¥1,086,000,000,000,000 (Quadrillion) In Debt And Rising, And WhyThe ¥ Will Soon Be A $: "A Lost Decade... Or Two"

Tyler Durden's picture

Yesterday the Japanese Finance Ministry made a whopper of an announcement: in the year ending March 2013, total Japanese debt will surpass one quadrillion yen, or ¥1,086,000,000,000,000. This is roughly in line with the Zero Hedge expectations that by this March total Japanese debt would surpass one quadrillion yen. In USD terms, at today's exchange rate, this is precisely $14 trillion. And while smaller than America's $15.4 trillion (net of all post debt ceiling breach auctions), which was $14 trillion about a year ago, the GDP backing this notional amount of debt, which just so happens is greater than the GDP of the entire Euro area, is a modest ¥481 trillion, so by the end of the next fiscal year, Japan will have a Debt to GDP ratio of 225%. And that's not counting all the household and financial debt. So prepare to add quadrillion to the vernacular. At this exponential rate of increase quintillion will appear some time in 2015 and so on. Yet the scariest conclusion is that as Bloomberg economist Joseph Brusuelas points out, America is not only next, it already is Japan. Actually scratch that, America is worse than Japan, which at least generated a real housing bubble in the years just preceding the onset of its multi-decade credit crunch, something not even America could do in comparable terms. More importantly, "the debt-to-GDP ratio of the U.S. recently surpassed 100 percent, and it did so in the four years after the onset of the recession, compared with the six years it took the Japanese debt-to-GDP ratio to do so." The Japanese may be better than America in most things, but when it comes to destroying its economy, the US has no equal. Brusuelas' conclusion: "If below trend growth is the most probable scenario in the U.S., the most likely alternative is that the U.S. economy is headed for a lost decade… or two." So... go all in?

From Bloomberg's Brusuelas:

The Long Malaise: Similarities Between Japan And The US

 

Slowly and surely, comparisons between the long malaise in Japan and the historically weak expansion in the U.S. are growing more valid.

 

These similarities primarily relate to the unique problems following the piercing of a debt-financed asset bubble that left many households, banks and firms with liabilities that exceeded assets following the bursting of a residential asset bubble. Unless policy is put in place soon or unless home prices are allowed to adjust to equilibrium clear-ing levels, it is growing more likely that the U.S. economy will continue to underperform in a fashion eerily similar to that of Japan over the past two decades. While differences between the U.S. and Japanese economies are many – the conspicuous consumption practiced by American consumers versus the thriftier Japanese public, for example – the similarities between the two economies are many. The direction of long-term yields and of the housing sector, as well as the increasingly leveraged U.S. balance sheet, look all too similar to Japan following the piercing of that country’s housing and equity market bubbles.

 

Peak to trough, home prices are down 33 percent. The Japanese housing market did not experience appreciable pricing gains during the first two decades of recovery, not exactly a comforting thought for either home owners or policy makers. A comparison between Japan and the U.S. housing markets in the four years following the bursting of their respective housing bubbles shows the two markets headed down the same listless path.

 

From the viewpoint of policy makers, the floundering housing market is blocking the process through which accommodative financial conditions stoke economic growth. This is likely why the Fed is considering purchasing mortgage-backed securities. It is also why PresidentObama, in his State of the Union address, expressed the desire to create a refinancing program that would support even the refinancing of mortgages not owned or guaranteed by Fannie Mae and Freddie Mac.

 

Meanwhile, the debt-to-GDP ratio of the U.S. recently surpassed 100 percent, and it did so in the four years after the onset of the recession, compared with the six years it took the Japanese debt-to-GDP ratio to do so. This makes it difficult for policy makers to push forward fiscal solutions to the housing problem, especially given private investor concern over the sovereign debt crisis in the euro zone.

 

Since the onset of the recession in the U.S., the economy has grown above the long-term trend of 2.7 percent in only three of 16 quarters, averaging a scant 0.16 percent rate of growth. This is very similar to the 0.5 percent average level of growth in Japan between 1991-2000. If below trend growth is the most probable scenario in the U.S., the most likely alternative is that the U.S. economy is headed for a lost decade… or two. Until a solution is put forward that addresses the shadow inventory of homes and permits prices to adjust, policy makers are just spinning their wheels, engaging in stop-gap measures that will probably prove insufficient to solve the most vexing of problems.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Oh regional Indian's picture

Japan is a non-nation, a non-entity. Completely controlled by FED wishes. A client state, through and through.

WIth Fukushima (getting worse every DAY, kids with protruding thyroids, radiation levels off the scale, even Boise Idaho baby death spike linked to Fukushima)....

When the great carry trade is finally folded, Japan will go bust. 60 years, all it took to engineer a society into total decline. 

