Posts Tagged Lenz

Japanese government debt | Lenz Blog

Update: I recall Kyle Bass’s words: “Japan spends 50% of its tax revenues today on debt service today, of which half is interest… if interest rates move… 2%, their debt service will exceed their revenue.”

Prof. Lenz writes that there’s really nothing to worry about:

Japan Times reports that the sum of central and local government debt in Japan will reach 195% of GDP in 2012. Asahi Shimbun leads today with an article about the next fiscal year budget, which will depend to 49% on new debt.

That sounds all very scary, until you realize that only about 5% of that debt is in foreign hands.

I fail to see why this is supposed to be reassuring.

95% is owned by Japanese.

So far. But what happens when the Japanese government needs to sell even greater amounts of debt? And they will have to, to pay for the largest budget since WWII. Will the domestic banks still continue to be willing buyers? Even under pressure? According to Mish, there have been fewer eager purchases of recent Japanese government debt auctions. If the Japanese banks and private investors will not step up to the plate in sufficient numbers in future, Japan will have to attract foreign buyers. Will they step up? What if they don’t, at least at present rates?

That of course means that while each citizen’s share of the debt is on average 5.54 million yen in 2012 Japan Times number, each citizen’s share of bond holding is over 5 million yen on average.

I admit it, I’m an economic ignoramus. Please explain how this works. I own no government bonds. Will I still get a share? Does this mitigate my debt burden? I didn’t ask for this debt burden, why am I saddled with it? How will I repay it? Please explain how this is different from indentured servitude.

If those bonds decline in value, that will only be the equivalent of an automatic increase in taxes.

And that’s ok, because… ?

And right now, all this means is a redistribution of tax burdens. Those with more than average holdings in bonds pay less to the government than they would in a system without public debt.

Update December 28: Paul Krugman, who actually knows something about these things, makes a similar point here.

via Japanese government debt | Lenz Blog.

I read the Krugman article, and I failed to understand it. There seem to me to be some important questions that Krugman does not address. E.g.:

    1. The debt, i.e. the yield on the bonds will be paid for… how? Does the bond yield not depend on economic growth? What if that growth is less than expected? Speaking of which, please read

      Japan Industrial Production Declines 2.6%, 3rd Quarter Capital Spending Drops 9.8%, Corporate Sentiment Drops to Minus 4; Powder Keg Waiting for a Spark

    2. Specifically, “
      • Factory output fell 2.6 percent from October
      • Exports fell for the second straight month
      • Capital spending in the third quarter dropped 9.8 percent
      • The Bank of Japan Tankan quarterly index of corporate sentiment fell to minus 4 this month. A negative figure indicates that pessimists outnumber optimists
    3. and “Japan’s problems don’t stop there. Europe is Japan’s third largest export market, and Europe is a basket case.
    4. Mish quotes Pater Tenebrarum who seems to make some important points:
      1. “Government spending does not ‘spur growth’. If it did, Japan would have been the world’s growth engine for the past two decades.
      2. “Like its counterparts in Europe, Japan’s government tries to get its house in order not by reducing spending – apparently a completely taboo subject in Japan – but by raising taxes. This will predictably – just as it does in Europe – double the burden on the economy.
      3. “Moreover, there may be no more time to take effective countermeasures against the growing debt load: the death spiral may well begin before such measures can be implemented and take effect.
      4. “Not only is Japan’s debt-to-GDP ratio uncomfortably high, its tax revenues continue to decline precipitously as a percentage of government spending. (see Mish’s blog for the chart)
      5. “Right now, Japan’s interest rates remain among the very lowest in the world. And yet, in spite of near record low interest rates, the percentage of tax revenue the government must spend on interest expenses is increasing fast.
      6. “The ‘dreadful dream’ that keeps Japanese finance ministers awake at night is that interest rates may one day rise
      7. “So far, Japan’s debt load has escaped the scrutiny of investors due to a peculiar quirk: its bonds are primarily held by domestic investors, many of whom are subject to ‘financial repression’ on account of regulations
    5. Not sure exactly what Tenebrarum means by “financial repression”, but perhaps he is referring to the fact that some banks/pension funds are obliged (legally? via certain kinds of “pressures”?) to purchase certain quantities of Japanese government bonds. Naturally, foreign purchases of Japanese public debt could not be so obliged and might not prove so co-operative as the domestic purchasers have been.
    6. Tenebrarum continues:
      1. Japan’s biggest pension fund (Japanese Government Pension Investment Fund) has become an involuntary net seller of JGB’s  – as the ratio of retirees to the working population has passed the threshold where it has to pay out more than it receives in revenue. It is worth remembering, perhaps, that pension funds do not store YOUR payments in YOUR account for YOU to draw from when you retire. Now the GPIF is selling bonds to pay new retirees. New contributors contribute to someone else’s pension payments, not their own. The question is, will there be any money left in the kitty by the time YOU retire?
      2. “the country’s aging population has been running down its savings quite quickly in recent years – soon the personal savings rate will turn negative.

