Japan, Debt, and Practicality

Should Japan monetize its debt, by purchasing government bonds, and then writing them off, or putting them into some sort of virtual instrument that serves the same purpose? Should other countries do the same? What would the spin off effects be, if any, and if so, what proportion would reside in the psychological sphere, and what in the economic? If this would be inflationary, describe the process.

"...Part of the problem is that they keep on telling the Japanese people that it does exist. The Japanese people face 250% debt to GDP. That they better get used to the idea that there will be higher taxes in future. In which case, not surprisingly, the Japanese people and companies say, well I'd better save some money. So it keeps the economy depressed,” he said.

The solution would be to give authority to the Bank of Japan’s Monetary Policy Committee to say that some of this debt should be written off and replaced on the Bank of Japan’s balance sheet by an entirely notional, perpetual non-interest bearing bond.

“For the Bank of Japan that's completely sustainable because on the liability side of the Bank of Japan there are monetary reserves. And although people often don't think about this, what money is, ultimately, is a perpetual, non-interest-bearing bond. That's what money is. It's due from the government, which they never have to repay....."

Lord Adair Turner on central banks, interest rates and printing money - Business InsiderLord Adair Turner on central banks, interest rates and printing money - Business Insider

Unlike other western countries, the better part of Japanese debt is owned by Japanese economic agents. It's not that they have other places to put their savings mostly because of the currency risk. This is why Japan has been able to run up such level of endebtedness which would be unsustainable for any other western countries. But there is always a moment of reckoning. And for Japan, when it decides to monetize their debt, only the Japanese will bear the consequences of this decision, leaving them worse off.

I think it is a great idea, I just don't know how good of an idea it will be in practice. I am unsure if anyone has ever done this before in the history of the world. So we'll see.

Ganesh said:

Should Japan monetize its debt, by purchasing government bonds, and then writing them off, or putting them into some sort of virtual instrument that serves the same purpose? Should other countries do the same? What would the spin off effects be, if any, and if so, what proportion would reside in the psychological sphere, and what in the economic? If this would be inflationary, describe the process.

"...Part of the problem is that they keep on telling the Japanese people that it does exist. The Japanese people face 250% debt to GDP. That they better get used to the idea that there will be higher taxes in future. In which case, not surprisingly, the Japanese people and companies say, well I'd better save some money. So it keeps the economy depressed,” he said.

The solution would be to give authority to the Bank of Japan’s Monetary Policy Committee to say that some of this debt should be written off and replaced on the Bank of Japan’s balance sheet by an entirely notional, perpetual non-interest bearing bond.

“For the Bank of Japan that's completely sustainable because on the liability side of the Bank of Japan there are monetary reserves. And although people often don't think about this, what money is, ultimately, is a perpetual, non-interest-bearing bond. That's what money is. It's due from the government, which they never have to repay....."

Lord Adair Turner on central banks, interest rates and printing money - Business InsiderLord Adair Turner on central banks, interest rates and printing money - Business Insider

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I'd say they have to figure out how to handle the shrinking population and the related problems as well as the stalled economic dynamics.

sookster said:

I think it is a great idea, I just don't know how good of an idea it will be in practice. I am unsure if anyone has ever done this before in the history of the world. So we'll see.

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that's exactly what the fed is doing! it holds $2.3 trillion in Treasury bonds.

Ganesh said:

Should Japan monetize its debt, by purchasing government bonds, and then writing them off, or putting them into some sort of virtual instrument that serves the same purpose? Should other countries do the same? What would the spin off effects be, if any, and if so, what proportion would reside in the psychological sphere, and what in the economic? If this would be inflationary, describe the process.

"...Part of the problem is that they keep on telling the Japanese people that it does exist. The Japanese people face 250% debt to GDP. That they better get used to the idea that there will be higher taxes in future. In which case, not surprisingly, the Japanese people and companies say, well I'd better save some money. So it keeps the economy depressed,” he said.

The solution would be to give authority to the Bank of Japan’s Monetary Policy Committee to say that some of this debt should be written off and replaced on the Bank of Japan’s balance sheet by an entirely notional, perpetual non-interest bearing bond.

“For the Bank of Japan that's completely sustainable because on the liability side of the Bank of Japan there are monetary reserves. And although people often don't think about this, what money is, ultimately, is a perpetual, non-interest-bearing bond. That's what money is. It's due from the government, which they never have to repay....."

Lord Adair Turner on central banks, interest rates and printing money - Business InsiderLord Adair Turner on central banks, interest rates and printing money - Business Insider

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Lol.....30 years of failed stimulus initiatives left Japan with a unsustainable level of debt and now the Progressives are forced to contend with reality.

Whats holding their economy back is its been run by a bunch of windbag progressive ideologues who refuse to address structural issues and who refuse to admit just how much of a failure their economic stimulus initiatives have been.

Fenton said:

Lol.....30 years of failed stimulus initiatives left Japan with a unsustainable level of debt and now the Progressives are forced to contend with reality.

