Signs China is about to Pop

[Buddha C]

You're going to have to post a credible source for this. Decades????? I'm 54 years old, and I can tell you that's patent bull****. Now they have manipulated their currency and probably broken every economic principle, and that will eventually catch up with them. It's like trying to defy the laws of physics.........you can try.......and fail. Anyway, China hasn't even been on the radar for decades. It was just decades ago, that people even started investing much money over there.

Then you need to go out.

I'm 20, and for over half my life I've heard people talking about China Collapsing.

ESPECIALLY on the Economist, which I hate, outside of its anti-China position.

 

[American]

Then you need to go out.

I'm 20, and for over half my life I've heard people talking about China Collapsing.

ESPECIALLY on the Economist, which I hate, outside of its anti-China position.

People have been doing nothing but bragging about how China is or is going to kick our ass for the past ten years. That they are eating our lunch, that the USA is finish and going on the junk heap of history. And I so believe you've been reading the Economist since you were 10 years old.

 

[Buddha C]

People have been doing nothing but bragging about how China is or is going to kick our ass for the past ten years. That they are eating our lunch, that the USA is finish and going on the junk heap of history. And I so believe you've been reading the Economist since you were 10 years old.

Good thing you're god and everything you 'believe' is happening in real life :roll:

 

[American]

Good thing you're god and everything you 'believe' is happening in real life :roll:

I'd write a book if I were you, while you still know everything.

 

[cpwill]

We'll just add it to the list of your predictions: collapse of the dollar, Eurozone, Japan, China, U.S., etc.... Is there anything i am missing?

1. I don't think I ever stated the dollar would collapse. I have said that it is possible that we will see a return of dollars from overseas as other nations divest of it as a means of trade (which in fact we are starting to see).

2. Japan is also going to go through a crises - there is no way to fund their entitlement system as it currently stands with the demographics that they have. You don't get finance ministers going out and telling people it is honorable to hurry up and die without cause.

3. The Eurozone continues to be boned. Timing? :shrug:

4. China continues to have a massive bubble in real estate, as well as associated debt instruments.

 

[Buddha C]

1. I don't think I ever stated the dollar would collapse. I have said that it is possible that we will see a return of dollars from overseas as other nations divest of it as a means of trade (which in fact we are starting to see).

2. Japan is also going to go through a crises - there is no way to fund their entitlement system as it currently stands with the demographics that they have. You don't get finance ministers going out and telling people it is honorable to hurry up and die without cause.

3. The Eurozone continues to be boned. Timing? :shrug:

4. China continues to have a massive bubble in real estate, as well as associated debt instruments.

Agree with 4, don't Agree with 2 and 3. Don't know much about 2 so....

Eurozone will never collapse (well, in the current context) France and Germany indirectly rely too much on the periphery's national currency weight artificially lowering the Euro value and thus severely aiding export (remember how expensive BMWs were in the early 90s, late 80s?) and just because their stupid prole electorate doesn't have the perspicacity to see that doesn't mean their representatives don't. Or at least they should see the necessary "One hand washes the other" of the EU.

 

[cpwill]

Agree with 4, don't Agree with 2 and 3. Don't know much about 2 so....

:shrug: I know more about 2 than I do 3.

Go check out Japan's Debt to GDP, it's roll-over schedule, and current interest rate. Then take a look at where Abe wants to take the interest rate, take a look at what that means for the rollover expenditures, and then take a look at Japan's demographics to see what is going to be happening with their social safety net expenditures (and ability to sell bonds) during the same time frame.

Obamacare can't spend the same $500Bn on subsidies and Medicare, and Abe can't spend the same Y50 Trillion on both old-age healthcare and debt servicing.

 

[Buddha C]

:shrug: I know more about 2 than I do 3.

Go check out Japan's Debt to GDP, it's roll-over schedule, and current interest rate. Then take a look at where Abe wants to take the interest rate, take a look at what that means for the rollover expenditures, and then take a look at Japan's demographics to see what is going to be happening with their social safety net expenditures (and ability to sell bonds) during the same time frame.

Obamacare can't spend the same $500Bn on subsidies and Medicare, and Abe can't spend the same Y50 Trillion on both old-age healthcare and debt servicing.