Tenebrarum’s article taught me something new: I’d never properly understood why the Japanese yen is “strong”: “Although it has implemented ‘ZIRP’ (zero interest rate policy), the money supply has been growing only very slowly, keeping the yen strong and leading to only slight increases and in some years even slight declines in consumer prices (this condition is of course a far cry from the country being ‘mired in deflation’  as the financial media regularly assert). The big question is for how much longer this relatively tight monetary policy stance can be kept up

  1. This doesn’t seem to me to bode well. Krugman is not convincing: where is the economic growth that will produce the government revenues, either from taxes or other forms of income to pay the bond yields? The whole exercise seems very like what Mish and others call “kicking the can”, i.e. postponing the hard decisions (such as seriously cutting government expenditure) for later generations to deal with.
  2. Mish makes this additional point that, so far, the Finance Ministry and Bank of Japan have not greatly inflated the money supply, unlike the Fed, but “The pertinent point is not the sorry state of affairs including a debt-to-GDP ratio of 220%, but rather when it matters. So far Japan has avoided printing on the scale of the Bernanke Fed, but one has to wonder how long that can continue in spite of Japan’s dire worst in the industrialized-world demographics.
  3. In another, earlier, post, Mish writes, “Japan ought to be financing its debt for as long as possible, as cheap as it can, while it still can. Instead, the bulk of it is 5-year duration or less, with next to nothing at the extreme long end. Ability to roll this debt over at perpetually low rates is going to be a problem sooner or later, and I think sooner, rather than later.

All of the above points are not addressed by either Lenz or Krugman in their respective articles, yet surely they need to be addressed in detail. Are these not legitimate concerns? And this is not even touching on the whole larger matter of government deficit spending and its long-term sustainability, a matter which is discussed in details in a work of fiction which I started reading recently: The Way to Freedom Part 1, and Part 2. The story points out that inflation of the money supply is only possible because there is no gold standard anywhere in the world, and the governments of every major industrialized nation have passed legal tender laws which grant the government a monopoly on money and enable it to tax its citizenry invisibly.

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New Take on Impacts of Low Dose Radiation « Berkeley Lab News Center

I first heard about the LNT (linear non-threshold theory) of the health effects of radiation exposure via Prof. Lenz’s blog (I couldn’t find a search function on the blog, but here are a couple of items that came up in a Yahoo search: Bernard Cohen on LNT junk science and Nobuo Ikeda on LNT and economics. I recall coming across an article about Gofman that claimed he had skewed the results of his experiments in order to make LNT more persuasive: he was dead against atmospheric testing, and his research had profound effects on its discontinuation. Didn’t log the link, tho. If readers can help, I’d be grateful.

I’m not competent to judge, of course, but I notice the existence of the concept of hormesis (and another article  here), by Art Robinson, a former colleague of Linus Pauling.

Researchers with the U.S. Department of Energy DOE’s Lawrence Berkeley National Laboratory Berkeley Lab, through a combination of time-lapse live imaging and mathematical modeling of a special line of human breast cells, have found evidence to suggest that for low dose levels of ionizing radiation, cancer risks may not be directly proportional to dose. This contradicts the standard model for predicting biological damage from ionizing radiation – the linear-no-threshold hypothesis or LNT – which holds that risk is directly proportional to dose at all levels of irradiation.“Our data show that at lower doses of ionizing radiation, DNA repair mechanisms work much better than at higher doses,” says Mina Bissell, a world-renowned breast cancer researcher with Berkeley Lab’s Life Sciences Division. “This non-linear DNA damage response casts doubt on the general assumption that any amount of ionizing radiation is harmful and additive.”

via New Take on Impacts of Low Dose Radiation « Berkeley Lab News Center.

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Effizienzhaus plus: German electric vehicle house | Lenz Blog

Prof. Lenz blogs indefatigably on the subject of solar energy production and other alternatives or emerging energy technologies. It’s all fascinating stuff, the stuff of dreams. Here’s just one recent extract.

I learned that “inductive charging” means having your electric vehicle charge automatically, eliminating the need to mess around with cables. You just park it at the appropriate spot and the energy is beamed to the vehicle wireless. That comes at a cost of less than 10%, since the project claims over 90% efficiency for the process.

I have just read all pages on that website and think this is an excellent project. They have built a model house that produces much more energy than it consumes. That makes it possible to power an electric vehicle as well as an electric bicycle from the balance. The idea is to get rid of the 70 percent of energy consumption that comes from housing and transport.

via Effizienzhaus plus: German electric vehicle house | Lenz Blog.

