Japan Risks Recession With Coming Tax Increases.
While economists worry that history is about to repeat itself, government officials say the country's huge debts leave it little choice. Japan has by far the worst government-debt problem in the industrialized world. Debt outstanding now amounts to 169% of gross domestic product, and has risen every year since 1991, when it was 65%, according to the Organization for Economic Cooperation and Development. That compares with 65% of GDP for the U.S. now and a 78% average for the euro area, both lower than a decade ago.
Japan's problem resulted from ballooning public spending and falling tax revenues, as the government tried to stimulate the economy out of its 1990s doldrums. Japan now has a primary deficit -- the gap between tax collections and the national budget -- of 7% of GDP.
The new tax increases are the government's attempt to get a grip on the problem. A series of complex pension and social-security contribution increases has begun this year. Heavier tax increases are expected to pass Japan's Parliament in the next few weeks. This legislation will abolish part of a 1999 special income-tax reduction starting in 2006, which economists say will mean 180,000 yen, or about $1,800, more to pay for a four-person household with an income of 10 million yen, or about $98,000. A similar measure is planned on top of that for 2007.
Japan is unlikely to get out of its debt bind so easily. For a start, its problem is much worse than that faced by the U.S. Japan's ratio of debt outstanding to GDP is already more than twice that of the U.S. at its 1993 peak, which was 75%. In addition to the primary deficit, Japan also has to pay interest on the money it is already borrowing. So, in spite of the tax increases, Japan's ratio will continue climbing to about 175% by the end of 2006, forecasts Brian Coulton, a senior director of Fitch Ratings' sovereign group.
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And people are rushing to buy the YEN?!
The US is bankrupt
Japan is Bankrupt
Europe is bankrupt
I have not seen the figures but I hazard a guess the UK is bankrupt as well
In the meantime most countries act as if there is some semblance of chance "to grow our way out of the debt".
The US$ is falling because at the moment we are increasing our debt and sucking up more of the worlds savings faster than anyone else.
Is any fiat currency any good?
When does the entire slate get wiped clean?
There is the case for gold, right there in a nutshell.
Mish. |