I believe there's a growing school of thought that see geriatric care as the new 'consumer revolution' of the 21st century. It doesn't sound so crazy, dunno how much I ascribe to it.

The debt servicing is only going to be secured by inflation and expanding growth. That's how debt servicing is maintained. If you wanted to speed that up honorably, you can raise taxes after the economy gets on its footing.

I believe period tax increases decrease speculative excess, like a hosing of ice cold water on a horny dog.

 

[cpwill]

I believe there's a growing school of thought that see geriatric care as the new 'consumer revolution' of the 21st century. It doesn't sound so crazy, dunno how much I ascribe to it.

The debt servicing is only going to be secured by inflation and expanding growth. That's how debt servicing is maintained. If you wanted to speed that up honorably, you can raise taxes after the economy gets on its footing.

I believe period tax increases decrease speculative excess, like a hosing of ice cold water on a horny dog.

Alright. What is the effect of inflation on interest rates?

Let's say you are an Island Nation in Asia with a debt-to-GDP of ~230%, a historic interest rate of ~1% because your populace massively invests in government bonds, and yet rolling over your debt (at that 1%) costs you ~21% of your budget.

Then let's say that you decide to (as the Abe administration has done) raise interest rates up to 2%. Now, I'm not a rocket-surgeon, but I do believe that 21*2=42. Mind you, that's of the overall budget. If you compare it to income, it comes out to 80% of government revenues.

Then let's say that the populace who has been investing massively in government bonds is aging, retiring, and starting to become net sellers of government bonds. That means now you are dependent upon regular and ever-increasing foreign inflows by investors who are going to take a rather jaundiced look at that 80% figure. If that merely adds one more percentage in interest, Japan is toast, it becomes a spiral, and it's sovereign debt crises time. If social safety net expenditures go up (hey! look at that!), Japan is toast - sovereign debt crises time.

In order for Japan to avoid this fate she needs to go back in time 40 years and have every couple have at least 1 (preferably 2) more kid(s). Or, she can simply throw her elderly out to starve (in a society where ancestors are venerated), and then dramatically reduce government expenditures. Neither of these is likely.

 

[Buddha C]

Alright. What is the effect of inflation on interest rates?

Let's say you are an Island Nation in Asia with a debt-to-GDP of ~230%, a historic interest rate of ~1% because your populace massively invests in government bonds, and yet rolling over your debt (at that 1%) costs you ~21% of your budget.

Then let's say that you decide to (as the Abe administration has done) raise interest rates up to 2%. Now, I'm not a rocket-surgeon, but I do believe that 21*2=42. Mind you, that's of the overall budget. If you compare it to income, it comes out to 80% of government revenues.

Then let's say that the populace who has been investing massively in government bonds is aging, retiring, and starting to become net sellers of government bonds. That means now you are dependent upon regular and ever-increasing foreign inflows by investors who are going to take a rather jaundiced look at that 80% figure. If that merely adds one more percentage in interest, Japan is toast, it becomes a spiral, and it's sovereign debt crises time. If social safety net expenditures go up (hey! look at that!), Japan is toast - sovereign debt crises time.

In order for Japan to avoid this fate she needs to go back in time 40 years and have every couple have at least 1 (preferably 2) more kid(s). Or, she can simply throw her elderly out to starve (in a society where ancestors are venerated), and then dramatically reduce government expenditures. Neither of these is likely.

None of what you described could not be fixed by a US injection. I believe the Lost Decade ingrained a longer term Child-Parent living term. Besides, even if you get 4-10% interest rates the government bonds are written in the Yen, which makes them susceptible to inflation. So the Bank itself could inflate but printing money. What would be affected is the secondary market.

Now, I suppose, let's use your calculation (I'm not good at math tbh D: If 1% is the real interest rate and that's 21% of the budget, and a 2% real interest rate is 42% of the budget, right? If inflation drives down real interest rates to 0, from 2% or even -1 wouldn't that also decrease the percent of your budget needed for revenues. Expanded medical care of retirees, or older working adults, could provide jobs and investment opportunities in and of itself. Would retirement homes be inefficient for the extremely dense population distribution in the cities?

