Which country has the biggest government debt-t0-GDP ratio in the world?
Which country went into recession two decades ago, and has never really emerged?
Which country’s leader has signalled he intends to print money, QE to infinity, to monetise that debt?
The answer to all of these questions is not Greece, Spain or Italy. Nor is it the U.S.
With interest rates at zero and government debt more than double its GDP—and rising—and an aging population who have virtually denuded their savings in patriotically buying govt bonds, it has little hope of ever reducing that debt honestly, and no hope at all if interest rates ever rise.
Japan is the world champions at kicking the can down the road—zero interest rates and piling up govt debt for two decades in a desperate but vain attempt to create the “stimulus” theorists say should have resulted in prosperity—consuming capital and chewing up the pool of real savings like a shark at a city beach—producing only more debt, more “deflation,” falling wages, falling production, falling demand, and two decades of stagnation.
And over the weekend, the Japanese election gave victory to the opposition Liberal Democratic Party, whose leader Shinzo Abe has for months been saying he will engage in quantitative easing beyond even the dreams of Bernard Hickey, printing paper money to monetise the debt and beyond—enough to turn “deflation” into raging inflation, and Japanese paper and government bonds into toilet paper.
‘He’s also on record as saying:
“he went into politics to help Japan ‘escape the postwar regime" and throw off the shackles of wartime guilt. In its place he has talked of creating a "beautiful Japan" defended by a strong military and guided by a new sense of national pride.
to change the constitution to allow Japan to "have a proper military and defend its own territory, including every inch of Japan's sacred land and sea - including the disputed Senkaku or Diaoyu Islands”… Mr Abe belongs to that part of Japanese society that does not really believe Japan's wartime aggression against China and South East Asia was a crime.
The world is carefully poised for catastrophe. Something profoundly bad is going to happen somewhere to set it off.
Will the catalyst be Japan?