AlabamaSoldier basically, the video is saying that in the future investors will be less and less willing to borrow money to them because they can't afford to pay them back as their spending much more than they're earning. So it's a spiral.
@@leikfroakies LOL... how do you compare the current situation to 80s... what was the interest rate set by the Bank of Japan in 80s?. It was from 4 to 8 %. Also, after 1985, Japan experienced enormous capital inflow from western countries after the 1985 dollar crash (Plaza Accord). Now, the table's turned, the current interest rate set by the BOJ is -0.1%. Would you buy their government bonds at that rate?. You don't get anything back ~. So the Japanese government decided to buy their own bonds by printing money because no foreigners are insane enough to buy them. This is why Japan has not recovered from the 1997 Asian Crisis, the government just kept buying up every asset and killing free market, facing liquidity issue. The end is near for Japan, if the rates start to pick up globally, Japan will follow too. Then we will see the Japanese government declare a default on their debt.
They created new bubbles to pay for losses on previous bubbles. Like opening new credit cards to pay the minimum monthly payment on already maxed out credit cards.
Nacho Miranda This is precisely the result of our system controlled by the banks and their slaves (our governments), they made sure it would be very difficult for us to understand these things, otherwise we would have burned all banks by now...
***** not really, i got 129 on the last check, not the internet crappy ones. But im losing power of attention and retaining information. Bad sleeping i guess.
+Nacho Miranda It started off very simple but got complicated FAST. I got lost around the 2:20 mark....the terminology/concepts just kinda got dumped on you after that point.
No it's not. It's not meant to be entertaining; it's meant to be informative, so to do that he used a music/sound that highlight the theme of the problem: DEBTS!
I want to know how Japan managed to get so much debt, it had been one of the strongest economies for 50 years, their defense spending is miniscule and Japan is still a huge exporter of electronics. Why didn't they just raise taxes to keep deficit under control?
+Kenpachi Zaraki They did, and they still are raising the taxes. For example, the consumption tax was just 3% prior to 1997 (and even that was only introduced in 1979), and is now 8%, with a scheduled increase to 10% in 2017. Personal income taxes vary from 5% to 40%, with additional fixed amounts (absurdly progressive taxation). The main problem is that increasing taxes hardly ever manages to raise money for the budget, especially in the long run - even with Japan's relatively mild taxation, compared to, say, Europe, this effect is very pronounced. Basically, industries tend to move to lower-taxed regions or find new ways to evade taxes, people tend to limit their income and spending (both legally and illegally), and in the end, while you added more burden on the people, you rarely raise significantly more money. At the same time, the population as a whole is getting older, putting more and more strain on the overextended welfare system (and, actually, the defence spending is also rising). It doesn't help that apparently, most of the wives only do part-time work (or no work at all), effectively robbing the whole economy of something around a quarter of total potential value, which isn't exactly negligible. Again, that's what you get for bad tax policy - people get to keep more money if they work less, and they also get a lot more free time - a win-win for the common guy. Japan is a great example of very poor incentives over the past half a century - many economists were signalling the warning bells long before the problem got entirely out of hand, but the advocates of "increased government spending helps the economy" won out. And of course, this is still a very shallow look at the whole problem - I suspect there's many layers and many bad calls over the years. But the main problem is still that socialism simply doesn't work. If you look at the prominent socialist countries in the world, almost all run on a massive debt and print money like crazy, while all the services they provide are very subpar and expensive (after all, that's why such services are rarely voluntary :)). It used to be that you saved up for your retirement, putting money aside - saving on interest, and having the retirement you paid for. Now, the current earners pay for the current retirees - and usually with plans that assume huge population growth, that simply doesn't exist in reality - and Japan is quite on the bottom of the leaderboards of population growth to begin with.
+Luaan wait... Japan is socialist? I never knew... Or maybe our conceptions of socialism are very, very different. Mine is state planned economy, as opposed to market economy (do not confuse with free market). This comes from Denmark's PM "Denmark is far from a socialist planned economy. Denmark is a market economy". Maybe, what you're referring to as socialism is welfare-ism? Keynesianism... running economies toward collapse since the 1930's.
+Kenpachi Zaraki Japan got so much debt because investors don't think it is actually going to default...thus they are willing to give more money to Japan. The maker of this video happens to think he just knows more about economics than everyone who is holding Japanese debt. Which is doubtful.
+Kenpachi Zaraki Japan is still a cash based economy this allows businesses to lie about income and government spending is quite large I think in japan there is a joke about how every river has a concrete riverbed. Let us not forget that the working population has been declining meaning more and more money is diverted to senior benefits and healthcare which was already generous as is. Combined with japan being the country where people are living to 100+ this strain on benefits is a big part of their spending. Now with seniors being such a large part of the electorate they can't possibly pass social security reform such reform should have been passed in the 80's. Japan will collapse 2050-2070 by my guess This will cause massive shock to the Asian and world economy as they will cause South Korea to collapse as they to face a demographic crisis. With the collapse of South Korea this will affect China which will affect us. At best this will lead to a major recession or depression for us depending if china falls. www.acting-man.com/blog/media/2013/05/Japanese-government-expenditures.jpg www.acting-man.com/?p=23599
+Thauã Aguirre there not socalist, the previous post is just trying to blame socalism for the problmes of a nation, whos suffering from a lot more also socalism dosnt exist anymore. when people say "Socailsim" they usally are refering to socail demoracy, witch is bascualy, a free market, funding good socail programs, taht feed back into the free market by reducting buiness and personal costs, by buying in bulk, and using the economies of scale
I feel like governments should be prohibited from spending more than they collect - that doesn't make much sense to me. It might be good in the short run but definitely not in the long run.
Ronald de Rooij wait but that treaty is older than me, how come we already had a sovereign debt crisis here then? Every government has been spending more than they collect
Ronald de Rooij If by exactly you mean not remotely... The treaty defined the degrees of debt allowed. It's actually a good thing to maintain some debt in a lot of cases.
Other parts of the video could use some unpacking of some of the terminology/steps 3:15 "If central banks tries to grow tax revenue, investors sell their bonds to account for inflation. This pushes up average debt costs" SO many skipped steps. This part could use better explanation.
Ironically, manga and anime aren't even mainstream in Japan. They also don't get much money from international fans, since most of those read scanlations online or watch anime for free. Happily ever not-getting-paid-for-your-work!
Not true. Reading manga and watching anime is perfectly normal in Japan. Though most adults it's not shows like Fullmetal Alchemist and Death Note, but rather more down to earth stories that don't gain much popularity in the west.
Seph Not always possible, unfortunately. In some countries, there is no legal way of acquiring such things, or there are no local or legal translations. Unless said people go out of their way to buy the Japanese versions-which they may not even understand-it is impossible for some to read and partake in anime and/or manga. People should try to support the creators though. Should.
Japan's debt is from the people. They can just print yen to pay for it, but the value of the money goes down. The low interest rate is also the reason why Japan has few problems. Greece's bonds are held by foreign countries and the currency is shared. So when they run out of money, they will have problems.
Exactly I just chimed in in the other post. Greece and US Sovereigned Bond by nature is very unstable for example these days central banks are dumping US Treasury in order to inject and stabilize their own currency. Result is toughening export from US and 8% high inflation. This video does not cover the bond ownership and Japan decades yields control policies at all
Kind of misleading .. Japan's central bank has reduced interest rates by repurchasing a lot of its own debt. It 'owes' that money to itself. So it kind of cancels out...
Jason Adrian True, but when the need to shrink the money supply comes; who is going to be willing to buy IOUs from the central bank. the moment the central bank announces that it's selling IOUs the market for them (IOUs) crashes.