 

[cpwill]

None of what you described could not be fixed by a US injection. I believe the Lost Decade ingrained a longer term Child-Parent living term. Besides, even if you get 4-10% interest rates the government bonds are written in the Yen, which makes them susceptible to inflation. So the Bank itself could inflate but printing money. What would be affected is the secondary market.

Now, I suppose, let's use your calculation (I'm not good at math tbh D: If 1% is the real interest rate and that's 21% of the budget, and a 2% real interest rate is 42% of the budget, right? If inflation drives down real interest rates to 0, from 2% or even -1 wouldn't that also decrease the percent of your budget needed for revenues. Expanded medical care of retirees, or older working adults, could provide jobs and investment opportunities in and of itself. Would retirement homes be inefficient for the extremely dense population distribution in the cities?

If investors are demanding a 2% return from GoJ Bonds, and inflation is 2%, then they will demand an interest rate of 4%, meaning that servicing the debt will require approximately 160% of government revenues..... at which point investors are going to begin to expect... well, let us say... significantly higher interest rates on significantly shorter paper, as at that point everyone is deliberately taking part in the worlds' largest ponzi scheme if they bother to play at all.... which would be, let us say, "rather unlikely".

However (oh, it gets worse) in fact investors are not currently demanding a 1% return - because historically the Yen has deflated in value, giving a real return of something more like 3%. Meaning that even if the massive outflow of Japanese investors did not reduce demand thereby increasing required return, a 2% inflation plus an additional percentage point of demanded return would put them at 6% interest rates, meaning... well, this is basic multiplication - you can do the math. The real story is a sovereign debt crises long before we get there.

It's a devil of a problem. You can print your way out of debt... but only if you're not in too much of it. Hope you enjoy feeling depressed.

 

[Buddha C]

If investors are demanding a 2% return from GoJ Bonds, and inflation is 2%, then they will demand an interest rate of 4%, meaning that servicing the debt will require approximately 160% of government revenues..... at which point investors are going to begin to expect... well, let us say... significantly higher interest rates on significantly shorter paper, as at that point everyone is deliberately taking part in the worlds' largest ponzi scheme if they bother to play at all.... which would be, let us say, "rather unlikely".

However (oh, it gets worse) in fact investors are not currently demanding a 1% return - because historically the Yen has deflated in value, giving a real return of something more like 3%. Meaning that even if the massive outflow of Japanese investors did not reduce demand thereby increasing required return, a 2% inflation plus an additional percentage point of demanded return would put them at 6% interest rates, meaning... well, this is basic multiplication - you can do the math. The real story is a sovereign debt crises long before we get there.

It's a devil of a problem. You can print your way out of debt... but only if you're not in too much of it. Hope you enjoy feeling depressed.

I don't know the exact debt structure of Japan, but if it holds (Debt Crisis are usually a result of high short term external debt) with even 3rd World Countries then it's over 60% of the total foreign investment (probably over 80%). Besides long term instruments guaranteed against inflation (percentage of which, would require national debt structure knowledge) these will be vulnerable to inflation. As for short-term paper, that is the only threat of adjustment.

I have absolutely no fear about the U.S. not 'donating' money to Japan, and especially for a Stimulus program. Iirc, America offered Stimulus money if Europe got in line with the U.S. and China and pumped money into the economy. They rejected it on the merit of Austerity . I stand by Europe being the major global economic negative determinant since 2010. I believe US would be far more than willing to assist Japan especially when part of their increased demand is for American, European and Chinese goods. They could make these loans at preferential rates.

China doesn't want us to collapse because we're an export destination, I think something along the lines of that in support of Japan (US --> Japan).

 

[Buddha C]

6 ||| Japan |||||||| 2.44 trillion |||| 30 September 2010 || 45%
------------------(Total Ext. Debt)--------------------------(" " " % of GDP)

External Debt and Public Debt as % of GDP, by country : PinoyMoneyTalk.com – Make Money Online, Stocks, Forex, Mutual Funds Philippines

 

[soot]

You might have a point if corporate profits were not thru the roof. There is obviously more room for wages there.

My point had nothing to do with room for wage increases.