The Yen is not a primary global currency, it is a dollar sub-set.

ori

watershed-day-may-this-pour-through-a-million-pairs-of-eyes/

 

GetZeeGold's picture

 

 

Don't have any money but I'll be happy to write you a check for that.

 

 

LuKOsro's picture

In my time, they didn`t use to teach us at school about such numbers: trillion, quadrillion, quintillion, etc. Soon we will run out of zeroes.

http://journey-to-alpha.blogspot.com/2012/01/bernanke-expands-zirp-till-mid-2014.html

Kick_the_Kan's picture

debt that will never be paid back....classic Ponzi.....new debt paying off old debt

StychoKiller's picture

So, when the value of a zero rises above 0.0, you won't be able to find any at any price! :>D

Oh regional Indian's picture

:-) If you are serious GetZee, it's the thought that counts. The money will come as it is meant to. Run after it, it just runs faster. Or so I've learned anyways.

ori

Seize Mars's picture

Japan is a non-nation, a non-entity. Completely controlled by FED wishes. A client state, through and through.

Correct. I am surprised at how many people don't seem to understand this. Their money supply is just another bucket for our money supply.

 

 

GeneMarchbanks's picture

Reparations for WWII. I could make a similar argument for Europe as well through the BWIs and even the EU to some extent. I can't imagine the opinions of the Okinawans is any different to many here in Europe about their perceived occupiers.

tired1's picture

ORI,

Do you have any insights into the Russian central banking system?

Oh regional Indian's picture

Nope Tired1. Why do you ask? 

ori

tired1's picture

I'm trying to understand where the WS/City CB influence ends or is diminished. Under Yeltsin it seemed that Rothchild had Russian entities under control, but with Khordokovsky in prison and Berezovsky and others in exile Putin seems to have been able to wrest away some money powers.

It seems that Russia is increasingly a target by NATO, the West having been able to bribe enough leaders to ring the western Russian borders with bases.

With the weakening of the USDEUR the money power shift (I think) is moving to RUS/CHI/IND. At least if Europe wants to buy petro products from Russia.

I also wonder what great plan Israel has to keep afloat if foreign hosts are unable to keep to supply of resorces stable. A few weeks without gas or water and the Bedouins are going have some old real estate back.

Eally Ucked's picture

Who cares about NATO bases, shortly they won't be able to afford to heat their houses, drive their cars and tanks, feed the population, they will close hospitals and cut pensions. Every f... item in their households comes from China or some other developing country but they have financials sectors! Will see how long it's going to propel their GDP's

GeneMarchbanks's picture

'I'm trying to understand where the WS/City CB influence ends or is diminished. Under Yeltsin it seemed that Rothchild had Russian entities under control, but with Khordokovsky in prison and Berezovsky and others in exile Putin seems to have been able to wrest away some money powers.'

Where it ends is where there is opposition to the CB/MIC/Intelligence agency model. Read some of Michael Hudson's stuff on the IMF involvement after Russia's bankruptcy and you'll get the gist. It seems you are on the right track though. A simple formula is: the less UST's they buy, the closer you are to 'opposition'.

tired1's picture

Thanks for the pointer. I was in the middle of some of that (EBRD) in Moscow in '96. Didn't have a clue as to what was happening. I recall one chat at a bar when one US intel guy who claimed that the US had funded the purchas of a mobile missile launcher, to make use of its' comm gear to set up point to point commercial telephony links. The sum wasn't all that much, but the interesting thing is that it was delivered complete - with the missle!

VanillAnalyst's picture

I think that the Japanese are doing a very responsible thing here, by raising awareness of national debt woes. Scorched earth baby.

 

Try fitting the 000's in quadrillion on a check.

StychoKiller's picture

Scientific notation is my friend! 1 Quadrillion = 1.0E+15

GeneMarchbanks's picture

Japanese buy their own debt, time to get the US to buy its own debt and not just one man. We're all in this together....

RiverRoad's picture

Lately Americans seem to be buying their own municipal debt.

DaveyJones's picture

it is ironic since americans buy everything else placed in front of them 

LawsofPhysics's picture

Wait for it... parity bitches, the world over.  Then gold is revalued.  China wants to be the next empire state in the future world of resource scarcity? I say let them fucking hang themselves.

A Lunatic's picture

This is a great opportunity for the thorough application of broken window economics. Lets nuke everyone and then rebuild..........jobs created (not just saved) and we're talking shovel ready here folks. This would also be a good time to usher in a new (still U.S. taxpayer backed) currency with which to rule the world..........we could call it the rubble.

Oh regional Indian's picture

Rubble.

Instant Classic. Well Done Sir.

ori

Chief KnocAHoma's picture

While the World situation is so turbulent I watch in amazement, and thank God everyday to be living in such interesting times. No fear here baby, just excitement for what we are witnessing and living through is a birth.

