Japan- New Budget, Issuing Debt Worth More Than Tax Receipts 2nd year In A Row

[Trajan]

if they don't reduce spending you're screwed, if they reduce spending they're screwed, in short they are screwed.



Japan's Proposed Budget Strains to Curb Debt, Spur Growth

TOKYO—The hard-pressed administration of Japanese Prime Minister Naoto Kan has unveiled its budget for the fiscal year starting in April, narrowly abiding pledges to limit spending and borrowing, but winning few plaudits from analysts who said it wouldn't make much headway in solving long-term fiscal problems or spurring growth.

Such is the dire state of Japan's fiscal situation that the budget announced Friday, totaling 92.4 trillion yen ($1.11 trillion), continues to rely more heavily on revenue from new bonds, projected at 44.3 trillion yen, than on all tax receipts, estimated at 40.9 trillion yen. The remainder comes from one-off funding from various government accounts and other nontax revenues.

Mr. Kan has pledged to limit core spending and debt issuance to this year's levels to show his administration is tackling Japan's debt problem. Japan's public debt has swelled to roughly twice its annual economic output as a result of nearly two decades of economic stagnation and numerous fiscal stimulus packages.

"You can hardly call tax revenue of 41 trillion yen and the borrowing of 44 trillion yen a stable fiscal policy," said Masayuki Suzuki, economist at Dai-ichi Life Research Institute. "The government has to either cut its spending or increase its revenue, or both."

Getting a grip on the debt has proven to be tough. Because of larger debt-servicing costs and social-security payments, the planned total spending is the largest on record, topping the previous record of 92.3 trillion yen in the current fiscal year's budget.

Efforts to cut expenditures have met stiff resistance. The export-dependent economy is dogged by deflation and a strong yen, making it vulnerable to another slump if spending is reduced too sharply.

"The economy is currently at a standstill," Finance Minister Yoshihiko Noda said. "It was certainly necessary for us not to focus only on fiscal rehabilitation, but also focus on projects that could help overcome deflation and generate growth."

Japan's Proposed Budget Strains to Limit Debt, Spur Growth - WSJ.com

 

[Toro]

Japan's tax revenues will equal social security payments and interest on the debt and nothing more. It's savings rate has plummeted and the working population has peaked.

Japan is a disaster waiting to happen.

 

[william the wie]

The questions about disaster are when will it happen and how will it affect the US. And some of the defensible positions on the subject are really off the charts. I posted that S&P thread on several boards and the answer I got from my old blog publisher shocked the crap out of me 2600 for a high and a low at the opening based on national defaults. Given Mike's performance in Precious Metals futures I listen very carefully to what he says. As best of the worse the US may very well see a financial boom in the coming year as a result of the Japanese collapse which may not be the first domino to fall in the coming year.

 

[Trajan]

theres a lot of that going around.

If I were a pessimist with a fairly knowledgeable grasp of history I'd say another 2-4 years at this level of economic global awfulness coupled with a major incident with regional impact on par with say; Sarajevo, a major embargo, massive colonial style expansion...war, large scale, very destructive, a reset button if you will........ahhhhh, I'm just crazy.Never mind.

 

[william the wie]

theres a lot of that going around.

If I were a pessimist with a fairly knowledgeable grasp of history I'd say another 2-4 years at this level of economic global awfulness coupled with a major incident with regional impact on par with say; Sarajevo, a major embargo, massive colonial style expansion...war, large scale, very destructive, a reset button if you will........ahhhhh, I'm just crazy.Never mind.

The demographics are wrong. Most of Asia is growing old without growing rich. Most of Europe is seeing its welfare state decline and depopulation taking hold. The US as the best of the worse will avoid much of the resulting disorder.

 

[loosecannon]

Japan's tax revenues will equal social security payments and interest on the debt and nothing more. It's savings rate has plummeted and the working population has peaked.

Japan is a disaster waiting to happen.

And yet the yen is still stuck in a deflationary trap and demand for the yen hasn't failed in what? 25 years?

Japan has been on the ropes for a decade at least and nothing bad happens.

When was the last time that a nation state deserved an AAA credit rating? 1972? Is there a nation state today that deserves even a Caa1 rating?

There is something to the notions of strength in numbers and relative value. If all the currencies and bonds are equally worthless and risky they might be surprisingly durable in a world that could not be more averse to economic calamity.