Capital isn't required to pay more for labor simply because they have room, any more than you should be required to pay more for a loaf of bread just because you have room in your personal budget.

A business's, industry's, or market's demand for labor, and the availability of a supply of labor sets the price.

Whether or not the business, industry, or market can afford to pay more isn't a factor.

Your diagram only serves to illustrate what I was previously saying.

The reason profits are up and wages are down is because U.S. business is no longer held captive by the U.S. labor market.

If you look at the period between 1950 and about 1975 wages are relatively "flat". They rise and fall and rise and fall but you don't hit a cliff where you see a consistent downward trend until you get to 1975.

That's about the time we started seeing all those goods on American shelves with "Made in Taiwan" and "Made in the Philippines" labels on them (and about the time those "Made in America" labels became popular too).

By the mid 1980s India, China, and a large majority of the South Pacific island nations were in on the deal. By the early 1990s Mexico, Latin and South America came on board. By the late 90s, early 2000s it was Russia and a handful of Easter European nations. The next big growth market (which is not to say that the previously mentioned places have even begun to stop growing) is in Africa.

Two years ago you'd hear folks talking about the BRIC economies (Brazil, Russia, India, China).

Lately it's become BRICA (Africa).

This economic cucumber has already become a pickle, and there's no going back to the way things were in the 1950s and 60s.

As I was also saying, while wages are falling in the United States we're seeing a corresponding increase in wages in the developing world.

Here's a diagram I pulled on urban China but if you care to look you can find similar situations in any of the countries I've discussed in both urban and rural areas:



For a long time the people of America lived in relative luxury while the people of the vast majority of the world lived in abject squalor.

That's still largely the case and will be long into the foreseeable future.

But things are becoming a bit more equitable.

That equity comes in large part because of American corporations.

American corporations are spreading prosperity around the globe.

They're certainly getting a good deal in return for their benevolence, as their profitability indicates.

But there's no denying that it is the capital that is creating this change for good in the world whereas if it had been left to labor the status quo would have been maintained indefinitely.

 

[iguanaman]

My point had nothing to do with room for wage increases.

Capital isn't required to pay more for labor simply because they have room, any more than you should be required to pay more for a loaf of bread just because you have room in your personal budget.

A business's, industry's, or market's demand for labor, and the availability of a supply of labor sets the price.

Whether or not the business, industry, or market can afford to pay more isn't a factor.

Your diagram only serves to illustrate what I was previously saying.

The reason profits are up and wages are down is because U.S. business is no longer held captive by the U.S. labor market.

If you look at the period between 1950 and about 1975 wages are relatively "flat". They rise and fall and rise and fall but you don't hit a cliff where you see a consistent downward trend until you get to 1975.

That's about the time we started seeing all those goods on American shelves with "Made in Taiwan" and "Made in the Philippines" labels on them (and about the time those "Made in America" labels became popular too).

By the mid 1980s India, China, and a large majority of the South Pacific island nations were in on the deal. By the early 1990s Mexico, Latin and South America came on board. By the late 90s, early 2000s it was Russia and a handful of Easter European nations. The next big growth market (which is not to say that the previously mentioned places have even begun to stop growing) is in Africa.

Two years ago you'd hear folks talking about the BRIC economies (Brazil, Russia, India, China).

Lately it's become BRICA (Africa).

This economic cucumber has already become a pickle, and there's no going back to the way things were in the 1950s and 60s.

As I was also saying, while wages are falling in the United States we're seeing a corresponding increase in wages in the developing world.

Here's a diagram I pulled on urban China but if you care to look you can find similar situations in any of the countries I've discussed in both urban and rural areas:

View attachment 67156910

For a long time the people of America lived in relative luxury while the people of the vast majority of the world lived in abject squalor.

That's still largely the case and will be long into the foreseeable future.

But things are becoming a bit more equitable.

That equity comes in large part because of American corporations.

American corporations are spreading prosperity around the globe.

They're certainly getting a good deal in return for their benevolence, as their profitability indicates.

But there's no denying that it is the capital that is creating this change for good in the world whereas if it had been left to labor the status quo would have been maintained indefinitely.