Exactly, the banks would need to be bailed out, but that seems problematic, considering Japan doesn't seem to have the big reserves the U.S. has to maintain inflation. I mean, it wouldn't surprise me if Japanese people start having to carry around big wheelbarrows of money to buy a loaf of bread :D Of course, that's just a bit of an exaggeration
I was wondering the same thing - the central bank is printing money and so all it does is raise inflation. It basically equates to the Japanese govt. printing money to pay interest and other expenses, instead of borrowing it. (This is just my understanding though)
The inflation targeting strikes me as a bit misguided. Monetary policy seems like an inappropriate tool to combat Japan's problems, namely population stagnation. Still, if it's IOUs between government entities, I don't see the danger.
Japanese Interest rate is now negative. Hence they make money by lending. Regulation forces Institutional Investors to buy bonds despite the negative return. Japan doesn't have a debt problem since that 'interest rate tray" in the video is now a source of income and not an expense due to negative interest rates.
The problem is "regulation forces institutional investors to" effectively donate to the government. Means there's no fiscal incentive to invest so people will do other things with their money
It's interesting to see how debt works through the eyes of a teenager :D , real life though... nothing of the sort. The video misses any economy growth and the fact that Japan doesn't have a trade deficit, but a trade surplus... actually it have the 4th biggest trade surplus in the world after China, Germany and Saudi Arabia. What the authors of the video miss, or more likely don't know, is that default doesn't come as a function of too much borrowing, but when you're unable to pay due to diminishing returns from government investment. Imagine the government needs a new bridge that connects two provinces. The bridge is projected to increase the economy and therefore, the revenue by 5%. The government decides to borrow the money for the bridge on an interest of 2%. Everything is nice and dandy, but building the bridge takes far too long and during that time Pear Inc. invents flying cars. The new car quickly picks up and most people commute between provinces in flying cars. The bridge gets built eventually, but due to the new transportation method instead of generating 5% increase in revenue it only generates 1.5%. Now the government has to pay for the bridge and the interest and doesn't get the needed revenue from the private sector to finance its debt. Now that's what happened in Greece and pretty much any country that ever defaulted. Japan and the USA are so far off from this kind of thing that it's even funny to think about it. In the words of Dick Cheney - "deficits don't matter". Now stop spreading misinformation on the Internet and find a better place for your money, maybe buy some government bonds or whatnot.
+Daniel Tinkov The big issue with Japan though is their GDP is more likely to shrink then it is to grow. With so much of the population retiring and so few new workers, it will take a lot of economic growth just to maintain their current GDP level. And the amount of economic increases needed to maintain the economy is only going to get higher.
GhostInTheShell29 as long as the GDP shrink doesn't outpace the population decline everything's fine. Imagine that Japan have GDP of 100 and population of 80. The population shrinks to 60, but the economy only to 80. The result is that the GDP per capita increased from 1.25 to 1.33.
www.theguardian.com/world/2016/nov/15/japan-fixes-vast-fukuoka-city-sinkhole-repaired-two-days here. imagine how much they paid just to repair that for 2 days knowing how big their dept is already.
@@Azhucabomb it's compounding interest so the interest rate stays the same but your interest is added as debt. Basically you have 100 dollars debt and for interest rate 5 percent you pay 5 dollars interest the next year you rate stays the same but it's from 105 dollars so it's more than 5 dollars of interest the next year
Yes! Finally some sanity in the sea of ignorant comments. Doesn't ANYONE realise Japan is a monetary sovereign and CANNOT GO INSOLVENT? (also long as the debt is in it's own currency) And thankfully, they are smart enough to have debt only in yen, instead of foreign debt. People have been moaning about the "crisis" of Japan for freaking 30 years now. Japan is NOT in a crisis! If anything the recent sales tax hike is going to contract the economy, which is where it REALLY matters.
Adam Kennedy SirRaven Depending upon what Japan does with it's own currency, Japan can have all three (or even four scenarios): 1. It can go insolvent by not printing enough causing it to default (highly unlikely) 2. Experience uncontrolled rapid maybe even uncontrolled inflation (still v. unlikely if only due to history and financial culture) by printing enough to fulfill both interest and reduce total debt amounts. 3.Degrading value of security/bonds in international market ( situation that currently exists and most likely scenario). Will keep happening as risk of default keeps steadily increasing hence demanding higher interest rates in international markets. However this scenario will have the least impact as most of Japan's debt is owned by Japanese investors and due to deflation/low inflation making low interest rates viable. This situation can likely last decades before coming to critical levels. And in that much time various reforms can stabilize the situation: 1. Decreased spending on benefits: Either through reform or due to decrease in elderly population, simply because the highest population section is the post WW2 pop. likely to die off in significant numbers in this decade. 2. Boom in GDP due to emerging service/industry line growth. (perhaps unlikely for japan unless robotics experiences a boom, a field in which they have significant competitive advantage.) 3. Immigration/Corporate culture reform: Two avenues which clearly exist for Japan which may offer significant increase in GDP due to lowering of costs/increasing efficiency. However less likely as it faces societal pressures which are v. difficult to change.
Adam, pure solvency is irrelevant, hyperinflation is though. And Raven, the whole point of the video is to show that Japan needs foreign inflows to make ends meet. They're a country with an aging and declining population that has very little natural resources. If their money is worthless, because they keep printing it, they'll have nothing... it'll be a disaster.
Mike S Remember though, hyperinflation is caused under extreme circumstances (Germany - post WW1 and Zimbabwe) The export market would have to collapse completely and depend purely on imports. I advise reading the blog link posted below bilbo.economicoutlook.net/blog/?p=3773
Adam Kennedy What currency must they pay the debt back in? I'm not sure of the answer, but lets say Japan's debt payment being 200% of GDP must be paid back in the equivalent amount in $US. Since the dollar is the world reserve currency I would imagine this is very likely. For simplicity lets say this is $10 trillion USD or $1,000 trillion Yen (exchange rate is about 1USD:120 Yen). If Japan begins printing money to pay back their debt, inflation will rise due to lowering the amount of each Yen even further. Lets say Japan manages to print so much that they lower the Yen value by 50%. That same $10 trillion USD is now 2,000 trillion Yen. So, attempting to pay back the money in inflation will not work long term and could lead to hyperinflation. I'll take a default over a hyper-inflationary event.
Money is more distributed among the people in Japan and Japanese banks hold their money. More than 80% of Japanese bond is held by pension funds and banks so I can say the government debt is Japanese people's savings. Japan does not default as far as they do not withdraw all their money very sudden.
The real problem is that Japan's fertility rate is lower than replacement level. As a result Japan's population is shrinking, the number of workers is decreasing, the economy is shrinking, and the elderly are growing as a segment of the population.
Honestly even if Japan didn't have the aging population it did, it would still be in serious trouble. This fact just speeds up the inevitable cancer of uncontrolled public spending.
Import more workers or run current account deficits...Japan is Monetarily Sovereign and has complete control over its sovereign finances and all of the laws and regulations related to its finances (fiscal/monetary policy)...
Bob Breckur Funny, Japan is a pretty small country with not as much testing land as China, yet they stand a chance. A pretty small one, but a chance nonetheless.
***** and 95% in Japan. No, the US is not in a better position and will end up like Greece. One of the few reason it has not done so sooner is because the US is a lot bigger.
***** Public debt is 17 trillion and personal debt is 14 trillion but there is only 4 trillion fed notes world wide. What are banks lending? Who is buying 17 trillion dollars worth of bonds when there is only 4 trillions in hard currency? What particular coinage act made the electronic money legal tender?
***** Most of the money for financing was created out of thin air by banks. This means that when a person borrows money to buy a house, the bank simply creates the money there and then with a few keystrokes. The general public believes that the money is originating from savings but that is simply not true.
se7ensnakes There is a legal reserve money that banks must possess. From the money they have lent, they are obliged by law to have, say 10% in the vault. When a country prints money they already account for that.
