Posts Tagged youtube

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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Tragedy of the Euro

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How young he is! Philipp Bagus has written an excellent and interesting history of the Euro, which you can buy on the Ludwig von Mises Institute website or download for free from the same site.

Read a summary of the interview on the GoldMoney site here. Here’s an excerpt:

In this video Philipp Bagus, Assistant professor of Economics at Madrid’s Universidad Rey Juan Carlos and author of The Tragedy of the Euro, and Alasdair Macleod of the GoldMoney Foundation talk about the eurozone facing the problem that is characterised in the “tragedy of the commons” analogy. Bagus explains this phenomenon by way of an example of overfished and over-exploited oceans due to a lack of property rights on oceans. In Europe, governments run larger deficits than their “competitors” in order to externalise the costs to all users of the currency. Knowing these incentives, the Stability and Growth Pact was put in place as per the early 1990s Maastricht Treaty, capping budget deficits at 3% of GDP and the debt to GDP level at 60%. However there was no enforcement of these rules which is why there have already been more than 80 infringements to this stability pact without any repercussions.

They talk about possible solutions to the euro crisis. Bagus points out that there are basically three different

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Feast for the eyes. Because life moves pretty fast

News of a different sort today, because I’m tired of the barrage of yapping about the various crises – the banking crisis, the Euro crisis, the nuclear crisis, etc.,… Long ago Jesus said, “The poor you will always have with you, but you will not always have me.” He could have said, “Crises you will always have with you, but this beauty isn’t going to stick around and wait for you to pay attention to it.” Or, as Ferris Bueller put it, “Life moves pretty fast…”

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Recent chills of December at last rapidly accelerated the delayed changing of Japanese maple leaves to vermilion and crimson.

via Stardust English Talk: Autumn giving way to winter after the final burst of glow.

No words necessary.



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Reddit Users save a life, maybe

From How the World Works. A friend of mine is due for a bone-marrow transplant, so I was interested in this story. I wonder what the rules are in the UK for compensating bone-marrow donors?

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Great story – the bank robbery

Mouse-tip to Lenz Blog.

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Music, rhythm, joy, spontaneity, life

Take a look at this amazing movie (see the trailer below). I saw the movie this afternoon. It was followed by a live performance by the boy himself, Takeo. Both were brilliant. The movie is in Japanese with no subtitles, so for those who don’t understand Japanese, here’s a brief summary.

Takeo is now about 25 years old. He has Downs Syndrome. He still couldn’t walk at the age of 3. He loves music and has a good sense of rhythm. His mum noticed this and helped and encouraged him. Downs kids are not easily educable (tho there’s a wide spectrum of disability), yet we see Takeo learning complex rhythm patterns. When he was 11,  he encountered the Senegal Sabar drum. He was apparently taught Senegal drumming by a Senegal drummer, Wagan N’Diaye Rose, who has given many drumming workshops in Japan. The movie shows footage of a visit by Takeo to Senegal for a Senegal drumming workshop, which includes jam sessions with the celebrated African musician (and Wagan’s father) Doudou N’Diaye Rose. We also see scenes of Takeo playing the drums, marimba, xylophone, piano, and other instruments, both alone and with others, notably an elementary music school teacher who invites Takeo to his home/workshop/studio and lets him play with whatever he wants, and a jazz pianist who enjoys improvising with Takeo and lets Takeo do the same.

The movie ends with an extraordinary performance by Takeo under a baobab tree – he first approaches the tree slowly and bowing, he plays a drum underneath its boughs, pausing every now and then to sing or to pick up a stick to drum with but you get the feeling he’s still feeling the inner silent rhythm even when he’s not drumming, and he finishes by backing slowly away from the tree.

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After the movie finished to loud applause, a troupe of musicians came in playing a variety of African percussion instruments, followed by Takeo himself. When they were all assembled on the stage, Takeo motioned to them all to stop, but they did not immediately obey. Takeo then took the mike and began talking, tho it was hard to understand what he was trying to say. One of the musicians eventually got tired and cut off his mike and started playing, but Takeo obviously didn’t like this and sulked, refusing to play.

