CEBR predicts 2011 to be the year of financial crisis in Japan; yea, with 200% debt to GDP, its surprising it hasn't happened already

I don't know how Japan has staved off the traders until now.  Debt is 200% of GDP.  Thinking of it another way, what percentage of GDP can Japan capture at the federal level in taxes?  Right now it is less than 30% of GDP.  Their debt is over seven times the amount that they currently take in through revenues.  Think of pulling down a 700K mortgage on a 100K after tax income. The Centre for Economic and Business Research is predicting a major financial crisis in Japan.  Its possible if you have ultra-low interest rates like Japan has, but if the rates go up, it will quickly eat up all of Japan's disposable income.  I think many of us are surprised that the Japan crisis has not already happened. 

Get ready for austerity on steroids.  But don't worry, there won't be any riots.  Japan is probably the only country where I never felt unsafe.  Via CEBR:
Japanese debt is now 200% of GDP and if it grows will need foreign financing which may be difficult to achieve. It is likely that the government will have to embark on fiscal retrenchment. Meanwhile, growth in the main Asian export markets will slow and the aging population will force the government to raise the retirement ageagain, this time to 75!

Comments

  1. What is the current retirement age in Japan?

    ReplyDelete
  2. Japan the effective age of retirement is close to 70 for men despite an official retirement age of 60.

    http://www.oecd.org/dataoecd/3/1/39371913.xls

    ReplyDelete

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