credit debt, but the rest goes to other debt, so the total debt comes in around 595% of revenue. With 100% of revenue already going to debt.

    That is why the first is not really a problem while the second is a massive problem.
    Last edited by DVSentinel; 09-03-12 at 02:12 PM.

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    Re: Japan Plans To Cut Spending, Could Run Out Of Money In A Month



    Here is what happened to the money.

  3. #43
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    Re: Japan Plans To Cut Spending, Could Run Out Of Money In A Month

    Quote Originally Posted by washunut View Post
    Interesting observation. Seems like exactly the course Obama wants to follow!
    Not really

    Japans bridges and railway network were before and still are in very good condition and efficient. US bridges, railways schools, road network etc are all in various states of disrepair and do need upgrading. Perhaps after 15-20 years of economic stimulus being used for infrustructure then we could say that is the course Obama wants to follow. It was done to build the interstate freeway network, but once that was complete, they did not build interstates to connect towns of 100 people 500 miles away to the system
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    Re: Japan Plans To Cut Spending, Could Run Out Of Money In A Month

    Quote Originally Posted by Lord Tammerlain View Post
    In Japan's case it is not social services that is the cause, but excessive infrustructure spending on projects that are unneeded and wasteful.
    Not that I am saying this is wrong, but do you have unbiased links to back up this statement?

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    Re: Japan Plans To Cut Spending, Could Run Out Of Money In A Month

    Quote Originally Posted by Helix View Post
    i'm not promoting soaking the rich to just give money away to people who won't work. we have a lot of nation building to do right here at home, and we should reallocate tax dollars and let the marginal rates go back to 1990s levels so that we can do that. the middle and lower socioeconomic classes spend what they make because they have to. this spreads the money out locally, and more efficiently than concentrating most of it in one place. it adds liquidity, and sustains a wider economic ecosystem. and people can still get quite wealthy; in fact, more will have a chance. the problem is that, whether by design, inadvertently, or both, rungs have been removed from the ladder. increasingly, one almost has to be born into moderate wealth to even have much of a chance. i'd like to see that change. on one hand, i see a lot of crumbling infrastructure, an insufficient electrical grid, and a failing energy model that is a national security issue. on the other, i see a lot of people desperate for work. i propose that we join the two and solve some problems.
    too bad you are not running for political office
    not only do you comprehend the complex problem, but you can explain it so that anyone listening/reading could understand
    and besides recognizing the problem you offer a common sense approach to solve it
    why are so few with such abilities on our ballots
    we are negotiating about dividing a pizza and in the meantime israel is eating it
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    Re: Japan Plans To Cut Spending, Could Run Out Of Money In A Month

    Quote Originally Posted by justabubba View Post
    too bad you are not running for political office
    not only do you comprehend the complex problem, but you can explain it so that anyone listening/reading could understand
    and besides recognizing the problem you offer a common sense approach to solve it
    why are so few with such abilities on our ballots
    thank you for the kind words.

    the reason that no one is proposing such a plan is that it would likely be considered too extreme for either of the parties to embrace, at least currently. there is a point of economic malaise at which such an initiative would receive support, but i suspect things would have to be a lot worse than they are now. it took an extended depression last time. i'd prefer to correct course before that happens.

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