You fail to explain who will buy the goods made in low wage countries when there is no middle class left here. There is a need for wage pressure and a increase in the minimum wage is a start. Wage growth is in a unsustainable condition that will hurt corporations too.

 

[soot]

You fail to explain who will buy the goods made in low wage countries when there is no middle class left here.

The middle class there.

 

[Kushinator]

If investors are demanding a 2% return from GoJ Bonds, and inflation is 2%, then they will demand an interest rate of 4%, meaning that servicing the debt will require approximately 160% of government revenues.....

A good example of a person who does not understand how financial markets operate! What the **** does "investers demanding a 2% return from GoJ bonds" even translate with respect to reality? Demand for yield is relative, meaning demand for 2% (or whatever) is based on the notion that AAA rated corporate paper is +2%, BBB is +5%, etc..., and the investors risk appetite is at a minimum.

Secondly (and this is a rather important concept to understand), inflation does not magically go to 2% without the requisite economic growth. Creating a scenario where inflation jumps by 2%, while holding every other conditional financial/economic variable constant, e.g. revenue and growth, displays absolutely nothing of any importance. It's just an imaginative way to confirm your bias.

at which point investors are going to begin to expect... well, let us say... significantly higher interest rates on significantly shorter paper, as at that point everyone is deliberately taking part in the worlds' largest ponzi scheme if they bother to play at all.... which would be, let us say, "rather unlikely".

Pure nonsense.

However (oh, it gets worse)

What, your ability to accurately describe the situation?

in fact investors are not currently demanding a 1% return - because historically the Yen has deflated in value, giving a real return of something more like 3%.

Terminology error on your part. If an economy is deflating, it means the value of its currency is.... wait for it.... inflating! In other words, it purchases more goods/services.

Meaning that even if the massive outflow of Japanese investors did not reduce demand thereby increasing required return, a 2% inflation plus an additional percentage point of demanded return would put them at 6% interest rates, meaning... well, this is basic multiplication - you can do the math. The real story is a sovereign debt crises long before we get there.

No idea what you're talking about here.

 

[imagep]

If investors are demanding a 2% return from GoJ Bonds...

Don't investors typically take whatever the best return that they can find for the risk level that they chose to invest at? Do investors actually determine (demand) the price, or is it more a result of supply vs demand?

Seems to me that investors, like everyone trying to sell or rent a product, have to be willing to accept the best price that they can get, and aren't actually able to "demand" any particular ROI.

 

[Buddha C]

Don't investors typically take whatever the best return that they can find for the risk level that they chose to invest at? Do investors actually determine (demand) the price, or is it more a result of supply vs demand?

Seems to me that investors, like everyone trying to sell or rent a product, have to be willing to accept the best price that they can get, and aren't actually able to "demand" any particular ROI.

That's an interesting way to look at it. Though, to be fair, everyone aggregately determines the price. The only people that can demand any particular ROI are the same guys that have the economic strength to demand that workers be paid a stagnant, and thus depreciating, wage. Though I inherently believe Capital markets are the most Free Market sector, which is why I always use their example of a catastrophic speculative excess chasing all the sheeple off the cliff. Unrestricted Capitalism, and thus 'true' Capitalism, is a contemporary flop. A gov't-dominated, and by definition Socialist, Market structure is the safest and most conducive to the Needs of the Human Condition and the Economic Necessity of Pain, Hardship and Inure.

 

[cpwill]

A good example of a person who does not understand how financial markets operate! What the **** does "investers demanding a 2% return from GoJ bonds" even translate with respect to reality? Demand for yield is relative, meaning demand for 2% (or whatever) is based on the notion that AAA rated corporate paper is +2%, BBB is +5%, etc..., and the investors risk appetite is at a minimum.

If investors are demanding a 2% return, then they are expecting a 2% return - if (when) Japan gets' downgraded, they will expect more due to the higher risk; and the likelihood is that the ratings agencies (again) will be the dumb money with regards to timing.

Secondly (and this is a rather important concept to understand), inflation does not magically go to 2% without the requisite economic growth.