I'm starting a financial literacy channel. I could use some of your animation styles. I manage a local Branch of a big four bank here in Australia. I am not good at graphics and only ok at post production. If you are good at either I would love to know more about you. PM me if you're interested jmdyason@gmail.com
Addogram let me know if you have any questions! Amazing animations! I'm sure if you post your talents in /r/jobs4bitcoins on reddit you'd receive some good responses (and maybe a job!) I've been doing minor graphic design this way and I wouldn't look back. Bitcoin. Is the freaking best. Get paid from anywhere in the world and then cash out to your local currency (if desired!) Through your regular setup
+Axel Rosalewski Take a look at the US -> printing money -> going to war to bring "democracy" to countries which are thinking about not using US-Dollars as their trading currency for oil (as the US heavily depends on the fact that the world is trading in USD or at least was, EUR and other currencies are getting heavier use nowadays) -> Hoping that other countries belief in you or force them to say that they belief... (the US would be "game over" or more precisely bankrupt for quite some time now...) -> the US indirectly declared their bankruptcy in 1971 (long story short: they refused to exchange USD to gold which was a clear sign of bankruptcy at that time) nothing happened -> in 2011 the US was bankrupt for some days before they found new debt holders (or creditors ? I'm not a native speaker, so I'm not quite sure which one is the financial English version...) -> in 2013 the US had to "shut down"... as the budget was extremely tight (other countries would have had to declare bankruptcy the US hat other ways, which included 800,000 state employees which were "given" unpaid holidays -> i could make this list way bigger as there were "almost bankruptcies" before 1971 and also way more in recent times... =>> the way the US solves this problem: they just increase the debt limit
+Michael Amann you know that saddam euro theroy was disproven right? the wiki-leak documets show that iraq was not some master plan to get oil, it was really a lot simpler and sadder. wiki leak documest show that geroge bush was planning hte ivasion since he first got into office, becase he wanted to remove saddam hussien, to improve his fathers legacy. also i dont think you undersnatd what the debt limit is. or US finaces at all
+anamarvelo i have never said it was to get oil (allthough interestinly countries with oil always need the US type of democracy...) Husseins decision to change to EUR was the trigger.... Also i understand the US debt limit... it is a artificial limit, but it represents the willingness of countries to lend the US money quite well...
first of all, unlike USA central bank - Federal Reserve, the central bank is belong to government, secondly it is domestic debt, thirdly debted moeny, no way you are reducing debt without affecting money circulation
Why's Japan's Debt a problem, but the US's is a crisis? To me it looks quite reverse. A lot of the debt the US gvmt owes is to itself(borrowing against social security). Which sucks, but it's a way easier problem to handle than Japan's Debt. Especially given that we have a much larger, more robust, and less stagnant economy. The video also casually asserts the debt to be around 80k per capita....but never addresses whether those investors are capable of paying it down themselves(eating the losses). Which is precisely because they *are* capable of doing that, and Cato Institute's not so subtle biases(agendas) are showing through. Video is only entertaining whether the government or the broader population should make a sacrifice for the good of the country. Not whether the investors(who benefit the most from all of that borrowing in the first place, since it's typically used to subsidize and grow industries they own or invest in) should be the ones to bite the bullet. The investors are also the ones who stand to lose the least from such a sacrifice, since they have distributed assets beyond just the bonds. None of them are going to be destitute from such a loss. But the government would collapse, and the population would be left SOL if either were required to personally take the hit.
Surely when the government defaults, that's precisely what happens? And after that, who wants to invest? and those that do will surely charge higher rates because of increased perceived risk?
Teppishc Smith Of course it's not *good* in any of the circumstances. The point was to briefly highlight deliberate oversights and simplifications in the video. Situation isn't as straight forward as their deceptive metaphors frame it, nor is it such a foregone conclusion that everyone's simply fucked.
Michael Van Wagenen I tried, but the populace saw fit to go a different direction with their votes. Only so much an individual or small group of people can do, ya know?
Bank of Japan is the main holder of the Japanese debt, along with other national investors, to about 90%. In the case of the US, a tremendous part is held by foreign investors (~30%). Social Security funds represent a way smaller part.
When Japan lost the war in 1945 the Allies power inflicted a debt system on them: Private Commercial Banks create money out of thin air but the government has to borrow it. The people are not educated fully on the problem with fractional reserve lending and so the problem continues.
Japan is a quadrillion yens in debt. Russia is no exception as they are also captured. The USA's banks control every aspect of society starting with Woodrow Wilson Opened who opened hells gates. Today the Federal Reserve's policy led to "investors euphoria" and Liars loans and to a bust which cause many foreclosures. The Family median networth dropped 40% to $77,300 in 2010 from $126,400 in 2007, the Fed said in its Survey of Consumer Finances which is released every three years. Presently there are 19 million homes and 8 million homeless. Tomorrow if your children decide they want to own a home they are going to labor most of their lives to pay a 30 year mortgage on a home that the bank got for free. The funny thing is that the mainstream media that are reporting these are actually owned by these SUPER ENTITIES. According to The Swiss Federal Institute (SFI) in Zurich released a study entitled “The Network of Global Corporate Control” that proves a small group have global economic control: www.sg.ethz.ch/media/medialibrary/2013/12/james_glatteth-2007-02.pdf The funny thing is that most of the mainstream media that are reporting this are actually owned by these SUPER ENTITIES. CNBC www.cnbc.com/id/45018010 A core of just 147 firms - many of them financial companies - control 40 percent of the wealth of 43,060 transnational corporations. A broader core of 737 control 80 percent, according to the theorists. HUFFINGPOST www.huffingtonpost.ca/2011/10/24/super-entity-147-global-economy-swiss-researchers_n_1028690.html A Swiss study appears to have uncovered what anti-capitalist activists have been claiming for years -- that the global economy is controlled by a small group of deeply interconnected entities. NEW SCIENTIST www.newscientist.com/article/mg21228354.500-revealed--the-capitalist-network-that-runs-the-world.html#.UxF0CJUX7zs "AS PROTESTS against financial power sweep the world this week, science may have confirmed the protesters' worst fears. An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy." FORBES www.forbes.com/sites/bruceupbin/2011/10/22/the-147-companies-that-control-everything/ Three systems theorists at the Swiss Federal Institute of Technology in Zurich have taken a database listing 37 million companies and investors worldwide and analyzed all 43,060 transnational corporations and share ownerships linking them. They built a model of who owns what and what their revenues are and mapped the whole edifice of economic power.
***** You cannot bet on something that has already occurred, unless you find people that do not see the inherent problem. However, If you believe that Iam here to happily dwell on the failure of the American experiment you are sadly mistaken. i have lived in America for a rather long time and I can readily tell you that there has been a revolutionary change for the worse. I believe that the USA is in capture. Any significant law is the result of lobbyist. That local government as well as the federal government is fully engulfed in corruption. That the wars that we are engaged in is as Smedley Butler described, a racket. We are exporting more death machines by far more than any country in the world: www.sipri.org/research/armaments/production/Top100. Our money is manipulated by private owners of banks in secret conference rooms. These Banks perpetuate business cycles using counterfeit money. And the job market is dismal. We are not leaving a nice situation for the people of the future. I wish I could be as optimistic as you.
Are you kidding me? You missed out on a lot of things. First machine flight, radio, television, ford assembly line, Thomas Edison with his variety of patents including the light bulb. On the side of Politics we had great presidents like George Washington, Andrew Jackson, Abraham Lincoln. Yet today we are dominated by a shadow government that is the same for nearly every country.the world. Our jobs are migrating to japan and many people here are unemployed. Many people lost their homes in the last asset bubble, and the ownership of major corporations appear to be monopolized. What more we are leading in an escalating race to build the most destrutive weapons in the world: Rail guns, scramjet hypersonic thermonuclear missiles. i wish we get a president of the vision that JFK had with space exploration.