Funny thing is that the only really strong currency in the world today is pegged to the dollar.

 

[loosecannon]

theres a lot of that going around.

If I were a pessimist with a fairly knowledgeable grasp of history I'd say another 2-4 years at this level of economic global awfulness coupled with a major incident with regional impact on par with say; Sarajevo, a major embargo, massive colonial style expansion...war, large scale, very destructive, a reset button if you will........ahhhhh, I'm just crazy.Never mind.

The demographics are wrong. Most of Asia is growing old without growing rich. Most of Europe is seeing its welfare state decline and depopulation taking hold. The US as the best of the worse will avoid much of the resulting disorder.

depopulation is a strength, not a weakness. Nobody with any sense wants a growing workforce or a growing population for the next 50 years, or more.

Asia's biggest problem by FAR is their huge and still swelling population. Imagine if you had two billion children to support!

 

[Toro]

theres a lot of that going around.

If I were a pessimist with a fairly knowledgeable grasp of history I'd say another 2-4 years at this level of economic global awfulness coupled with a major incident with regional impact on par with say; Sarajevo, a major embargo, massive colonial style expansion...war, large scale, very destructive, a reset button if you will........ahhhhh, I'm just crazy.Never mind.

The demographics are wrong. Most of Asia is growing old without growing rich. Most of Europe is seeing its welfare state decline and depopulation taking hold. The US as the best of the worse will avoid much of the resulting disorder.

depopulation is a strength, not a weakness. Nobody with any sense wants a growing workforce or a growing population for the next 50 years, or more.

Asia's biggest problem by FAR is their huge and still swelling population. Imagine if you had two billion children to support!

It's the other way.

Unless people want to start saving massively, there will be fewer and fewer young, working people supporting older, nonworking retired people, which means that young people are going to have to pay more and more in taxes to support the older folks' pensions.

 

[Toro]

Japan's tax revenues will equal social security payments and interest on the debt and nothing more. It's savings rate has plummeted and the working population has peaked.

Japan is a disaster waiting to happen.

And yet the yen is still stuck in a deflationary trap and demand for the yen hasn't failed in what? 25 years?

Japan has been on the ropes for a decade at least and nothing bad happens.

When was the last time that a nation state deserved an AAA credit rating? 1972? Is there a nation state today that deserves even a Caa1 rating?

There is something to the notions of strength in numbers and relative value. If all the currencies and bonds are equally worthless and risky they might be surprisingly durable in a world that could not be more averse to economic calamity.

Funny thing is that the only really strong currency in the world today is pegged to the dollar.

The fact that nothing bad has happened for so long makes me more worried that something bad will happen.

One heard the same argument during the Housing Bubble - home prices hadn't fallen nationally in 60 years, so why worry? Then we had a Minsky Moment.

A Minsky Moment is coming for Japan.

 

[william the wie]

theres a lot of that going around.

If I were a pessimist with a fairly knowledgeable grasp of history I'd say another 2-4 years at this level of economic global awfulness coupled with a major incident with regional impact on par with say; Sarajevo, a major embargo, massive colonial style expansion...war, large scale, very destructive, a reset button if you will........ahhhhh, I'm just crazy.Never mind.

The demographics are wrong. Most of Asia is growing old without growing rich. Most of Europe is seeing its welfare state decline and depopulation taking hold. The US as the best of the worse will avoid much of the resulting disorder.

depopulation is a strength, not a weakness. Nobody with any sense wants a growing workforce or a growing population for the next 50 years, or more.

Asia's biggest problem by FAR is their huge and still swelling population. Imagine if you had two billion children to support!

A large number of doctrinaire Marxist, Keynesian and Austrian economists and virtually all biologists would disagree with that position. The Malthusan formulation was disproven centuries ago by Jethro Tull.

 

[william the wie]

The fact that nothing bad has happened for so long makes me more worried that something bad will happen.

One heard the same argument during the Housing Bubble - home prices hadn't fallen nationally in 60 years, so why worry? Then we had a Minsky Moment.

A Minsky Moment is coming for Japan.

The wiki version of the Minsky moment is a bit obtuse and narrow. But I so totally agree with you. Do you know how to find and link the sand pile instability experiment that was making the rounds after the meltdown. That was the easiest to understand explanation of among other things Minsky moments that I've ever read.

