Ladies and Gentlemen,
1. How do you explain Japan? They've run huge deficits, and government debt is 230% of GDP. For comparison ours is a little below 100%, netting out government debt owed to the Fed. Despite the deficits and debt, Japan historically has suffered from deflation. This is honestly a question, I'm not trying to make a point. I don't like debt either and worry whether at some point the government will figuratively crank up the printing presses and inflate itself out of its mess.
2. Also, how do you explain the massive amount of fraud associated with the Covid spending bills? Do you want to repeat it? Everybody and his dog applied for loans they didn't need that the government forgave. If people would just use common sense like masks, social distancing, wash your hands, stay home if you're sick unless you test negative, etc., we wouldn't have lockdowns, so wouldn't need as much government support for the unemployed and businesses. Unfortunately the Lockdown Lovers refuse to take these simple steps.
Originally Posted by Tiny
Ok tiny, I'll try to get back on track here with a few comments. You can expect the frauds and poseurs like Mucus McLame to punctuate our intelligent conversation with semi-literate posts that serve no useful purpose other than to underscore the vast chasm between their phony claims of academic pedigree and their appalling ignorance with respect to every topic under discussion.
1. Regarding Japan, it was one of the first major industrial countries to embark on a course of massive fiscal and monetary stimulus starting in the early 1990s following the collapse of the real estate bubble. Japan was the first to experience large-scale QE and negative interest rates. I've not been able to wrap my brain around the latter. Once interest rates fall to zero or less, you might as well toss traditional rules of prudence to the winds. Government debt is no longer a burden since investors are PAYING to hold it, instead of demanding a real rate of return. (Of course, if deflation - defined as falling prices - is severe enough, investors can still earn a real rate of return despite negative interest yields, but I digress.)
Your question seems to be - how did Japan get away with racking up twice the debt/GDP ratio we have without seriously impairing its international creditworthiness or unleashing runaway inflation? One reason has to do with the country's chronic trade and BoP surpluses. They suck in liquidity and help finance its domestic spending sprees. (Thirty years ago, everyone complained about the need for Japan to reduce its massive trade surpluses - today it's China.) By contrast, the US has run huge trade deficits (rather than surpluses) for decades. As for inflation, not only has Japan avoided a major outburst, it's proven very difficult for the Bank of Japan even to raise the pace of inflation significantly.
For more answers, I would suggest doing a little research on what Milton Friedman and Paul Krugman had to say about Japan's QE efforts. I know Friedman wrote about it before he died in 2006. Krugman did a paper back in 1998 analyzing it through a Keynesian IS-LM "liquidity trap" framework. I hesitate to recommend it since Krugman is an idiot and he has been bragging about that paper ever since it was published 22 years ago, but it might still offer a few useful insights:
https://www.brookings.edu/wp-content...uez_rogoff.pdf
Besides the differences in our economic models, there are important cultural and banking differences between the US and Japan which affect any comparisons between their experience and ours. For instance, when Japan's real estate bubble burst in the early 1990s, it took years for the major Japanese banks and other lenders to write down their impaired loans to reflect market reality. They avoided this in part because they were supported by the keiretsu system of interlocking bank-corporate relationships. In the US, we had the opposite problem during the 2008/09 Great Recession. Because of our strict mark-to-market GAAP rules and mentality, our banks were way too quick to write down stricken mortgage-backed assets on their books. (Assets held in the trading inventory rather than the investment account were supposed to be repriced DAILY.) The economic recovery only started after those mark-to-market rules were suspended in Q2 2009.
2. The fact that fraud has run rampant in many of the CARES Act pandemic relief programs was entirely predictable. There are always bad actors out there ready to game the system. You know, dishonest liars like Mucus McLame. In an emergency like the covid shutdown where you need to get money out in a hurry to where it is urgently needed, you can't spend weeks drafting foolproof anti-fraud rules. You have to learn as you go. Rules for the PPP program were changed several times after it was rolled out last April. Because the loans are forgiven if a borrower follows the rules, Mark Cuban called PPP loans the best deal ever invented for small businesses. A lot of stories came out last week about how prison inmates, gang members and other unqualified applicants in California have stolen billions of dollars from the CARES Act unemployment assistance program. I don't think many other states outside of CA, IL and NY experienced such a high level of fraud. Red states administered their portions of the program more carefully and responsibly than blue states that are governed by incompetent dim-retards. No surprise there.