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Costs of switching nuclear off | Lenz Blog

Prof. Lenz has some interesting things to say about the Fukushima nuclear crisis. As there is so much hyperventilating blogging going on (anxiety and unease sell, and they are also somewhat addictive), I like to read alternative views. Here’s a selection:

New York Times has an excellent article about some of the damage to the climate and Japan’s economy expected from slowing down nuclear energy.

They estimate about 3 trillion yen per year in extra fossil fuel costs, which will place a burden on the balance of trade. And they report on a government estimate of about 210 million tons of CO2 emitted over 1990 records, a 16% increase, while Japan is supposed to reduce by 6% under the Kyoto protocol.

I learned that Japan was the world’s largest importer of coal to begin with.

via Costs of switching nuclear off | Lenz Blog.

SPIEGEL has published an interview on radiation damage from the Fukushima accident with Shunichi Yamashita, who has been working as an adviser to the Fukushima prefecture government and plans to be involved in the large follow-up studies coming up.

He is reasonably well informed about the lack of danger from low doses, but still says that he doesn’t know for sure about the absence of risk under 100 millisieverts dose. I don’t agree with his position, which I think is much too generous to the irrational fear crowd. As far as I am concerned, at the very least the 100 millisieverts per month proposed by Wade Allison should guide all related decisions.

One thing I have learned from this interview is that people relocated from Chernobyl saw their life expectancy reduced from 65 to 58 years. That is a massive health effect from the evacuation, and it is mostly caused by irrational fear, leading to symptoms as depression, alcoholism, and suicide.

This story should not repeat itself in Japan.

SPIEGEL interview with Shunichi Yamashita | Lenz Blog.

Mainichi reports on a couple of cases where Fukushima residents’ health was damaged by fear-induced stress. They say that Fukushima Medical University plans to study the problem in a systematic way and will publish results of a survey in autumn of this year.

Since no one has got radiation exceeding a reasonable limit of 100 millisieverts a month, all the health damage from the accident is expected from this kind of nocebo effect, and none whatsoever from radiation.

via Psychological stress | Lenz Blog.

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Not the dumbest NYT article ever | Lenz Blog

Regarding the Speedi data fiasco, Prof. Lenz has some useful comments. It’s a short blog entry and I’ll re-post it in its entirety.

But it comes close. The irrational fear crowd just got big play in the New York Times.

They make a lot of noise about the fact that the SPEEDI computer simulation data was not released in early days. This is of course old news, and the idea that the Japanese government is in the business of hiding facts about radiation was not convincing when that particular story came up earlier.

What makes this whole article so extraordinarily stupid is the fact that they spend four pages writing on the evil information hiding policy of the Japanese government, and how lots of people were irradiated because of that, without ever bothering to tell us what level of radiation actually was released in the places and times in question.

I assume with four people researching this story and several months of time they might be able to find out. But no, they hide this vital fact.

Without that, no one can fact check their accusation of “additional damage”. Maybe that is the point.

They also mention that Prof. Kosako wanted the unreliable computer simulation data published immediately. The thing one needs to remember about him is that he resigned from his post as a government advisor because no one listened to his idea that 1 millisievert per year was the right standard to act on in this crisis.

Since that standard is wrong by about three orders of magnitude, I for one think it is a good thing that no one listened to him and that he is out of the way right now.

via Not the dumbest NYT article ever | Lenz Blog.

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#Fukushima Teacher Pressured to Resign Over His Effort to Protect Children from “Invisible Snake” (Radiation) | EX-SKF

We humans are so susceptible to words. First read this headline (and the article, if you want). Sounds like a clear-cut case, doesn’t it? Teacher tries to warn his students about radiation risks. School authorities don’t like it because it “creates fear/panic” (the big no-no). Teacher “quits”, or was he pushed?

Fukushima Teacher Muzzled on Radiation Risks for School Children

via #Fukushima Teacher Pressured to Resign Over His Effort to Protect Children from “Invisible Snake” (Radiation) | EX-SKF.

Here’s another take: Prof. Lenz at Aoyama Gakuin University points out:

As far as I can tell from the article, all he had to face was the fact that pupils and their parents asked him to spend less time on the subject in class. Since he was hired to teach Japanese literature, I think that is a reasonable request. He can alert anybody all the time he wants when classes are finished, but it is somewhat strange to think he is entitled to use his pulpit as a Japanese literature teacher to spread his (misguided) views.

You may need to read the article again to find where and how Prof. Lenz got this interpretation.

Now read the headline again: Fukushima Teacher Muzzled on Radiation Risks for School Children.

Of course, they could have run with “Fukushima Teacher refuses to teach Japanese literature: insists on talking about radiation”. I wonder why they didn’t?

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