This seems to complete ignore how this really works. There is literally zero chance of a government defaulting on debt it owes in a currency it controls. As long as bonds are denominated in Yen, they always have the option of monetizing their debts ("printing" enough money to pay bondholders.) This has consequences, of course: declining exchange rate and domestic inflation. But if it's true that Japan has been stuck in a deflation spiral, then domestic inflation is desirable. In a deflationary environment, people will put off a purchase because it will be cheaper later...bad for the economy. Higher inflation also increases nominal revenues, making payments on existing debt less onerous. Similarly, if your economy is struggling, a declining exchange rate is also desirable, since it makes your exports more competitive. All in all, this is a win-win for Japan. Note that if the central bank is targeting a higher inflation level than currently exists, its method of achieving target inflation is to lower interest rates, including those on government bonds. If there isn't enough investor interest to achieve its target, it can use open market operations to buy bonds directly. Either way, interest rates don't go up unless inflation exceeds the target, which this video tells me is a long ways off. If the point of the video is that you should avoid buying Japanese government bonds, the point still holds. The effect on an investor's pocketbook is the same whether it's a haircut (partial default, Greek-style) or a declining exchange rate. But if it's trying to convince me that Japan is on an economic precipice because of high government debt...that's just not the case.
+Neil Carey You know, "putting off a purchase because it will be cheaper later" used to be known as "saving". It included the awesome capability of being able to fund your own retirement comfortably :) Don't let yourself be fooled - the ones that profit from inflation are the government and the ones closest to the "printed" money (banks, subsidy receivers, ...). Everyone else suffers. It's not a coincidence that governments have always found ideas of people like Keynes and his predecessors very enticing - it gives them more power, at the expense of the people. Have you ever seen the computer market? It's one of the most deflationary industries of modern times. And yet, it seems like you do in fact own a computer. How is that possible when you know that you can get a better computer cheaper the next year? How come everyone around you _also_ has a computer, as well as a smart phone... why not just buy them later, when they're going to be cheaper?
+Luaan I am sorry but you should not be fooled, Luaan. Mr Carey seems to really understand this topic and by your comment I can tell that you have not really expertise when it comes to macroeconomics. The concept Neil was talking about is not "saving" and in no way similar. Saving refers to financing and his point was about consumer price expectations. Further, you cannot compare decreasing microeconomic prices to macroeconomic inflation. I can suggest you some really good economic books in case you want to educate yourself on this topic. Btw, I agree with you that inflation is bad for most people, most of the times.
+Loki Ronin Is inflation bad for most people most of the time? I would posit that high inflation is good for debtors, which in most advanced economies is a sadly large proportion of people. We should all be as lucky as the baby boomers who saw high inflation just after they got their first mortgages, only to see it drop substantially once they entered the high savings part of their lives.
I guess the height of tray is level of interest, and area of tray is amount of money borrowed, so if you borrowed 100$ at 5% interest you will have to return 5$, but if you borrow 200$ at the same interes you will have to return 10$. This is how I understand this, anyone else have any idea?
It's confusing because it's actually wrong. When you hear talk of foreign investors coming over and investing in your country without any talk of where they might exchange their currency for your local currency, it is then that you know that the person speaking knows very little about what is actually going on. I suggest you look up some names to get a better idea: Stephanie Kelton, Warren Mosler, Randall Wray, Michael Hudson. They have talks on TH-cam.
***** Can you explain why? In the classes I've taken (which is only a few) relating to economics, any bank note/Yen that is created that is printed without the value created in the economy to back it up causes inflation. In other words, if the markets of japan only create, let's say, one million Yen worth of goods/services, then the value of one Yen would go down if 1.1 million Yen was printed. Is that not true?
You are assuming that if Japan can create one million Yen worth of goods/services...that the demand for those goods and services stay the same. Demand is the other moving factor used to determine price and ultimately inflation.
The proportion of foreign investors in Japan is 8% and around 50% of the holders are government-related organizations such as JP, BOJ, and GPIF who are very unlikely to sell their bonds at anytime for systematic reasons. The rest are owned by domestic Japanese banks etc. This is an exceptional situation amongst other developed countries like US. For example, in US, more than 30% of government bonds are owned by foreign investors, most of which are Japanese and Chinese. But still I think we have to consider the possibility very carefully.
JP, GPIF do not own the bonds they hold. They are holding bonds on behalf of retirees who will increasingly be cashing out. It is not what they want to do, it is what they can do. JP & GPIF have fiduciary duty to manage the portfolio to the best interest of the owners, not to freely subsidize an over-spending government.
Most of Japan's debt is held by the Japanese people in Japanese yen, not US dollars. In the case of Japan, even if the debt is high, the government can print money to solve the problem as much as it wants. This is debt, but it is not debt. And Japan has the largest net worth in the world. While many countries, such as Argentina and Turkey, have defaulted on their debts and gone bankrupt due to ballooning debt, Japan's situation is different. The U.S. is in a similar situation to Japan.
Are you suggesting that Japan can print as much money as they want without negative consequences? And if so, why doesn't the Bank of Japan just print enough money to make all the Japanese citizens millionaires? Or better yet Trillionaires?
In my view, whilst the analysis in this video might feel convincing in some ways, it actually relies on a way of thinking that is now very much outdated. Governments of developed countries that control their own currency do not *need* investors (foreign or otherwise) to buy their debt. The vast majority (over 90%) of new Japanese government debt is now bought by the Bank of Japan (BoJ), not by investors, and the BoJ is completely insensitive to the interest rate it pays for it. The interest rate need never rise due to lack of investor confidence, because the BoJ will always offer to buy the debt at 1% or whatever they set the rate at. If necessary the BoJ will simply buy 100% of all new government debt, investors are not required. The Japanese government and the BoJ can keep doing this indefinitely. Additionally since the BoJ is part of the government, really the Japanese government owes all this money to itself. The interest on the debt collected by the BoJ simply goes back into government coffers anyway. Additionally Japan has a balance of trade that is roughly zero, it exports about the same as it imports. So overall this situation seems stable to me, Japan does have a demographic problem but that's not totally unsolvable. Of course, it's very different to how it *used* to work, but the world has changed.
Eh mate, you mind giving this another watch and tell me if all this meant that the citizen lost ~17.5% a pay check and an extra 9% on stuff like groceries? I'm a little confused on it
@@mechoilwcaman2034 I've rewatched the video and I'm not quite sure what you're asking. The video doesn't talk about a 17.5% cut in pay checks, or a 9% increase on the cost of groceries. Perhaps you could rephrase your question?
But whenever the BoJ buys, it's new money coming into circulation, right? Whereas if investors bought, it'd be already existing money. So there's a fundamental difference of who funds the dept. Wouldn't MMT (which is what I assume you're advocating) cause inflation?
The government debt owned by the government subsidiary is not real debt. The government debt is mostly owned by the Japanese central bank which is a part of the Japanese government. The interest payment directly goes to Treasury Department.
+SoldierCyfix Investors mainly. In Greece and the U.S.'s case they owe to other countries. The U.S. owes money to China, Japan, Corporations, Banks, oil exporters, social security, and other countries and Greece owes a ton of money to Germany and the EU.
In the grand scheme of things, yes. Thunny thing is, is that the majority of European countries are in debt, except for Switzerland, Norway, and a few Eastern European nations. All of them that are in debt are part of the European Union
I was just trying to point out the absurdity. when you look at the world from a realistic standpoint. all the countries being in debt to each other (all the planet in debt) is very nonsensical
+SovietTenkDestroyer That's one thing people need to be aware of. Net debt is rarely listed, only outstanding debt. So both US and Japan have much less debt as % of GDP than some sources list.
Whenever there's a debt, there's an equivalent surplus. So how come no one ever examines the fiscal surpluses underpinned by Japan's debt? Probably, because they don't know how the system really works (like the people who made this video).
