>Japan's currency will never inflate because it's always been that way
I think you're going to change your tone very quickly over the next year or so. Japan's government has never set targets for inflation until now. They are sitting on the largest debt stack to gdp in the world right now at ~245%. They spend almost half their revenues on debt service ALONE.
What happens when inflation hits two percent? What do you think all of these people holding JGBs bringing in 60bp are going to do? They're going to run, not walk.
There was a day and a half when not a single person bought a Japanese government bond because the government wasn't purchasing. The government is buying ALL and I mean ALL the bonds right now.
They are printing as much money as the fed in an economy that is a third our size (~70 billion USD per month). They are going to double the monetary base in two years.
This is clearly unsustainable and the yen is in for some serious devaluation in the very near term when people start running from JGBs.
Why are you quoting me? I NEVER said this.
In fact, I said the OPPOSITE - inflation is already rising in Japan and it is likely to continue to rise.
It's hyperinflation that I ruled out.
>This is clearly unsustainable
No it isn't. It's been said that it was unsustainable 20 years ago as I said above. This is why the ratings agencies IDIOTICALLY predicted Japanese default in 1997. Cue 20 more years of zero percent interest rates. They were a little bit wrong.
It wasn't unsustainable then which is why it continued for 20 more years. And it's not now either.
"How many more decades of zero inflation / deflation are needed"
That's pretty much what you said.
So what if predictions 20 years ago have turned out to be incorrect? That's really not relevant. Japan's government has never said they will do anything to achieve 2% inflation before.
It's going to be a lot messier than you think.
No you weren't. You created a straw man and then set it on fire.
>So what if predictions 20 years ago have turned out to be incorrect?
So you're making the SAME predictions based upon the SAME model that the last 20 years has proven to be utterly wrong.
We've already proved that 20 years of deficit spending and the highest public debt in the world doesn't automatically cause hyperinflation. It doesn't even necessarily cause inflation at all.
If your model cannot sufficiently explain why that happened then your model is wrong. And it can't. If we went back in time, you'd be making the exact same predictions in 1997.
>Japan's government has never said they will do anything to achieve 2% inflation before.
Japan started inflation targeting in March 2001. Is 13 years enough time?
I just quoted your exact words and you said exactly what I summarized. You're being a bit ridiculous.
It's actually a pretty simple explanation. The market can remain irrational for a long time, and Japan has never had a monetary policy as insane as its current one.
They are going to DOUBLE their money supply in TWO years. I'm not sure that you understand that massively monetizing your debt has consequences.
It's a massive experiment that is going to end badly.
I think it's more like 25% of revenues, not 50%, but otherwise you're spot on. BTW, the bond futures market froze up last week, too.
But what you're forgetting is that our friend crdoconner has no problem with the idea that the government can print money and then lend it to itself at whatever interest rate it chooses. (Either that, or he doesn't understand the difference between benchmark interest rates and government bond prices.)
I think you would have been right a couple years ago. Japan is projected to spend $257 billion on debt service this year. They bring in about $500 billion in revenues.
> ... End of story.
End of story indeed. I'm obviously too "brainwashed" to have anything of value to say.
But I would like to point out that I never said government debt was the cause of Japan's economic stagnation.
That depends. Do you still think that hyperinflation is even a remote possibility in Japan?
>But I would like to point out that I never said government debt was the cause of Japan's economic stagnation.
Nope, you didn't, but austerianism IS still the default economic mode of thought these days amongst Japanese and western elites, and it is strongly linked to the belief in impending hyperinflation.
austerianism?? Where? Japan is overspending by large amounts every single year and I have yet to hear any Japanese politician (apart from Hashimoto) talking about making economies. Abe's program is all about spending to death.
Where is this opinion being held? Right ^^^ fucking ^^^ here.
Where is it being implemented?
Here: http://www.bloomberg.com/news/2013-01-29/japan-s-government-...