Good point. That, for example, is why Zimbabwe is set to take over from the U.S. as global hegemon, because inflation causes real economic growth :roll:

Abenomics has some pretty solid additions, and he will get higher growth from it. But the 2% inflation is his target because he thinks it will trigger higher economic growth by depreciating the currency and reducing the debt drag. Horse, then Cart.

Creating a scenario where inflation jumps by 2%, while holding every other conditional financial/economic variable constant, e.g. revenue and growth, displays absolutely nothing of any importance

:shrug: it hasn't been done, and no one has offered it. We will see higher growth in the short term (probably - we'll see how successful Abe is with raising taxes, and what the effects are; and now there is a wild(er)card in the mix of trouble over the Senkakus). Furthermore, the way the debt is structured, less is actually due to roll over in the next couple of years, meaning that they have some buffer to temporarily handle barely higher rates. This will not allow them to outrun their debt.

Pure nonsense.

Please name a country where 75% of revenues are required for debt-service, and let us know what their rates are?

Terminology error on your part. If an economy is deflating, it means the value of its currency is.... wait for it.... inflating! In other words, it purchases more goods/services.

:doh Yes. If you have the ability to do basic math, you will note that is where I pulled the real rate of return of 3% from. A 1% return on the Bond plus a 2% deflation equals a 3% real return for investors in GoJ bonds. (1 + 2) = 3. (1 - 2) = -1.

No idea what you're talking about here.

Yeah, I think you just should have said that.

But we'll go with the Simple Version then: Japan has been depending on mass domestic purchase of its' bonds to keep its' borrowing rates low. But then Japan forgot to have kids. So now the Japanese populace is aging and retiring, meaning that all those purchasers of bonds are becoming sellers of bonds. This is going to dramatically decrease demand for Japanese bonds, thereby increasing the interest rate that the government will have to offer in order to sell new ones. But Japan is so deep in hock that increasing the cost of their debt servicing (for example, by increasing the interest rates that they have to offer) is going to ruin their ability to service their debt.

 

[cpwill]

Don't investors typically take whatever the best return that they can find for the risk level that they chose to invest at?

Roughly - the point being that Japanese bonds are already at the assessed level of risk that investors are demanding a real 3% return in order to purchase them.

Do investors actually determine (demand) the price, or is it more a result of supply vs demand?

......Yes?

Seems to me that investors, like everyone trying to sell or rent a product, have to be willing to accept the best price that they can get, and aren't actually able to "demand" any particular ROI.

Sure they can - if someone offers to let me buy a Greek bond (ie: loan money to the Greek government) with a ROI of 2% over 10 years, I will tell them to get lost. If someone offers me 10% over 2 years, well, you may have a deal. Capital is fungible.

 

[cpwill]

The Diplomat: China's Emerging Speculation Problem

There is growing concern that China’s economy may face a slowdown because of speculative investments in local government financing vehicles and real estate. This type of crisis would mirror that which occurred in the U.S. in 2007-2008, with asset price declines in real estate leading to liquidity and solvency issues in overleveraged financial institutions, triggering a financial crisis. Although China’s financial leverage ratios are not as high as those in the U.S. preceding the crisis, and the Chinese government is often considered a backstop for the loan operations of the banking system, there is still good reason for this concern.

First, some of the shadow banking products are based on these loans to local government financing vehicles and real estate. Local government financing vehicles have been building infrastructure that has not been profitable. For example, ghost towns throughout China have been constructed without attracting residents or businesses. Some towns involve extravagant touches, mimicking New York City or Paris. Much of the borrowing carried out by local government financing vehicles, through trust loans, bond financing, or other financial mechanisms, is now recognized as being used to make payments on the existing debt. Real estate development is also increasingly risky in some places since there are recognized bubbles in several property markets, ensuring that the higher property prices rise, the harder property owners will fall on the downswing, especially if they have borrowed against the existing value of their property.