A big chunk of it is in pension funds. Unless the government can confiscate the surplus it won't help them. Politically it is easier to devalue the currency.
richrdroma Yep, pensions, institutions, individuals...the debt service payments are income and revenue in the private sector, which supports consumption that drives the economy. "Devalue the currency"? The yen remains one of the world's strongest and most stable currencies.
Not forever. There's only three options to get out of a big debt like this: inflate, default or austerity. Now which of these three options is the easiest to sell to the public? In fact the selling to the public part has already happened and BOJ are already doing their best to make inflation happen.
richrdroma You forgot the best and most common way out: GDP growth. Tax revenue flows in once the economy grows, even just a bit. The US had 114% debt to GDP after WW2. All was paid down easily by higher GDP, not by any of the measures you mention. That's what Japan's stimulus is aimed at doing.
Geoff Botting Yes you are right. With austerity I basically meant spending less than they make. If they increase revenue that will be easier to do. But with Japans demographics this will be tough.
There is a trick to Japan's debt. The government borrows money from the Bank of Japan for public works projects, but the Bank of Japan borrows money from the people. The Bank of Japan borrows money from the people. Japanese people save money without spending it, so there is a lot of money in the bank. The banks have to lend out the money to pay interest, so the government spends more and more. In other words, the Japanese government is not borrowing money from abroad, but from the Japanese people. Japan also has the highest net foreign assets in the world. In fact, it is the richest country in the world.
If you really think Japan could turn into Greece...Hold your horses. IOU bond holders(Investors) in this video are actually mostly Japanese local banks->individual investors...You get the picture? This video didn't explain well enough about the importance of where the investors are from.
The Japanese people are so fortunate to have a government that actually cares about infrastructure and the public sector. Without these essential services, Japan would rapidly become a 3rd world country, with dirt roads and total anarchy. Government spending creates jobs, stabilizes the economy, and gives people something to believe in.
Negative interest rates make investors in Japan pay for security, and incentivise investment elsewhere. The Central Bank can buy the debt using QE and effectively delete the debt. This can continue ad infinitum without necessitating inflation.
So basically they used a strategy that worked only temporary for certain purposes, but they never changed their way of functionning and kept it for who knows how many years and are now completely fucked
and that's before you even look at Japans demographics. they're going off on a kamikaze mission of below replacement levels of births because the women are over educated and do not want to start families because they would lose their *independence*. There's also the high cost of living which is counter to starting families. Independent, educated women don't have children. Problem?
Justin sénéchal That might be so but in this hyper-individualized world we've created, we don't actually need each other anymore, just money, what you're saying rings hollow. I'd start a family if I could see a point, and that she wouldn't divorce me, take my kids, become a welfare queen while society eggs her on for being independent. 50% of marriages end in divorce, 80% initiated by women. #sexodus #mgtow
TOKYO (Reuters) -- Japan's net external assets hit a record amount in 2021 as the nation retained its position as the top creditor for 31 years in a row.....
+David Darling The day the US debt isn't solid is the day the world's economy literally collapses upon itself. And thus we have much worse problems; its literally an outside context problem.
But none of this has come to pass! Yes, inflation is up, but interest on the government debt hasn't changed. Japanese debt as a percentage of gdp is going down! The government is buying up government bonds on the open market with printed money and cancelling them! The debt ratio is down from 230% to 220% and will continue to go down. This is called "monetizing" the debt. It's basically printing money.
Exactly. The Japanese government is basically printing money to purchase and cancel it's own debt, this leads to inflation. It's not good because it devalues the money already in circulation, but it's better than your economy collapsing, ala Greece.
Well having some inflation after quite a time of deflation doesn't seems like so bad. Yeah, you're losing a little of adquisitive power, but not completely... Even thought, it depends on how much of the debt is paid by money printing...
Inflation is a good thing when you're the one with high debts. It's bad if people owe you money. The acquisition power for the government only changes in terms of import. If everything gets more expensive by 5%, the governments income is likely to increase by around 5% too, due to taxation, which is usually a relative and not an absolute value. Also a cheaper currency makes your own products more attractive on the international market, while making foreign products less attractive on the domestic market. It also has strong downsides but it really depends on your interests and who you are.
A lot of what's been said in this video doesn't make any sense. First of all, even though Japan's debt-to-GDP ration is the highest in the world at 229% of GDP, they are paying their debt back. This is happening continuously. It's not like investors are not getting their money back. It's just that right now, the country is accumulating more debt than what's being paid back. Plus, there doesn't appear to be any concern from investors that they won't get their money since the interest rate on a 10-year government bond is at 0% right now. Second, lowering interest rates isn't just simply another way of saying the central bank will print money. When a central bank is lowering interest rates, it's simply lowering the interest rate that banks have to pay in order to borrow from the central bank. This does require money creation, but central banks are loaning money to banks all the time whether or not they lower interest rates. Central banks are only doing some serious money creation when they're buying government debt which also known as quantitative easing. Theoretically, the central bank could just buy up all of the government's debt. Of course, if the central bank buys more and more debt, this means that inflation could become a problem. However, right now inflation is hovering around 0% despite the fact that the Bank of Japan is conducting a massive debt buying program right now so this doesn't appear to be a problem for now. Thirdly, yes, the balance of trade has been declining in Japan, but it actually has gone up recently and Japan's current account surplus has gone up as well so there is still plenty of money out there for the Japanese government to borrow despite the fact that Japan has an aging population.
Following a concept you already understand but your audience doesn't with some graphics is not necessarily going to help visualizing it. You gotta make sure every visual clue happening (size changes, arrows pointing, symbols changing place) has a clear explanation to its connection with the subject. But this video is 3 years old - so there's that. I'll check some more recent ones! Looks like this went suddenly viral or at least is being recommended to multiple people for some reason. (Money speculation is one hell of an efficient suicide method, holy crap.)
Japan is a sovereign issuer of its own currency. It is not tied to another currency or a commodity (gold). It does not borrow money it creates money. An example: Japan spends a billion dollars on services and purchasing products. It pays these individuals and companies the billion dollars. For example at the end of the year Japan taxes this billion at 20%. There is still 800 million in debt. So they sell bonds to cover the debt. Now Japan is no longer in debt until the bonds mature. Japan pays the 800 million in bonds plus interest. If according to this video theory the only way Japan can get out of debt is to tax the 800 million and then in effect these people worked and sold good to Japan for nothing. Then it is a zero sum game. In actuality the 800 million is what Japan put into its economy for it to grow. That is what Japan has in savings. The same applies to the US. Governments are not like households or businesses or local governments who do rely on tax revenue to pay its bills.
Yes, but if inflation goes up for whatever reason, investors will sell their bonds until bond prices go low enough that they get a positive real return, meaning that the government won't be able to sell new bonds to investors without bumping up the yield. The issue isn't paying down the principal, but paying off the interest rates when the debt is so large that interest payments are a substantial portion of the budget. When you are already in that situation where the government relies on low interest rates, you can't increase inflation without cutting deficit spending. If you are stuck in a deflationary economy, stocks will be undervalued because risk-free assets with a fixed yield in currency gives a higher yield. This means that companies have a much harder time raising money by issuing new equity (which would dilute the stock) and end up having to borrow instead, or cut capex. Which makes the problem worse as you've now pushed austerity and liquidity trap problems over to the private sector as well, not just government.
There is no problem because it is a domestic government bond. There is no problem because more than 90% of the debt of the Japanese government comes from the Bank of Japan and private banks in Japan. It's like borrowing from your family, so it doesn't matter if you don't return it at worst.
TL;DR: Japan has a ton of old people who aren't spending -- most aren't even working -- and like all old people, saving their money which isn't being circulated in the economy and inducing a savings glut. No income, corporate/enterprise, consumption, etc Tax, no money to run the government.