Whats holding their economy back is its been run by a bunch of windbag progressive ideologues who refuse to address structural issues and who refuse to admit just how much of a failure their economic stimulus initiatives have been.

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Yeah, it's rich.

First it's, 'more debt. more debt - nah, you can never have too much debt. This Keynesian/Abenomics stuff will work like a charm'.

Now it's, 'ummmm...okay, so about that debt. Should we just ignore it? Not honor it?'.

No mention of the fact that this freight train to Debtsville bought them nothing but an economic lost generation.

When will they learn? You CANNOT spend your way out of macroeconomic trouble...it simply does not work like that. When you are fat, the solution is not more donuts...you have to sacrifice.

OK, but except fro blaming, shaming, chortling, and the Japanese oldsters, what would this project actually look like? Inflation in Japan is problematically low, and efforts to date have not been able to increase it. Despite debt, the Japanese standard of living is not exactly horrible, and by world standards pretty darned good.

The bank of Japan announces it is going to "retire" 50% of national debt. Now what?

Ganesh said:

OK, but except fro blaming, shaming, chortling, and the Japanese oldsters, what would this project actually look like? Inflation in Japan is problematically low, and efforts to date have not been able to increase it. Despite debt, the Japanese standard of living is not exactly horrible, and by world standards pretty darned good.

The bank of Japan announces it is going to "retire" 50% of national debt. Now what?

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Japans problem is not monetary. MMT and the left have always misunderstood Japan's problems. It's structural and it needs massive reforms.

t4pi0k4 said:

that's exactly what the fed is doing! it holds $2.3 trillion in Treasury bonds.

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Yeah but The Fed is expected to be paid back in interest from The Treasury.

sookster said:

Yeah but The Fed is expected to be paid back in interest from The Treasury.

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If you ask some people around here, they think it doesn't matter since it's money we owe ourselves.

I suspect these people have never had a joint account with someone.

Debt monetization isn't going to fix the problem that they have. The BoJ has been fairly vocal in the limits of monetary policy and the need for fiscal policy implementation. Japan's problem is demographic. Their declining/stagnant population is impacting output. They need to implement a highly progressive immigration program to replace the net deaths in the economy, as it's been proven that they can't increase productivity fast enough to offset it. They also need to implement a highly progressive fiscal program that drives GDP and supports the immigration policy.

Monetization will just allow the yield curve to go to zero. It'll create some problems for banks who price off the curve as there won't be a relevant country risk free rate to use. It wouldn't have any benefit.

sookster said:

Yeah but The Fed is expected to be paid back in interest from The Treasury.

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The Fed remits profits to the Treasury.

Khayembii Communique said:

Debt monetization isn't going to fix the problem that they have. The BoJ has been fairly vocal in the limits of monetary policy and the need for fiscal policy implementation. Japan's problem is demographic. Their declining/stagnant population is impacting output. They need to implement a highly progressive immigration program to replace the net deaths in the economy, as it's been proven that they can't increase productivity fast enough to offset it. They also need to implement a highly progressive fiscal program that drives GDP and supports the immigration policy.

Monetization will just allow the yield curve to go to zero. It'll create some problems for banks who price off the curve as there won't be a relevant country risk free rate to use. It wouldn't have any benefit.

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Terrible idea. Sure, it will boost their economy, but depending on immigration undermines their society in just about every other way.

Henrin said:

Terrible idea. Sure, it will boost their economy, but depending on immigration undermines their society in just about every other way.

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Well, economic output is a factor of demographics, particularly population size and productivity rate. They can't boost their productivity rate any further, and so if their population is declining they need to reverse that. Japan's economy is notoriously anti-immigrant, and adopting a more accommodating immigration policy isn't going to "undermine their society".

Khayembii Communique said:

Well, economic output is a factor of demographics, particularly population size and productivity rate. They can't boost their productivity rate any further, and so if their population is declining they need to reverse that. Japan's economy is notoriously anti-immigrant, and adopting a more accommodating immigration policy isn't going to "undermine their society".

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A country that depends on immigration from other countries and has a declining birth rate will find that sooner or later that the native populations culture is overrun by whatever cultures are coming in. The myth of the mixing pot is just that a myth. In reality the dominate culture wins the day, while the other sub cultures are just ruled. Sure there is some mixing that happens, but that is pretty much corruption and nothing else.

Henrin said:

A country that depends on immigration from other countries and has a declining birth rate will find that sooner or later that the native populations culture is overrun by whatever cultures are coming in. The myth of the mixing pot is just that a myth. In reality the dominate culture wins the day, while the other sub cultures are just ruled. Sure there is some mixing that happens, but that is pretty much corruption and nothing else.

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A country's birth rate includes all citizens, which come from different cultures. What a load of extreme right wing bs.

Khayembii Communique said:

A country's birth rate includes all citizens, which come from different cultures. What a load of extreme right wing bs.

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Yes, and if the birth rate of the COUNTRY is below replacement and the country depends on immigration the majority culture will still be taken over in time. Your point is simply put irrelevant.