The musicians were very good and the rhythm was infectious. A woman in the audience got up and began dancing, as did several children. She moved to the front and danced around Takeo. Slowly, he melted and began dancing with her, then playing the drum he was carrying. Suddenly the piece ended and the room erupted in applause.

My daughter was there right in the front row. At one point she stood up and approached the drum set Takeo was playing and began tapping on it.  She too has Downs Syndrome.

Here’s a 2006 video of Takeo playing the balafon:

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Homepage for the movie:

Here’s a similar performance to the one we saw, with the same musicians “Malaika”, playing in Osaka, Japan, earlier this year. It’s really interesting to see how musicians and audience react to an unpredictable player! It looks like he’s just doing his own thing, following his own drum as it were, and then he and all the other players come right into sync and finish all together. Astounding.

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OWS and Capitalism – who are the real bad guys?

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Saying “it’s not capitalism that’s the problem, it’s CRONY capitalism” is, how shall I put it, weak! Who is going to take the time and trouble to make the distinction? Plus the fact that capitalism is used in both phrases means that capitalism still gets tarred with the same brush.

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Japanese economic future guaranteed by the government! Oh, wait…

Here’s more good news on the Japanese economic future (mouse-tip to Saving Japan for the link). I have some comments about the content, as perhaps you do, too. Watch the video first.

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  1. @48 secs, the commentator says, “This (annual worldwide consumption of 900 tons of seafood) is an addiction repeated all around the world, but it’s not helping the main exporter which is floundering.” Addiction implies irrational behaviour. It implies that people are fools. They are not fools, they are rational calculating decision-makers. To say they are addicted to seafood implies that eating seafood is a self-destructive behaviour. This is clearly not so, but we hear this phrase often: Americans are addicted to debt, or people all over the world are addicted to oil. These statements are equally misleading and fallacious. And secondly, how can buying something which is sold on the free-market have negative consequences for the main exporter?
  2. The main point seems to be that the strong yen is eating into the profits of these seafood companies. The implication is that something should be done about it, or something can be done about it: “it eats into companies profits”, “People’s livelihoods are at risk”, “this will lead to a hollowing-out of Japanese manufacturing and create unemployment”.
  3. At 2 min 40 the president of Asahi Seikakusho says that products and machines are no longer selling well and that given the world economic situation, “Japanese companies have to look for whatever opportunities they could discover.” So what else is new? Welcome to the world of entrepreneurial business. But listen to what the commentator says next: “But that’s not going to be easy in a country where the government itself is deeply in the red. Japan has the highest national debt of the major economies, owing almost twice as much as the entire economy makes in a year.” The implication seems to be that the “opportunities” involve government intervention, or perhaps even government subsidy. But do they? The commentator seems to assume but there can be no business or economy without major government involvement, subsidy or support. This is a commonly held belief but I wonder if it is true.
  4. By the way, the choice of Asahi Seikakusho as THE representative of Japanese manufacturing industry is a bit fishy. And anyway, if they can’t sell at the prices they charge, they must find a way to sell more cheaply, find something else to sell that people are willing to buy, or throw in the towel. So, what else is new?

Japan it seems can only be saved by the government, but the government is broke and worse, up to the neck in debt! Given these assumptions, it is clear there is no way out.

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Another short, well-made video

Here is another interesting short video. It is professionally made, and I don’t aspire to make anything this slick – it is not worth my time to learn how to do so. I like the background graphics. Watch for the ones that pop up when Ferguson says “Lehman Brothers”. I prefer a speaker on video to be facing me/the camera, tho I suppose switching to a side-view or some other view helps provide variety. But does a short video really need it?

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Simple but effective videos

What do you think of this video as a teaching or a marketing tool?

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I’m looking into creating my own instructional videos. If I could make something like the one above, I’d be happy. Here’s why. Read the rest of this entry »

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