Second, the shadow banking products are interconnected in a way that is not transparent, so that financial failures in one area of the financial economy may bring down other sectors as well. For example, credit guarantee companies have guaranteed the loans of other companies, and have themselves lent to companies, often creating complex webs of interconnectedness. Failure of one company in the web has in the past threatened the entire chain of connected firms and has required government intervention. In another example, the underlying loans for non-standard debt assets of wealth management products sold by banks to individual customers are often based on trust loans, entrusted loans, or bankers’ acceptance bills, which have been extended to risky borrowers like the real estate developers mentioned above. Individual customers bear the risk if these income streams dry up, as the regulatory authorities have declared that the government will not be held responsible. Many other instances of interconnectedness exist, but the bottom line is that holders of shadow banking assets are not safe from a potential crisis.....

 

[Kushinator]

If investors are demanding a 2% return, then they are expecting a 2% return

Why not expect a 5% return, or hell, why not 10%?

Good point. That, for example, is why Zimbabwe is set to take over from the U.S. as global hegemon, because inflation causes real economic growth

As always, you confuse reality with your reality. Real economic growth causes inflation. Hyperinflation is a totally different animal, and is predominately (lack of) production driven.

Please name a country where 75% of revenues are required for debt-service, and let us know what their rates are?

When 95% of the debt is held internally, debt service acts as a form of income which in turn is taxed back into the government coffers. Japan is not dependent on FDI inflows to protect its low interest rates.

where I pulled the real rate of return of 3% from

:bootyshake <----------- there

You are simply making things up to suit your argument.

 

[cpwill]

Why not expect a 5% return, or hell, why not 10%?

:shrug: they might, if they lose confidence. But right now they are not.

As always, you confuse reality with your reality. Real economic growth causes inflation. Hyperinflation is a totally different animal, and is predominately (lack of) production driven.

No. Inflation is a monetary phenomenon. An increase of supply in goods and services for sale without an increase in the monetary supply leads to deflation, as a flat amount of dollars chases a greater amount of goods. The BoJ is explicitly attempting to increase the money supply in order to jack up inflation independent of real economic growth because they believe that weakening the Yen will increase real economic growth.

I'm suspicious of that entire approach, mind you. I'm not sure that "give foreigners stuff for less than it should be worth by stealing wealth from our citizens in order to give it to them" is a particularly wise economic approach. But :shrug: it is theirs.

When 95% of the debt is held internally, debt service acts as a form of income which in turn is taxed back into the government coffers. Japan is not dependent on FDI inflows to protect its low interest rates.

Japan is not dependent on FDI inflows so long as it's populace does not age. Unfortunately for them, however, the Japanese populace is as effected by time as everyone else. Japan has been able to lend to it's domestic populace because that populace was strong net savers - but now they are retiring because - shockingly - people age. And so this is what Japanese saving that you are depending on to keep financing 95% of their debt issuance looks like:

The Japanese citizens who were purchasing JPG bonds are about to start selling them instead.

But I can't help but notice that you did not answer the question. Can you name a country where 75% of revenues are required for debt-service, and let us know what their public borrowing rates are?

You are simply making things up to suit your argument.

:roll: Well then you do the math. A 1% nominal return plus 2% deflation equals what real return rate?

 

[JP Hochbaum]

I think reduction in poverty is bad. China will pop from a not enough poor people bubble.

"There are many remarkable economic statistics about China.
China contained 22% of the world’s population when its reforms began in 1978, so the percentage of the world’s population directly benefitting from China’s rapid economic growth is seven times that of the 3% of the world’s population in the US or Japan when they began rapid growth, or the 2% of the world's population in the UK at the time of the Industrial Revolution.
China’s 9.9% average increase in GDP per capita during the two last five year plans is the fastest economic growth per capita ever achieved by a major country in human history.
In the same period China’s annual average 8.1% increase in household consumption, and 8.3% annual increase in total consumption, including state expenditure on items vital for quality of life such as education and health, was the fastest of any major economy. Coupled with a life expectancy above that which would be expected from China’s GDP per capita it is evident China experienced the most rapid increase in living standards of any country.
Measured in Parity Purchasing Powers (PPPs) – that is the real increase in output in steel, cars, transport, services etc. - the greatest absolute increase in output ever recorded in single year by the US was in 1999 when it added $567 billion in output. But in 2010 China added $1,126 billion – more than twice the increase in output in a single year ever achieved by any other country in human history."

Socialist Economic Bulletin: China accounts for 100% of the reduction in the number of the world's people living in poverty