Japan has a people problem.

That's it, you don't need fancy economic theories, although they do have economic problems.

It's a combo meal deal. It's not just their bigoted reaction to immigration, it's not just their low birth rates, or their culture.

Can you have a thriving economy with a shrinking population? Hard to see how, the biggest consumers are young parents and the young are taking a look at their world and rejecting it.

In a genuinely weird way, American has the same problem. Both countries need to start seeing their people as assets to be cultivated. Still, they don't do what we do, which is to see people as something to be stripmined.

Until then, we and they, have a people problem, and will suffer because of it.

late said:

Japan has a people problem.

That's it, you don't need fancy economic theories, although they do have economic problems.

It's a combo meal deal. It's not just their bigoted reaction to immigration, it's not just their low birth rates, or their culture.

Can you have a thriving economy with a shrinking population? Hard to see how, the biggest consumers are young parents and the young are taking a look at their world and rejecting it.

In a genuinely weird way, American has the same problem. Both countries need to start seeing their people as assets to be cultivated. Still, they don't do what we do, which is to see people as something to be stripmined.

Until then, we and they, have a people problem, and will suffer because of it.

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You know, saying the word bigoted to literally everything you oppose isn't a winning strategy. They understand a hell of a lot more about how to control a countries political, social and cultural direction than liberals in the west ever will.

Henrin said:

You know, saying the word bigoted to literally everything you oppose isn't a winning strategy. They understand a hell of a lot more about how to control a countries political, social and cultural direction than liberals in the west ever will.

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Words have meaning, and I take care in using them.

"The racial discrimination that exists in Japan is reminiscent of the segregation-based atmosphere of 1950s America, posing a hostile environment for those of non-Japanese origin."
http://wilsonquarterly.com/stories/...face-and-bigotry-japans-problems-with-racism/

There are other sources, I suggest you avail yourself of them at the earliest opportunity, next time preferably before you prance your ignorance around.

Gonzo Rodeo said:

If you ask some people around here, they think it doesn't matter since it's money we owe ourselves.

I suspect these people have never had a joint account with someone.

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All I am saying is Japan is taking the debt, making it a single zero interest bond, that doesn't have to be repaid. That's different than what we are doing. All I am saying.

sookster said:

Yeah but The Fed is expected to be paid back in interest from The Treasury.

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The Fed returns that interest, less their mandatory 6% expense fee, back to the Treasury.

late said:

Japan has a people problem.
That's it, you don't need fancy economic theories, although they do have economic problems.
It's a combo meal deal. It's not just their bigoted reaction to immigration, it's not just their low birth rates, or their culture.
Can you have a thriving economy with a shrinking population? Hard to see how, the biggest consumers are young parents and the young are taking a look at their world and rejecting it.
In a genuinely weird way, American has the same problem. Both countries need to start seeing their people as assets to be cultivated...

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First, (for you and the OP) we've had Many discussions on Japan's demographic and other economic problems.
Many far more incisive than this string has been.
ie. http://www.debatepolitics.com/economics/123630-kyle-bass-zirp-trap-w-108-221-a.html
http://www.debatepolitics.com/economics/251222-endgame-japan-s-pyramid-scheme.html
and many more, those are just two of my string starts.

Second, I see little-to-No evidence that diversity has helped an already successful country's economy.... Unless it's from cultures/races that are not really that diverse. America is held up as a prime example, but is so only if you consider Brits, Polls, Dutch, Jews, Irish, Germans, Italians, 'diverse'.
This would certainly also go for other cultures/Race that are already successful, such as NE Asians that over-populate out elite schools. Let's keep em all. Send more.
Let's take all the Japanese and make their country 'Volcano National Park'.

BUT, the same CANNOT be said about the Flood of immigrants from South of the Border, or Haiti and other Caribbean 'nations', nor those we Sinfully brought here as slaves.
These people are big net losers to the economy, as are the new North African/Arab flood of immigrants to Europe. These people allowed/encouraged in as the new bases of the the Social Welfare pyramid are instead, net draws on it.
This means disaster for Europe, whose fertility is right down there with Japans, (1.3-1.6), and to a lesser extent.. us.
Our fertility is higher, but mostly because of those new immigrants higher birth rates.
That's one reason wages don't grow, they are low-skilled imports.
NOT the same as Chinese engineering students at MIT, Caltech, etc.

Japan is certainly Xenophobic, and is entitled to stay that way. It's just they haven't shrunk their spending in line with their aging population and shrinking workforce.

BUT words do have meaning, and nebulous generalities about the gifts of 'diversity' have to be clarified.
The First World and the people who built it are fading/dying, and being 'replaced' with Third Worlders.
Good Luck with that!
Europe's and Japan economies are dead in the Water.
Much more another time.

mbig said:

Second, I see little-to-No evidence that diversity has helped an already successful country's economy....

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Not what I said.

I said they have a people problem.

Better luck next time.