The Japanese Titanic: Japan's Public Debt Will Surpass ¥1 Quadrillion Yen Any Day Now

How much is a quadrillion? That's a thousand trillion....


Recently, I've been getting my daily money market news fix from the usual suspects: Mish Shedlock, Karl Denninger and Mad Max Keiser but there's another blog that I've found that hits the mark consistently and updates more than several times a day. It's called Zerohedge. I highly recommend it because the guy that runs it seems to get the scoops on what's going on days and even weeks faster than all the rest.

The latest one rings the alarm bells for Japan once again. Japan's Public Debt is about to surpass ¥1 Quadrillion any day now. Jeez! How many zeroes are there in a quadrillion? I didn't even know without having to look it up.


Let's see that's a one with fifteen zeroes after it. Like this: 1,000,000,000,000,000.


Zero hedge reports in Japan Will Raise More Cash From Debt Issuance Than Taxes For Forth Year in a Row


Japan's marketable public debt, already the largest in the world at $11.2 trillion compared to America's $10 trillion (of course this assumes the whole SSN sleight of hand is funded, which it isn't), is due to surpass ¥1 quadrillion any month now (aka the exponential phase). And that's just the beginning. As Bloomberg reports, "Bond sales to the market will climb to a record 149.7 trillion yen ($1.9 trillion), while the national budget’s reliance on debt for funding will rise to an unprecedented 49 percent in the year starting April 1, Japan’s government said Dec. 24.


The article goes on to stomp on these Keynesian "economists" (read: clowns) who claim that the government should increase spending to pick up on falling consumer spending and loosen monetary restraints (read: print like hell) in order to pump up the economy before a recovery starts:


In other news, and to all the neo-Keynesians out there, we post the following thought experiment: according to the head priest economic growth derives from debt issuance. And since apparently every country (yes, yes, that has its own currency) can issue infinite amounts of debt, why doesn't the US and Japan (and the EU post Eurobonds), simply announce it will monetize, aka print, an infinite amount of debt tomorrow? Shouldn't that lead to global GDP promptly rising by infinity %? Or is there an actual problem with this hypothetical scenario which takes current debt trends to their ludicrous extreme.


Want to see what a quadrillion pennies look like? Here ya go!

Here we have buildings (in front) used for scale at a trillion. They're now dwarfed by the large cube of pennies in back (quadrillion). The large cube is a quadrillion, or a thousand times one trillion. This cube is roughly a half-mile wide and would weigh an astonishing three billion tons.

Translation: Japan is doomed. 2012 and beyond are going to be rough ones.


Happy New Year! If you are in Japan, may I suggest drinking as much as you can, while you can. 

Japan's Insane Tax-At-All-Costs Political Class

This will be my 800th posting on this blog. I think it is fitting that, after all that has happened, as through the short history of this blog, the economy of Japan and most western nations are close to collapse, as Japan's national debt is over 200% of GDP, as the US government has surpassed the legal limit on the debt ceiling for that nation and into de facto bankruptcy, as silver hits a new 31 year high to nearly $44 USD an ounce and gold is knocking at the door of $1500 dollars an ounce, that this 800th blog should be about taxes and the economy.

BEATLES CARTOON - TAXMAN

Once again, the news shows that our rulers never learn their lessons when it comes to taxation and debt. After the disastrous events of the last month starting on March 11th and continuing today, once again, the government of this country shows that their only answer to our financial problems is to raise taxes.

Jiji Press reports:

Tokyo, April 18 (Jiji Press)--Japan is considering raising the consumption tax by 3 percentage points for a limited period of some three years to secure funds to rebuild areas devastated by the March 11 earthquake and tsunami, officials said Monday.

   Japan will be able to secure 7.5 trillion in annual tax revenue by raising the tax rate to 8 pct from 5 pct, government and Democratic Party of Japan officials said.

   The nation is preparing the first supplementary budget for fiscal 2011 with the spending amount of some 4 trillion yen. The budget will be covered without new debt issuance.

   Tokyo is likely to compile more budgets for the current year, as many in the government and the ruling party believe that more than 10 trillion yen should be spent in total on the reconstruction of the disaster-devastated areas.