The complication is on purpose. It keeps people from getting outraged over being ripped off. Central banks basically run a Ponzi scheme and all countries that are run by them will end up crashing eventually.
The Japan debt burden argument is so stupid. They have always had a relatively high debt/GDP ratio and yet the yen is a massive safe haven and they maintain huge net international assets. Why? Unlike the US where foreigners own most of the government debt, Japanese banks own most of Japan's debt and they are loyal to their daimyo masters (aka the LDP). They wouldn't sell their JGBs even if Hiroshima got nuked again.
As at March 2016 there was USD11,463.6b in total privately held US treasury securities, USD6,287b of which was held by foreign and international holders. That's over 54%. www.fiscal.treasury.gov/fsreports/rpt/treasBulletin/b2016_3.pdf
Tyler Schmidt You just cherry-picked data. Notice how it says privately held debt US Treasury securities. That's only a fraction of the total US Treasury securities (www.fiscal.treasury.gov/fsreports/rpt/treasBulletin/current.htm). Of the $19.5 trillion dollars worth of securities issued, $5.5 trillion is to government agencies, and another $3 trillion is to the Federal Reserve. That means 44% of the total debt is held by some form of government institution and 56% by the public. Of the public debt 54% is held by foreign investors, but that's only around 30% of the total issued. So you're argument is cherry-picked at best and fallacious at worse.
I was originally referring to the "debt held by the public" which you have incidentally conflated with the "public debt" in your statement. As that stands my statement was correct, as is my point: a massive amount of US debt is held by foreign holders.
How is Japan supposed to repay its debt if it has to rebuild Tokyo every time Godzilla attacks? You can only export so much Hello Kitty merchandise and Henti porn.
Basically, the interest on the debt (1%) already equals 23% of GDP ( the money japan makes). So if the interest rate rises to the normal 4%, then japan’s interest will equal 94% of GDP, meaning Japan will have no money to spend on stuff like hospitals and fire services so they will have to borrow anything they spend, making the problem even worse.
then the interest accounts for 100% of the States anual tax revenue so they have no option to pay for schools healthcare, the military, infrastructure...
I really want to watch this... but I can't get more than 60 seconds in without going crazy from the background music. Like wtf is that?! And it keep starting and stopping, it's SUPER distracting.
whoever made this: the music is over-bearing and takes attention away from the voice over, learn to blend music. Also your music is flat throughout the video, use curves to lower the volume up and down to signal to the important parts of your video.
20 trillion in debt with no indication of slowing down, most likely increasing rate of debt acquisition. Puts the USA at #16 in debt to GDP ratio (Japan #1, Zimbabwe #2). Couple that with the fact that the current economy is almost entirely based on access to cheap capital...
Yes, the US does have a debt problem and if we're not careful, then this can happen to us as well. This is what scares me when I hear of people wanting to take on even more expenditures like free college, Healthcare, etc. I mean, they're noble goals, but they just aren't realistic right now. We have enough trouble with social security, and if we can't get that straight, then we shouldn't be starting up any more programs like it. Although, Nineveh is correct. Even with those issues, we're still no where near bankrupt. TopTech is right about the number, but I think he forgot that the $20T is overall debt, while $16T is yearly GDP. If we get our act together, we can definitely pay it off. Our current credit rating is AA+, so we get charged REALLY cheap in terms of interest. Japans is currently around A depending on who you ask. Keep in mind this is current standing. There are forecasts to take into consideration as well. Don't take this as an expert opinion though. This is just what came up in my research.
Joshua Lim if we freeze the debt by balancing our budget, we can out grow the debt in about 30 years. The US has seen its GDP grow every year since the end of the civil war, even during the great depression. all we would have to do is stop spending money we don't have. this is impossible for the dummies that live in our capital though.
Snoot Snooterton if noone spent money they dont have the entire world economy would collapse because houses require loans businessness require capital therefore business require investors investors require lawa laws require governments governments require dealing with other governments
So close all schools and hospitals, disband military and let the infrastructure crumble? If borrowing is what keeps a country alive, fed, safe and happy I'd say it's worth it -- even if you might not be able to pay back. This is different from a personal loan.
You start off with a blatantly incorrect notion. Japan will pay all of its current debt even if it never runs out of it. The only reason investors (including Japan's population) trusted Japan with such a large debt is that they have a spotless trackrecord of paying its debt back on time that stretches over 7 decades (it also helps that their economy is stable). The largest chunk of the debt Japan accrued by 2012 that is represented by the number presented in the video will be paid in 1-2 decades after the government borrowed it, with a small percentage of it stretching out farther than that. That is completely different to "never".
11 years later and Japan is still muddling along. Which suggests to me that the orthodox economics proposed are false. Japan’s debt is owned mostly as national debt, where China has pushed much of thier debt to provinces, and the EU has debt held by countries within the union and the US has debt at each tier of government (local and state and national). This has all happened at the same time that massive growth has. What’s going on? Read up on MMT and realize that the denomination of wealth must be produced as debt. Wealth=debt, it’s basic accounting, not rocket science. Double entry bookkeeping. Hyperinflation only occurs in already failed states.
This video is a fine example of how something simple can be made *extremely* confusing. The background music doesn't help either.
I actually understood Japan's debt problem and got confused after watching this video
He used like 4 different terms for raising interest. Makes you have to slow down the video a little more just to grasp it
So unfair to the creator of this video.
What the fuck did i just watch
@@icantthinkofaname8139 japan being extremely broke, i did not realize what i watched until i turned subtitles on XD
Oh my god, the music in the backgound just destroys the whole video, it's impossible to focus
absolutely true, worst music you could find for this kind of video
thought i were the only one. So fucking true.
completely agree!! Awful sounds!
!
*****
:o
Ok, I now understand nothing about Japan's budget problems.
AlabamaSoldier basically, the video is saying that in the future investors will be less and less willing to borrow money to them because they can't afford to pay them back as their spending much more than they're earning. So it's a spiral.
That's because everyone from Alabama is a dummy 😂
The problem is, Japan has had a 'debt crisis' since the 80s. Financial collapse has been projected ever since, yet nothing has ever happened
soo you don't although already watched the video OK GOODDD BoY
@@leikfroakies LOL... how do you compare the current situation to 80s... what was the interest rate set by the Bank of Japan in 80s?. It was from 4 to 8 %. Also, after 1985, Japan experienced enormous capital inflow from western countries after the 1985 dollar crash (Plaza Accord).
Now, the table's turned, the current interest rate set by the BOJ is -0.1%. Would you buy their government bonds at that rate?. You don't get anything back ~.
So the Japanese government decided to buy their own bonds by printing money because no foreigners are insane enough to buy them. This is why Japan has not recovered from the 1997 Asian Crisis, the government just kept buying up every asset and killing free market, facing liquidity issue.
The end is near for Japan, if the rates start to pick up globally, Japan will follow too. Then we will see the Japanese government declare a default on their debt.
9 years later and Japan's debt problem is still not "game over".
They created new bubbles to pay for losses on previous bubbles.
Like opening new credit cards to pay the minimum monthly payment on already maxed out credit cards.
@@SethMethCS evantually they are gonna run out of bubbles and when that happens its game over
That background music increased my Cortisol hormone level.
it amuses me that this video explains it for a 5 year old and im still having a hard time to understand
Nacho Miranda I had trouble paying attention to the video with that very annoying background music otherwise decent video
PaperBag yeah it explains in a good simple way..but still I gotta watch it another 5 times.
Nacho Miranda This is precisely the result of our system controlled by the banks and their slaves (our governments), they made sure it would be very difficult for us to understand these things, otherwise we would have burned all banks by now...
***** not really, i got 129 on the last check, not the internet crappy ones. But im losing power of attention and retaining information. Bad sleeping i guess.
+Nacho Miranda It started off very simple but got complicated FAST. I got lost around the 2:20 mark....the terminology/concepts just kinda got dumped on you after that point.
