March 28th, 2010, 12:11 PM
What is critical size of national debt in comparison to
GDP after what bankruptcy is likely?For example Japan
has national debt 200% and still didn't have default.
Is size of general debt more important?
Why different countries do not cancel debts one to another?For example US has big debt and one of the main its creditors is Japan.But Japan has huge debt too.So why they do not cancel debts one to another and will not become free of debts?How this world market mechanism is working?
The Japanese situation is also very unique. Although they have huge debt levels, the debt is owned domestically by citizens and domestic corporations like Toyota, etc. As a result, the dynamic is much different than if the money were owed to other countries and bond holders as is the case with a good bit of the United States national debt.
That being said, Japan has suffered economically because of the massive amount of money it spends servicing its debt. The interest rates are currently something like 0.3 percent, but there is so much debt that the payments still consume a large amount of the government budget. Obviously, Japan will need to take on more debt to address the recent tragedy, which just makes things worse.
I think its important to realise that debt does place a huge burden on a country's GDP as debts must be repaid at some point in the future. Debts also play a crucial role in driving forward a country's economy too. There is always that mini boom that helps people into jobs, provides opportunities for the unemployed and re-skilling certain key sectors of a community such as the needy, the long term unemployed who otherwise would not get a chance of employment had it not been for massive stimulus spending. The trick is to get the balance right. I dont think cancelling debts between countries is a good idea. It leads to loss of revenue for the countries that have loaned out. Also we must consider that same country may have borrowed itself which is a debt that country could be lumbered with a loss of revenue form lendings may lead it to borrowing more money which leads to even more debt! Either way you look at it, debts place a country at a disadvantage and must be controlled in some way. But you cannot eradicate debt.
Originally Posted by Stanley514
There are many factors playing into the debt leading to default or not, the most important being, just like previous posters said, is the debt internal or external?
Japanese citizens are known to be savers, thus Japanese banks have high capital and are able to lend the government, unlike the opposite situation which is happening in many countries where the government is bailing out big bangs since most loans of the banks went unpaid.
Now the other factor is the growth of the GDP of a country, is the country really in recession or having growth? Lets take Japan vs Greece as an example
Lastly the current account balance and please notice that Japan has a positive current account balance where as Greece has a negative balance indicating that the debt is increasing in a high rate which is unsustainable
When a strong country has the ability to print or add zeros in order to create as much currency as they wish, there is really no such thing as traditional/real debt for that nation.
There is also no correlation between the current fiat currency "debt" situation/s and any boost in any economy. Debt grows an economy only when that debt is to be repaid with a greater amount of products, goods, services and/or commodities. Government debt is paid by and with the creation of more fiat currency and so economic growth does not occur, what occurs is an inflation of currencies and a reduction in the amount of products, goods, services and commodities the repayment of fiat currency debt will buy/purchase.
Most US debt is also internal--something like 60% last time I checked.There are many factors playing into the debt leading to default or not, the most important being, just like previous posters said, is the debt internal or external?
What % of Japans is?
Read the creature from Jeckel Island and watch "money as debt". It is far different than you imagine. We will not default on the debt, you just wont be able to buy anything with your fiat currency. Every country in the world is competing with each other to devalue their currency the fastest. The central banks of the world act in collusion with each other during this devaluation by using currency swap. Normally when more USD are created, than more EURs and Yens are created etc. The net effect over time is to steal from the savers and apply a hidden inflation tax.
I hate to bring this up again but countries that create their own currencies never have to default. The government of the United States of America will never default unless they choose to do so. It does not matter who holds the debt/promise for X amount of fiat US dollars to be paid back to them with "interest" (additional fiat US dollars on top of the principle).
Concerning the actual percentage of who holds most of the "debt" occurred by the US government, well that would be the US government itself. The US Government used Non-Marketable Government Account Series, or GAS securities, to issue and redeem about 57 trillion dollars to and from itself in 2011 alone. Outside of these securities, the government also owns another 5 trillion of their own debt. The total "debt", or total amount of bills/notes/securities the US government issued last fiscal year was worth 65.2 trillion dollars. The US government had to pay out (redemption) 64 trillion dollars worth of bills/notes/securities as well as some US dollars. The dollar difference between issues and redemptions added another 1.2 trillion dollars to the national debt.
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