October 21, 2009

CORRECTION...:

Rising Debt a Threat to Japanese Economy (HIROKO TABUCHI, 10/21/09, NY Times)


How much debt can an industrialized country carry before the nation’s economy and its currency bow, then break?

The question looms large in the United States, as a surging budget deficit pushes government debt to nearly 98 percent of the gross domestic product. But it looms even larger in Japan.

Here, years of stimulus spending on expensive dams and roads have inflated the country’s gross public debt to twice the size of its $5 trillion economy — by far the highest debt-to-G.D.P. ratio in recent memory.

Just paying the interest on its debt consumed a fifth of Japan’s budget for 2008, compared with debt payments that compose about a tenth of the United States budget.

Yet, the finance minister, Hirohisa Fujii, suggested Tuesday that the government would sell 50 trillion yen, about $550 billion, in new bonds — or more. [...]

One of the lessons of Japan’s experience is that a government saddled with debt can quickly run out of room to maneuver.


...the lesson is that debt matters if you run out of temporal room to maneuver. Japan ran debts far higher than ours the whole time people insisted they were going to overtake as us the economic uberpower. It's only the recognition that they are a terminal nation, rather than a growing one, that makes the debt matter. They're on a path where there will be no one to pay the dent back.

Posted by Orrin Judd at October 21, 2009 1:49 PM
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