And the consumption tax hike.
Many among the Japanese elites (not to mention American and European) feel the same way as you. Even among the neoconservatives they're somewhat schizophrenic about spending.
Haha. That's not austerianism. Austerity is when you cut down to the levels of spending you can afford. What Japan (and many other countries around the world) are calling "austerity" is just digging the hole a little less fast. But they are still actively digging the hole, year after year, producing more and more debt.
Austerity is just an over-abused media buzzword to say you are cutting a small piece in your obese amount of spendings. Nothing to do with the actual meaning of the word.
The tax hike will have nil effects on the fact that there are deep changes in Japan's structure to stop overspending, without mentioning the fact that increasing tax will bring diminishing revenues (and lower consumption) after a certain limit.
"In economics, austerity describes policies used by governments to reduce budget deficits during adverse economic conditions."
https://en.wikipedia.org/wiki/Austerity
The fact that you invented a new definition of austerity used only by you changes nothing.
Japan has been practicing austerity for decades because many among the government erroneously believe (like you) that a government's capacity to borrow in a currency it prints is limited and will some day reach a limit.
The fact that Economists invented a new definition to pass fake deficit cuts for real careful spending changes nothing.
The actual definition of the word, man: http://www.merriam-webster.com/dictionary/austerity
"a situation in which there is not much money and it is spent only on things that are necessary"
Yeah, Japan spends ONLY on things that are necessary. Building dams, renovating administration buildings from scratch right after the 3.11 Earthquake is damn necessary.
Seriously, buy a dictionary. They are cheap.
Pretty much what Europe has been doing since 2009, by the way - maybe I don't see the full picture with my limited understanding of economics, but it kinda sounds crazy to me.
I think the deflation and low growth are structural problems. Japan can't really stomach the creative-destruction necessary for a capitalist economy to thrive, and so on. I'm sure you've heard it before.
nl thinks that, if we can just hold it together for a bit longer, something will turn up. And maybe nl is right. Maybe, next week, someone will discover a wonderful new technology that will usher in 20 years of miraculous economic growth, and we'll all be saved. But I'm not counting on it.
Not stupid, but brainwashed perhaps. The fact remains that these predictions of Japanese hyperinflation using the EXACT same argument as yours have continued for two whole decades.
When are the predictions going to cease? How many more decades of zero inflation / deflation are needed before it becomes clear that continued deficit spending DOESN'T inevitably lead to hyperinflation? Three decades? Four decades? A century?
At what point do you start to consider your model broken and your predictions useless?
>And it would be completely true. They tried that in Zimbabwe, didn't they?
ABSOLUTELY WRONG. What they tried in Zimbabwe was borrowing a currency they DIDN'T print (US dollars). They were then reliant upon foreign food imports (because they ruined their farm indsutry) and had no real resources to service their FOREIGN debt. So they printed money and tried to exchange it for USD with predictable consequences.
Japan did not borrow USD. It will NEVER borrow USD. It will NEVER end up like Zimbabwe. Not now. Not in ten years with 300% debt. Not even with a trade deficit and 500% debt. NEVER.
Weimar was like Zimbabwe (its debts were denominated in Gold). Argentina was like Zimbabwe (it pegged its currency to the USD). Greece was like Zimbabwe (it can't print Euros any more than it can print gold).
Japan is NOT like Zimbabwe. It controls its debt. It controls its currency.
>I'm wall aware that Japan has a few magic charms
Japan has no magic charms and its trade balance is irrelevant to its capacity to borrow. It borrows in its own currency so it can borrow as much as it likes at whatever interest rates it likes. End of story.
For it to escape its economic rut this idea that it has to first pay off its huge debt needs to die. It actually needs to ramp up spending on jobs, just like the US did at the end of the great depression.
People need to stop seeing sky high Japanese debt as the cause of its stagnation and start seeing it as the result of its stagnation. Cause and effect flows the other way.