Like a woman having contractions, one part of World screams in pain, then another. The contractions grow closer together, and any father knows what that means, get off the golf course and hurry to the hospital.

We all await to see what this new birth will bring.Will it bring a revival of the human spirit where the real producers (people who work for a living) finally demand the non-producers (parasite bankers, trial lawyers, welfare riders) to pull there own weight? Or put more simply; No real work, no food.

Or might it bring the opposite. Maybe the non-producers will overwhelm the system and strip the productive of their hard earned wealth? Will farm lands be seized to provide for the State? Will your small trucking company be forced into servitude to carry goods to those that demand it? And if so how long can that last before someone has to produce?

Will the Christians remember that the events leading to the execution of Christ included him throwing money changers from the Temple? Are we about to toss them to street yet again, and what will be their response if we do?

Will the American electorate wake up and realize that voting for substance is more important than voting for style? One can only hope.

Will science save us? Will new energy forms break through to keep the World working and fed, or will the black gold run out forcing us back to a simpler life style? Would that be all bad?

Many sense a huge creative destruction on the horizon, but what? Jubilee? World War? Dark Ages?

Is it possible that what lies ahead, after some pain, could be the birth of a new reality where the scales are actually balanced as they should be? Could we be close to shedding the efforts trying to force utopia, thereby accepting that the World is not, and never will be perfect and fair for all? Trying to force this goes against the laws of nature and only causes wider spread suffering.

If we ever grow up and face that reality, we can move forward and develop an existence where freedom allows the producers to earn and thus willing provide through charity (And by that I mean giving more than 1% of your income or an embarrassing $369) to provide for the truly needy.

Believe it or not, we still have the power to chose our direction.

Remember this: The Republicans are not necessarily right, they are simply less wrong.

Seize Mars's picture

@Turd: thanks, saw this. Good stuff.

mendigo's picture

Dear Turd

Very interested but as a simple minded person I think it makes a theoretical point not quite relevant to the reality. In large part people like myself have not been spending thier savings but have been and are being asked to spend thier future earning of which the value is somewhat uncertain and in fact we are spending our children's future earnings.
Separately I think that our government is making zero interest rate loans which will never be payed back. How much can I afford to borrow and for how long at zero percent (or negative real rates). The problem is that the keynsian analysis relies on an assumption of resposible. government and an intent to repay. We are now in the realm of the wealthy stealing what they can while it still has value and this is supported by both parties.
Run that through your spreadsheet and tell me where that takes us please.

Seasmoke's picture

Quadrillion just doesnt roll off the tounge like million, billion and trillions.......This is going to be their downfall .....(sarc)

tired1's picture

Simplify:

1.8 x 1015

Need to get away from all those zero's, too easy to make an accounting mistake.

Captain Kink's picture

1.08 x 1015

like a 720 trillion yen mistake  

 

Raging Debate's picture

Ya like in Goldmember when Dr. Evil demanded a billion, gazillion, million Yen.

fuu's picture

Millions of billions.

Chief_Illiniwek's picture

When do we get to (my favorites...) zillions and gazillions?

kaiten's picture

Japan wins! :)

chinaguy's picture

So it this Bretton Woods 4 (or whatever) ALL of the world's CBs decide to debase in unison & siphon off the last of the gravy for their respective Oligarchs?

lotsoffun's picture

yup.  do you remember some guys named o'neal, fuld, greenberg (2x), rubin, mozilla (geez, the lists goes on).  all a big game, who gets the chips off the table first?  greed is a bitch.

 

 

Money never sleeps's picture

These guys started selling Yen last week with massive amounts: spadacapital.com Apperantly they were not the only ones when looking at the chart.

Scalaris's picture

Can't wait to trade in vigintillions.

Catullus's picture

And they want to buy an additional ¥46 trillion ($650b) in foreign bonds.

Currency Suicide. How long before this ¥10 quadrillion?

Dr. Engali's picture

The Nikkei went from 38,000 to 8,500 during that time too. How long before the bond vigilantes hit them?

Irish66's picture

Are you on CNBC?  talking head just said this

Dr. Engali's picture

No. I don't know what pains me more. Watching CNBS or the liar in chief.

old naughty's picture

Fukushimas will help made at least a few more decades lost!

Agent P's picture

"So prepare to add quadrillion to the vernacular."

I think you meant to say "quadrirrion".

Dubaibanker's picture

While the economies are in decline, the stock markets move with great volatility and trend lower and sometimes rise too, for example in the US in 2011.

I had some thoughts on this when USA lost its prestigious AAA rating on Aug 5, 2011.

http://dubaibanker.blogspot.com/2011/08/major-shift-in-textbook-economic...

Any comments?