   To finance the second and later budgets, the government will issue reconstruction bonds. Many think that the revenue from the envisioned tax hike should be used entirely to redeem the reconstruction bonds, the officials said.

It says in the first paragraph, "Japan is considering raising the consumption tax by 3 percentage points for a limited period of some three years..." Sure. Only three years, right? And after that, we're supposed to believe that the Japanese government will have their financial house in such good order and fine shape that they can cut taxes? What planet are these people living on? Has the Japanese government ever cut taxes? How, pray tell, are they supposed to be able to do that when the economy is so bad and, as I mentioned, our public debt has surpassed 200% of GDP?

History also shows us what happens when sales taxes are raised. There will be a correlating drop in sales equal to the percentage of the sales tax; raise taxes by three percent and sales will drop by three percent. And who winds up paying for this kind of sales tax hike? Not the ultra-rich or corporations who have all sorts built-in tax advantages. The rich only have to spend a few percentage points of their income for basic foodstuffs. The average middle class household is spending 15~25% or more just for survival. Hit them with a sales tax increase and you hit them below the belt. 

The good example goes like this: Say, average millionaire wants to buy a new yacht? No problem. It's needed to entertain guest so it is a business and tax write-off. But, say, the single mother with a two kids whose husband has run off and doesn't pay any alimony, is not buying yachts and diamond necklaces, she is scrimping and saving to buy milk, eggs and rice. and the basics she needs to survive.

A 3% hike in her grocery bill hits hard. 

The average household is is also expected to carry the burden of massive public debt created by the government. It is this government who arbitrarily decides to tax one class of poor people to give to another class of poor people (in this case, the average Japanese family gets taxed to pay for the suffering and reconstruction of the poor who suffered in the Tohoku disaster) all the while the government takes a margin for delivering these services and gives no-bid reconstruction contracts to their cronies.

Nikkei 225 at ¥9441 on April 19, 2011

The economy is already in desperate shape. Japan's credit rating has been downgraded in the last year and the Nikkei 225 is wheezing away at under 9,500 (it is at 1/4 the amount it was at the height of the bubble economy) and it has also been reported that 15.7% of Japan's population now live below the poverty level. Think about that. 

And, with all of that, with all of this suffering and misery caused by badly thought out government policies, these people want to raise taxes? They must be completely insane.


Japan owns trillions of dollars in US government bonds that were bought with tax monies taken from the public. The value of these bonds have lost some 40% over these last 10 years due to the rapid decline of the US dollar, yet, even with this, the Japanese government has painted Japan into a corner whereby we cannot unload this debt without causing a quick rise in the yen and hurting Japan's export economy.

Silver & gold price explosion is flashing warning signs about the economy

Gold breaks new record to $1503 the day of the posting of this article

Not only that, at least twice in the last 365 days, Japan (and most recently foreign central banks) has intervened in the dollar x yen rate and flushed billion of yen (billions of US dollars) in foolish attempts (that haven't worked) in order to lower the value of then yen.


The fact of the matter is that, for reconstruction, as Peter Schiff points out, Japan should want a stronger yen as that would make our buying of oil and raw materials as well as other items needed to rebuild the ravaged areas cheaper.


But, no! As usual, when it comes to doing something about the economy, the government cannot admit its errors and try to strip them away. As is the case now, and has always been the case, the government of Japan's answer to financial problems is not to cut spending or to sell poorly valued and foolishly bought US government backed securities (that lose value every day), but the answer is, and always will be to spend and raise taxes.


That is why our economy has been so messed up for this last 20 years and that's why is is so easily predictable that our economy will be messed up for at least the next decade or more as Mish Shedlock so skillfully points out.


The politicians who live on dead and proven failure Keynesian economic policies are leading this country down the road to ruin. It will be soon enough, at this rate, that Japan will be like the Philippines. Throw this situation in with how the youth of this country have no where near the dedicated and hard work ethics of their fathers and grandfathers and you have a chemistry that spells out for a very grim economic future indeed


When we look back at what happened in twenty years from now, we'll not be surprised for a second that Japan will be jokingly referred to as the Northern Philippine archipelago.