Ramsey, first off, I don't think $500 billion touches the problem. I think the number is way up in the trillions. I heard the number $30 trillion last night, but I don't remember now if that is the bad debt or the total debt package. In any event, even if that is the total amount of debt, I would be surprised if less than 10% (ie 3 trillion) is bad debt, and more is on the way as SE Asia goes down. I do not think the Japanese government can simply buy the debt at face value from the banks and give them a clean slate. If they can, they should do it NOW. There was some legislation passed in Japan back in February that stipulated that the government would buy some of the debt, but the amount, the percentage of par, and the mechanics of the buyback were all to be determined in the future. Your scenario assumes that Japan has absolutely inexhaustible coffers, and I personally have no idea how much they have. the fact that this obvious "all Japanese" solution has not been implemented seems to me to indicate that either (1) it isn't feasible, or (2) it's political suicide for the person implementing it.
Second, even if they could "buy" their way out of the bad-debt banking sector problem, that doesn't stop the problem of the sliding economy. The economy is in decline because Japan has an aging population that is not composed anymore of young consumers. GNP and GDP have been in decline for years now. Major Japanese manufacturers have left Japan in droves due to (1) the pressure of American and European governments demanding that the Japanese build plants on their soil, and (2) the flight of those very manufacturers to countries with much lower labor costs. And as long as the economy is in decline, the yen is going to lose value, and as it does, the whole SE Asian economic problem worsens, and that in turn worsens the situation in Japan. It is now a very vicious cycle feeding on itself.
I think your solution is in effect exactly what the Japanese themselves are saying, ie basically, there is no real economic problem. I assure you that there is. And you can watch the people taking their yen out of Japan and infer from that that a lot of people in Japan think there is too.
jess. |
