Academics Warn of Japanese Debt - ...a time bomb that could wreck the world economy... -greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
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FEBRUARY 04, 13:18 EST
Academics Warn of Japanese Debt
By SCOTT STODDARD - Associated Press Writer
TOKYO (AP) Japan's ballooning public debt, made worse by wasteful public works spending, is a time bomb that could wreck the world economy, two Japanese academics said Friday.
``We are looking at a danger signal blinking near and bright,'' said Akio Ogawa, a lecturer in the Graduate School of Public Policy at Tokyo's Chuo University.
Ogawa and Takayoshi Igarashi, a professor of law at Tokyo's Hosei University, spoke at the Foreign Correspondents' Club of Japan about the need to slash both public works spending and the debt if Japan is to regain its economic might.
Attempting to jump-start the economy, the government has lavished funds on bridges to sparsely populated islands, concrete linings for rivers and roads to nowhere, they said.
Rather than helping the economy or the people, the spending mostly benefits an ``iron triangle'' of powerful politicians, bureaucrats, and businesses, Ogawa and Igarashi said.
The second-richest country in the world is also the world's most indebted nation. Its public debt exceeds 600 trillion yen ($5.5 trillion), or 130 percent of gross national product, Ogawa said. GNP is the value of all goods and services produced by the country.
Worse, the government may be hiding another 100 trillion yen ($926 billion) in debt from a special coffer that the Ministry of Finance uses to make loans to public corporations for infrastructure projects, Ogawa said.
A Finance Ministry official declined to comment on the figure. He did say that none of the loan recipients is in danger of defaulting. The official spoke on customary condition of anonymity.
Japan racked up debt mostly over the past decade as the government, urged on by the United States, tried to spend its way out of its longest economic slump since World War II.
In 1997, Japan spent more than $402 billion on roads, bridges, ports and other public works projects more than the United States, Canada, Germany, France, Italy and Britain combined, Ogawa said.
Anger over excessive spending on public works boiled over last month when 90 percent of voters in Tokushima, western Japan, rejected a government plan to spend $954 million to dam a river.
Opponents say it will destroy the ecosystem. Construction Ministry officials say it's necessary to stop possible flooding. The government says it will go ahead with the project despite the vote.
Taxpayers will continue footing such bills unless Japan breaks up the league of bureaucrats, executives and politicians who benefit from such largess, Ogawa said.
``Now we face a dire choice between huge tax increases or hyperinflation to help reduce, if not wipe out, the debt that has already got out of control,'' he said.
But the last time the government raised taxes, in April 1997, the economy sank into recession and dragged down the rest of Asia.
The alternative, printing more money, would reduce the value of savings and force up prices, hurting consumer demand and ultimately the economy.
Either way, Japanese purchases of everything from Italian suits to American-made computers and Asian commodities would suffer.
``It's an accident waiting to happen,'' said Matthew Poggi, an economist at Lehman Brothers (Japan) Ltd.
-- snooze button (firstname.lastname@example.org), February 05, 2000
There aren't good limks to a particular story, but this link is better:
-- snooze button (email@example.com), February 05, 2000.
Here is another timebomb: EARTHQUAKE!
In 1992 was the American release of Peter Hadfield's book SIXTY SECONDS THAT WILL CHANGE THE WORLD. It dealt with the potential earthquakes which will inevitably hit Tokyo due to the three tectonic plates shifting in the southern ocean bay. The worst case scenario will be a MASSIVE LOSS OF LIFE! However, the extensive fatalities will depend upon the epicenter and time of day.
When these earthquakes totally wreck Tokyo, massive damage will result in panicked selling of US held bonds in order to rebuild the Japanese infrastructure. Wall Street will be unable to stop the panic selling, and America will experience a sudden panic session of fright.
This has NOT YET HAPPENED. But it could...
-- dinosaur (firstname.lastname@example.org), February 05, 2000.
The Japanese will in all probability need to liquidate their US Bond holdings MUCH sooner than the next earthquake. Look to see them start working on this in the NEAR future, as a way to finance their current accounts, when the banks in Japan rebuff them on a new round of true loans.
Also, if things in the bond market get much more chaotic on the down side, they may decide to take their money and run, which would be MY move but I'm an old privateer who now wears fancy suits. They DO decide to take their money and run, there won't be ANYWHERE in the US to hide from the fallout. I've seen whole planetary systems go FZZZZst when someone BIG took their money and ran.
And one of my good friends here has made his way out of countries with only the clothes on his back in some of these situations, when they went south.
-- Joss Metadi (warhammer@Pride.of.Mandeyne), February 06, 2000.
So where would you run in this case? Options here range from none to none.
-- Tom Carey (email@example.com), February 06, 2000.
It seems like this is a story that repeats.
"Japanese economy picking up. . . . Japanes economy going south."
I get the feeling the Japanes are indeed hiding some important fac6ts from the world. Only time will tell how big the damage is.
-- Rick (firstname.lastname@example.org), February 07, 2000.