 

[loosecannon]

The demographics are wrong. Most of Asia is growing old without growing rich. Most of Europe is seeing its welfare state decline and depopulation taking hold. The US as the best of the worse will avoid much of the resulting disorder.

depopulation is a strength, not a weakness. Nobody with any sense wants a growing workforce or a growing population for the next 50 years, or more.

Asia's biggest problem by FAR is their huge and still swelling population. Imagine if you had two billion children to support!

It's the other way.

Unless people want to start saving massively, there will be fewer and fewer young, working people supporting older, nonworking retired people, which means that young people are going to have to pay more and more in taxes to support the older folks' pensions.

I understand the rationale, but it is ass backwards.

 

[loosecannon]

Japan's tax revenues will equal social security payments and interest on the debt and nothing more. It's savings rate has plummeted and the working population has peaked.

Japan is a disaster waiting to happen.

And yet the yen is still stuck in a deflationary trap and demand for the yen hasn't failed in what? 25 years?

Japan has been on the ropes for a decade at least and nothing bad happens.

When was the last time that a nation state deserved an AAA credit rating? 1972? Is there a nation state today that deserves even a Caa1 rating?

There is something to the notions of strength in numbers and relative value. If all the currencies and bonds are equally worthless and risky they might be surprisingly durable in a world that could not be more averse to economic calamity.

Funny thing is that the only really strong currency in the world today is pegged to the dollar.

The fact that nothing bad has happened for so long makes me more worried that something bad will happen.

One heard the same argument during the Housing Bubble - home prices hadn't fallen nationally in 60 years, so why worry? Then we had a Minsky Moment.

A Minsky Moment is coming for Japan.

25 years and the yen is still strong as an ox. There is something counterintuitive at work.

 

[loosecannon]

The demographics are wrong. Most of Asia is growing old without growing rich. Most of Europe is seeing its welfare state decline and depopulation taking hold. The US as the best of the worse will avoid much of the resulting disorder.

depopulation is a strength, not a weakness. Nobody with any sense wants a growing workforce or a growing population for the next 50 years, or more.

Asia's biggest problem by FAR is their huge and still swelling population. Imagine if you had two billion children to support!

A large number of doctrinaire Marxist, Keynesian and Austrian economists and virtually all biologists would disagree with that position. The Malthusan formulation was disproven centuries ago by Jethro Tull.

Centuries ago Jethro Tull was a farmer who said that his work as an author compromised his expertise as a farmer. And vice versa.

Any competent biologist knows that we are approaching the population limit. When that occurs population will be a burden, not a benefit.

I can't believe that so many smart people don't realize the fallacy of an ever expanding workforce in an economy that has already broken under the stress of a continually expanding econ model destined by the forces of basic math to fail.

The human population bomb is the critical bubble underlying all other econ bubbles. Every species that becomes too dominant will multiply to the point that it dwarfs it's food supply and then succumbs to enforced depopulation/austerity. Biology 101.

The Malthusan formulation is hardly important, the basic drift is as certain as the rising sun. Malthus was right. Everybody with any sense recognizes it.

 

[Trajan]

Japan's tax revenues will equal social security payments and interest on the debt and nothing more. It's savings rate has plummeted and the working population has peaked.

Japan is a disaster waiting to happen.

And yet the yen is still stuck in a deflationary trap and demand for the yen hasn't failed in what? 25 years?

Japan has been on the ropes for a decade at least and nothing bad happens.

When was the last time that a nation state deserved an AAA credit rating? 1972? Is there a nation state today that deserves even a Caa1 rating?

There is something to the notions of strength in numbers and relative value. If all the currencies and bonds are equally worthless and risky they might be surprisingly durable in a world that could not be more averse to economic calamity.

Funny thing is that the only really strong currency in the world today is pegged to the dollar.

The fact that nothing bad has happened for so long makes me more worried that something bad will happen.

One heard the same argument during the Housing Bubble - home prices hadn't fallen nationally in 60 years, so why worry? Then we had a Minsky Moment.

A Minsky Moment is coming for Japan.

thank you for that. I did some reading on the 'Moment'.....so, I guess my amateur questions/comments are; does the IMF have the funds that would be necessary?b) what do we think inflation of that magnitude will do, c) they don't have a resource that can pull hard cash, d) japan doesn't have near the cash economy i.e. barter russia did then...

 

[Trajan]

depopulation is a strength, not a weakness. Nobody with any sense wants a growing workforce or a growing population for the next 50 years, or more.