This was actually very well done, and with clear visualized information, you definitely get a thumbs up.
My hat's off to you sir. Well done.
Thank you NeoBlue :)
+NeoBlue weaboo.
+NeoBlue no it's not. It's simplistic and wrong on almost every point.
+Addogram damn japan is in a shithole
+stringduality There are more important issue's then to dislike other's interests.
That choice of music is very distracting
Thank you for saying this.
No it's not. It's not meant to be entertaining; it's meant to be informative, so to do that he used a music/sound that highlight the theme of the problem: DEBTS!
I want to know how Japan managed to get so much debt, it had been one of the strongest economies for 50 years, their defense spending is miniscule and Japan is still a huge exporter of electronics. Why didn't they just raise taxes to keep deficit under control?
+Kenpachi Zaraki They did, and they still are raising the taxes. For example, the consumption tax was just 3% prior to 1997 (and even that was only introduced in 1979), and is now 8%, with a scheduled increase to 10% in 2017. Personal income taxes vary from 5% to 40%, with additional fixed amounts (absurdly progressive taxation). The main problem is that increasing taxes hardly ever manages to raise money for the budget, especially in the long run - even with Japan's relatively mild taxation, compared to, say, Europe, this effect is very pronounced. Basically, industries tend to move to lower-taxed regions or find new ways to evade taxes, people tend to limit their income and spending (both legally and illegally), and in the end, while you added more burden on the people, you rarely raise significantly more money. At the same time, the population as a whole is getting older, putting more and more strain on the overextended welfare system (and, actually, the defence spending is also rising). It doesn't help that apparently, most of the wives only do part-time work (or no work at all), effectively robbing the whole economy of something around a quarter of total potential value, which isn't exactly negligible. Again, that's what you get for bad tax policy - people get to keep more money if they work less, and they also get a lot more free time - a win-win for the common guy. Japan is a great example of very poor incentives over the past half a century - many economists were signalling the warning bells long before the problem got entirely out of hand, but the advocates of "increased government spending helps the economy" won out. And of course, this is still a very shallow look at the whole problem - I suspect there's many layers and many bad calls over the years. But the main problem is still that socialism simply doesn't work. If you look at the prominent socialist countries in the world, almost all run on a massive debt and print money like crazy, while all the services they provide are very subpar and expensive (after all, that's why such services are rarely voluntary :)). It used to be that you saved up for your retirement, putting money aside - saving on interest, and having the retirement you paid for. Now, the current earners pay for the current retirees - and usually with plans that assume huge population growth, that simply doesn't exist in reality - and Japan is quite on the bottom of the leaderboards of population growth to begin with.
+Luaan wait...
Japan is socialist? I never knew... Or maybe our conceptions of socialism are very, very different. Mine is state planned economy, as opposed to market economy (do not confuse with free market). This comes from Denmark's PM "Denmark is far from a socialist planned economy. Denmark is a market economy".
Maybe, what you're referring to as socialism is welfare-ism?
Keynesianism... running economies toward collapse since the 1930's.
+Kenpachi Zaraki Japan got so much debt because investors don't think it is actually going to default...thus they are willing to give more money to Japan. The maker of this video happens to think he just knows more about economics than everyone who is holding Japanese debt. Which is doubtful.
+Kenpachi Zaraki Japan is still a cash based economy this allows businesses to lie about income and government spending is quite large I think in japan there is a joke about how every river has a concrete riverbed. Let us not forget that the working population has been declining meaning more and more money is diverted to senior benefits and healthcare which was already generous as is. Combined with japan being the country where people are living to 100+ this strain on benefits is a big part of their spending. Now with seniors being such a large part of the electorate they can't possibly pass social security reform such reform should have been passed in the 80's.
Japan will collapse 2050-2070 by my guess
This will cause massive shock to the Asian and world economy as they will cause South Korea to collapse as they to face a demographic crisis. With the collapse of South Korea this will affect China which will affect us. At best this will lead to a major recession or depression for us depending if china falls.
www.acting-man.com/blog/media/2013/05/Japanese-government-expenditures.jpg
www.acting-man.com/?p=23599
+Thauã Aguirre there not socalist, the previous post is just trying to blame socalism for the problmes of a nation, whos suffering from a lot more
also socalism dosnt exist anymore. when people say "Socailsim" they usally are refering to socail demoracy, witch is bascualy, a free market, funding good socail programs, taht feed back into the free market by reducting buiness and personal costs, by buying in bulk, and using the economies of scale
what do you mean game over? do the octopuses come out of the water, mutate with the dragons and burn down japan with giant katanas?
Yup
This will be the time when Godzilla saves them.
Mene Tekel Rebuilding Tokyo increases GDP and creates jobs. so yea, godzilla saves the economy.
thanks for a close to top comment guys its my first so far :)
ironmantis25 lol godzilla ftw
Japan has the largest current account surplus,
is the largest creditor country,
and has the largest foreign exchange reserves.
one side of the coin
@@myczxr yoo smarty
holy shit... that's really horrible music behind the clip
It's like it's supposed to complement the problem of debt.
I liked it.
That music makes me very dizzy and confused
That defies at least 13 definitions of music.
Definitely bad music. Why even have music on such a video?
I feel like governments should be prohibited from spending more than they collect - that doesn't make much sense to me. It might be good in the short run but definitely not in the long run.
afonsords That is exactly the policy of the European Union written down in the Maastricht Treaty.
Ronald de Rooij wait but that treaty is older than me, how come we already had a sovereign debt crisis here then? Every government has been spending more than they collect
afonsords Because in 1992 it was agreed that countries had time until 2017. Which was too long.
Ronald de Rooij Oh that's unfortunate x)
Ronald de Rooij If by exactly you mean not remotely... The treaty defined the degrees of debt allowed. It's actually a good thing to maintain some debt in a lot of cases.
Other parts of the video could use some unpacking of some of the terminology/steps 3:15
"If central banks tries to grow tax revenue, investors sell their bonds to account for inflation. This pushes up average debt costs"
SO many skipped steps. This part could use better explanation.
Just keep selling Manga and they'll be fine
Ironically, manga and anime aren't even mainstream in Japan. They also don't get much money from international fans, since most of those read scanlations online or watch anime for free.
Happily ever not-getting-paid-for-your-work!
Not true. Reading manga and watching anime is perfectly normal in Japan. Though most adults it's not shows like Fullmetal Alchemist and Death Note, but rather more down to earth stories that don't gain much popularity in the west.
Why would anyone buy Manga/Anime when they can get it for free through piracy?
Because they presumably want manga/anime to keep getting made?
Seph Not always possible, unfortunately. In some countries, there is no legal way of acquiring such things, or there are no local or legal translations.
Unless said people go out of their way to buy the Japanese versions-which they may not even understand-it is impossible for some to read and partake in anime and/or manga.
People should try to support the creators though. Should.
Japan's debt is from the people.
They can just print yen to pay for it, but the value of the money goes down.
The low interest rate is also the reason why Japan has few problems.
Greece's bonds are held by foreign countries and the currency is shared.
So when they run out of money, they will have problems.
isnt that good for yen to depreciate?
No exacly, theyr are held by the EU.
And countries like Italy Spain and Greece cant print money if Brussels doesnt give the okey.
Exactly I just chimed in in the other post. Greece and US Sovereigned Bond by nature is very unstable for example these days central banks are dumping US Treasury in order to inject and stabilize their own currency. Result is toughening export from US and 8% high inflation. This video does not cover the bond ownership and Japan decades yields control policies at all
exactly two people, Suzuki and Sony :) good luck
Does this music give anybody else a panic attack ?
Brickstun Ram yupp
this
LOL
Kind of misleading .. Japan's central bank has reduced interest rates by repurchasing a lot of its own debt. It 'owes' that money to itself. So it kind of cancels out...
