Japan may disagree with that assessment:
* Interest rate: https://fred.stlouisfed.org/series/INTDSRJPM193N
* Inflation: https://fred.stlouisfed.org/series/FPCPITOTLZGJPN
* YEN-USD: https://fred.stlouisfed.org/series/EXJPUS
> Dean looks at GDP per capita. But Japan's aging population means that you really want to look at GDP per working-age adult. And by that measure Japan's growth has been essentially the same as America's
[…]
> The truth is that these days Japan looks less like a cautionary tale than like a role model. Its performance only looks bad if you assume that the debt is a terrible problem, when all the evidence says that it isn't
* https://twitter.com/paulkrugman/status/1215628645869420545
25 years of <1% rates, huge 'money printing', and yet no inflation or currency debasement, and respectable per-worker GDP growth.
Where's the problem?
* https://www.brookings.edu/bpea-articles/its-baaack-japans-sl...
I'd like to see the economic models that were used to calculate at what (estimated) point this becomes "unsustainable". Do you have a citation?
What percentage of the population has to be "elderly" or taking their pension? What is the minimum percentage of the population that needs to be in 'working age' years before it becomes a problem?
Unless there are models people are just throwing darts in making these statements. Show me that the math exists (even though I may not understand it as a layman). Pontificating is cheap.
Krugman in 1998:
> The purpose of this paper is to show that the liquidity trap is a real issue-that in a model that dots its microeconomic i's and crosses its intertemporal t's something that is very much like the Hicksian liquidity trap can indeed arise. Moreover, the conditions under which that trap emerges correspond, in at least a rough way, to some features of the real Japanese economy. To preview the conclusions briefly: in a country with poor long-run growth prospects—for example, because of unfavorable demographic trends […]
> In the model of sections 1-3, a liquidity trap will arise only if future productive capacity is actually lower than current capacity. Before loosening that constraint, we can ask why one might expect Japan's future capacity to be relatively low compared with today's. And the obvious answer is demography: Japan's combination of declining birth rate and lack of immigration apparently means a shrinking rather than growing labor force over the next several decades.
[…]
> Moving outside the formal model, the prospects for a liquidity trap also depend on investment demand. Here demography again comes into play: the prospective decline in the labor force reduces the expected return on investments.
https://www.amazon.com/Shrinking-population-Economics-Lesson...
From a review: " The parlous state of Japan's pension system is well known, but Matsutani reviews the projections: by 2030, contributions will cover only 44% of expenditure, leaving a projected yearly deficit of ¥57 trillion by 2030 and a cumulative debt load of ¥1,240 trillion, roughly equal to the sum of all household wealth in Japan today. Getting back to balance would entail either more than doubling contributions from 15% to 34%, or cutting benefits by 56%."
I'm sure they have. But we're all a bunch of randos on the Internet to each other, which is why I'm asking for citations: I'd like to hear the sources which people's thoughts come from so I can better assess them.
Otherwise the person on the other end of the screen is just another crazy from /r/wallstreetbets. :)
While I’ll readily concede that Japan has surprised everyone, at some point in time the sheer magnitude will overcome the lenders’ belief. Their ability to repay, and then it all goes downhill very fast.
That’s the thing - hyperinflation happens fast. You usually don’t see inflation, high inflation, higher inflation, and then hyperinflation. Instead you see slow deterioration and then a huge jump in a short period of time. It’s like falling off a cliff in its suddenness.
If everyone does that, then the cliff moves closer, and your algorithm loses all predictive power.
* https://en.wikipedia.org/wiki/File:UK_GDP.png
* https://en.wikipedia.org/wiki/United_Kingdom_national_debt#H...
The UK is still rolling forward that debt:
* https://www.theguardian.com/business/2014/oct/31/uk-first-wo...
Japan peaked at 180%.
The US can always revert the Trump tax cuts (for the rich), as they didn't seem to do anything useful and get some extra revenue. That should help.
[0] - https://www.statista.com/statistics/267226/japans-national-d...
Japan lends to itself. The BoJ owns so much of the government bond market that there are days where the benchmark bond simply doesn't trade [1]. Under absolutely no circumstance will Japan have any issue repaying Yen denominated debt when they have a monopoly on the Yen. They're theoretically not far away from just retiring the whole bond market and just running an overdraft at the BoJ for all government borrowing requirements.
Can you provide evidence to your point on hyperinflation happening all of a sudden too? I think all instances in history (except maybe Zimbabwe, but I've lost the details) involve external obligations that are unable to be met (War repatriations payable in gold for Germany, extreme dependance on imports for Venezuela since the economy was so misbalanced, high USD denominated debt burdens for Argentina ... etc). I
[1]: https://www.wsj.com/articles/nobodys-trading-10-year-japanes...
I’ve saved the best for last, though. Nicholas Kraus is probably the leading expert on hyperinflation, and has a great list here. [3]
[0] - https://www.investopedia.com/articles/personal-finance/12291...
[1] - https://www.weforum.org/agenda/2019/08/inflation-deflation-v...
[2] - https://www.reuters.com/article/us-emerging-inflation-graphi...
[3] - https://www.cato.org/sites/cato.org/files/pubs/pdf/hanke-kru...
I meant to address this point separately. What you say is technically true, but if they just retired the debt, Japan would simultaneously become a much poorer country.
Remember, the owner of the debt gets to mark it as an asset, so while the debt would be canceled out, the assets would drop in an equal amount [0].
[0] the Accounting equation is Assets = owners equity + liabilities, so a reduction in liabilities must cause a corresponding reduction in assets. And yes, it’s that insidious, but it is spun by people who have an interest in people not understanding this.