Asia's biggest problem by FAR is their huge and still swelling population. Imagine if you had two billion children to support!

A large number of doctrinaire Marxist, Keynesian and Austrian economists and virtually all biologists would disagree with that position. The Malthusan formulation was disproven centuries ago by Jethro Tull.

Centuries ago Jethro Tull was a farmer who said that his work as an author compromised his expertise as a farmer. And vice versa.

Any competent biologist knows that we are approaching the population limit. When that occurs population will be a burden, not a benefit.

I can't believe that so many smart people don't realize the fallacy of an ever expanding workforce in an economy that has already broken under the stress of a continually expanding econ model destined by the forces of basic math to fail.

The human population bomb is the critical bubble underlying all other econ bubbles. Every species that becomes too dominant will multiply to the point that it dwarfs it's food supply and then succumbs to enforced depopulation/austerity. Biology 101.

The Malthusan formulation is hardly important, the basic drift is as certain as the rising sun. Malthus was right. Everybody with any sense recognizes it.

I don't see how the food supply angle figures in this, if its an imposed shortage.

 

[william the wie]

Food production is no where near peak efficiency, factory farming is not the highest efficiency technique and that is what we got. No till, I think it is called multi-story but that just means multiple crops at different mature heights produces the most calories per acre/input costs. Factory farming is based on input subsidies such as below cost water that arise from antiquated computations of mineral rights for aquifers. Increasing food production by at least one and more probably two orders of magnitude is well within the realm of possibility but it would require different types of agricultural machinery.

 

[loosecannon]

Labor intensive farming is more productive/acre than the existing green revolution model of factory farming, which relies heavily on petro products. But it is less productive/manhour. The price of food is already bound to the price of petroleum and nat gas due to the reliance on chemical pesticides and fertilizers as well as locomotive energy.

Food supply is just one way in which population increase is at odds with economic stability.

Our modern industrial economy doesn't need as many workers, even if we could secure a perpetually growing workforce and feed and provide for them we would still need to create jobs for them if we intend them to pay for our ever increasing entitlements.

And so far our efforts to create a secondary service sector have produced an awful economy: A medical industry that provides less health, less health care but at much higher costs, a financial services industry that shreds wealth as well as it creates it, a whole plethera of professional products and services that consume an increasingly large % of our disposable income while providing few benefits (insurance, legal and accounting services etc).

Shortage of commodities and land itself combined with automation and the increasing environmental degradation human population entails make any model of economic sustainability based on continual population growth a recipe for a dystopian future to be sure.

 

[Toro]

And yet the yen is still stuck in a deflationary trap and demand for the yen hasn't failed in what? 25 years?

Japan has been on the ropes for a decade at least and nothing bad happens.

When was the last time that a nation state deserved an AAA credit rating? 1972? Is there a nation state today that deserves even a Caa1 rating?

There is something to the notions of strength in numbers and relative value. If all the currencies and bonds are equally worthless and risky they might be surprisingly durable in a world that could not be more averse to economic calamity.

Funny thing is that the only really strong currency in the world today is pegged to the dollar.

The fact that nothing bad has happened for so long makes me more worried that something bad will happen.

One heard the same argument during the Housing Bubble - home prices hadn't fallen nationally in 60 years, so why worry? Then we had a Minsky Moment.

A Minsky Moment is coming for Japan.

25 years and the yen is still strong as an ox. There is something counterintuitive at work.

It is counterintuitive. Kind of like the Nasdaq was at its highest when it was at its weakest in the winter of 2000, or housing was at its weakest at its peak in summer 2006. That's what makes it dangerous.

But maybe I'm wrong though...

 

[loosecannon]

It is counterintuitive. Kind of like the Nasdaq was at its highest when it was at its weakest in the winter of 2000, or housing was at its weakest at its peak in summer 2006. That's what makes it dangerous.

But maybe I'm wrong though...

No, I am sure you are right.
But that doesn't prevent the rest of the world from being wrong. Like you said once, the world relies on trust....in popular fantasies. Or social fictions.

The folks who dreamt up the matrix of cross linked derivatives to make all assets winners, also dreamt up a globalized economy that could not fail, because there was no alternative and the survival of the planet relies on daily delivery of food and fuel.

They may prove to be the world's greatest idiots, but so far the economy has been surprisingly durable despite it's paper foundation. If their vision prevails the yen can't collapse. Regardless of it's weakness.