Jason Adrian True, but when the need to shrink the money supply comes; who is going to be willing to buy IOUs from the central bank. the moment the central bank announces that it's selling IOUs the market for them (IOUs) crashes.
Exactly, the banks would need to be bailed out, but that seems problematic, considering Japan doesn't seem to have the big reserves the U.S. has to maintain inflation. I mean, it wouldn't surprise me if Japanese people start having to carry around big wheelbarrows of money to buy a loaf of bread :D Of course, that's just a bit of an exaggeration
I was wondering the same thing - the central bank is printing money and so all it does is raise inflation. It basically equates to the Japanese govt. printing money to pay interest and other expenses, instead of borrowing it. (This is just my understanding though)
Grey Warden I see, so you're saying that they should try to create demand with the printed money instead of adding supply
The inflation targeting strikes me as a bit misguided. Monetary policy seems like an inappropriate tool to combat Japan's problems, namely population stagnation.
Still, if it's IOUs between government entities, I don't see the danger.
Japanese Interest rate is now negative. Hence they make money by lending. Regulation forces Institutional Investors to buy bonds despite the negative return. Japan doesn't have a debt problem since that 'interest rate tray" in the video is now a source of income and not an expense due to negative interest rates.
MJ the Student Actuary ye but this video is old
Lol you are dumb if you think that !
negative interest rate? more of a glorified donation.
The problem is "regulation forces institutional investors to" effectively donate to the government. Means there's no fiscal incentive to invest so people will do other things with their money
How can they force them to buy negative interest bonds?
this is really uncomfortable to listen, the music and monotone voice are just weird
jesus the music makes me feel very uncomfortable
It's interesting to see how debt works through the eyes of a teenager :D , real life though... nothing of the sort. The video misses any economy growth and the fact that Japan doesn't have a trade deficit, but a trade surplus... actually it have the 4th biggest trade surplus in the world after China, Germany and Saudi Arabia. What the authors of the video miss, or more likely don't know, is that default doesn't come as a function of too much borrowing, but when you're unable to pay due to diminishing returns from government investment. Imagine the government needs a new bridge that connects two provinces. The bridge is projected to increase the economy and therefore, the revenue by 5%. The government decides to borrow the money for the bridge on an interest of 2%. Everything is nice and dandy, but building the bridge takes far too long and during that time Pear Inc. invents flying cars. The new car quickly picks up and most people commute between provinces in flying cars. The bridge gets built eventually, but due to the new transportation method instead of generating 5% increase in revenue it only generates 1.5%. Now the government has to pay for the bridge and the interest and doesn't get the needed revenue from the private sector to finance its debt. Now that's what happened in Greece and pretty much any country that ever defaulted. Japan and the USA are so far off from this kind of thing that it's even funny to think about it. In the words of Dick Cheney - "deficits don't matter". Now stop spreading misinformation on the Internet and find a better place for your money, maybe buy some government bonds or whatnot.
wow really interesting, thanks for the comment!
+Daniel Tinkov The big issue with Japan though is their GDP is more likely to shrink then it is to grow. With so much of the population retiring and so few new workers, it will take a lot of economic growth just to maintain their current GDP level. And the amount of economic increases needed to maintain the economy is only going to get higher.
GhostInTheShell29 as long as the GDP shrink doesn't outpace the population decline everything's fine.
Imagine that Japan have GDP of 100 and population of 80. The population shrinks to 60, but the economy only to 80. The result is that the GDP per capita increased from 1.25 to 1.33.
+Daniel Tinkov Yes but with an ageing population, government expenditures will increase.
Daniel Connell yup, that's why Japan invests so heavily in robotics. That's the only way to keep the expenditures under control.
a price to be paid for that 1 week sinkhole repair achievement.
Hahaha
hahahahaha i nearly spit out my food, hilarious
www.theguardian.com/world/2016/nov/15/japan-fixes-vast-fukuoka-city-sinkhole-repaired-two-days
here. imagine how much they paid just to repair that for 2 days knowing how big their dept is already.
paid*
right. tnx
As well done as this is, the vast majority of people are going to watch this and still come away just as ignorant and clueless as they were before.
The only thing I don’t understand is why the interest expense tray gets wider.
@@Azhucabomb Because the total debt continues growing, the amount of interest payed grows even the interest rate remains the same.
@@Azhucabomb it's compounding interest so the interest rate stays the same but your interest is added as debt. Basically you have 100 dollars debt and for interest rate 5 percent you pay 5 dollars interest the next year you rate stays the same but it's from 105 dollars so it's more than 5 dollars of interest the next year
@@ragvirsinghhothi8848 Jesus fucking Christ that's terrible. No wonder people kill themselves over debt. That should be illegal.
@@TheChickenRiceBowl dude compound interest is what literally every bank uses worldwide lol
This is good info, but damn, heavy metal would've been better than whatever the hell is playing in this video
great vid, horrrible background music
Glitch music 2deep4u bro?
+スパムむすびロバート haha definitely
way 2 deep
Japan has it's own currency, (sovereign currency) thus controls it. A country cannot go insolvent if it owns it's own currency
Yes! Finally some sanity in the sea of ignorant comments. Doesn't ANYONE realise Japan is a monetary sovereign and CANNOT GO INSOLVENT? (also long as the debt is in it's own currency) And thankfully, they are smart enough to have debt only in yen, instead of foreign debt. People have been moaning about the "crisis" of Japan for freaking 30 years now. Japan is NOT in a crisis! If anything the recent sales tax hike is going to contract the economy, which is where it REALLY matters.
Adam Kennedy SirRaven Depending upon what Japan does with it's own currency, Japan can have all three (or even four scenarios):
1. It can go insolvent by not printing enough causing it to default (highly unlikely)
2. Experience uncontrolled rapid maybe even uncontrolled inflation (still v. unlikely if only due to history and financial culture) by printing enough to fulfill both interest and reduce total debt amounts.
3.Degrading value of security/bonds in international market ( situation that currently exists and most likely scenario). Will keep happening as risk of default keeps steadily increasing hence demanding higher interest rates in international markets.
However this scenario will have the least impact as most of Japan's debt is owned by Japanese investors and due to deflation/low inflation making low interest rates viable. This situation can likely last decades before coming to critical levels. And in that much time various reforms can stabilize the situation:
1. Decreased spending on benefits: Either through reform or due to decrease in elderly population, simply because the highest population section is the post WW2 pop. likely to die off in significant numbers in this decade.
2. Boom in GDP due to emerging service/industry line growth. (perhaps unlikely for japan unless robotics experiences a boom, a field in which they have significant competitive advantage.)
3. Immigration/Corporate culture reform: Two avenues which clearly exist for Japan which may offer significant increase in GDP due to lowering of costs/increasing efficiency. However less likely as it faces societal pressures which are v. difficult to change.
Adam, pure solvency is irrelevant, hyperinflation is though. And Raven, the whole point of the video is to show that Japan needs foreign inflows to make ends meet. They're a country with an aging and declining population that has very little natural resources. If their money is worthless, because they keep printing it, they'll have nothing... it'll be a disaster.
Mike S Remember though, hyperinflation is caused under extreme circumstances (Germany - post WW1 and Zimbabwe) The export market would have to collapse completely and depend purely on imports. I advise reading the blog link posted below
bilbo.economicoutlook.net/blog/?p=3773
Adam Kennedy What currency must they pay the debt back in? I'm not sure of the answer, but lets say Japan's debt payment being 200% of GDP must be paid back in the equivalent amount in $US. Since the dollar is the world reserve currency I would imagine this is very likely. For simplicity lets say this is $10 trillion USD or $1,000 trillion Yen (exchange rate is about 1USD:120 Yen). If Japan begins printing money to pay back their debt, inflation will rise due to lowering the amount of each Yen even further. Lets say Japan manages to print so much that they lower the Yen value by 50%. That same $10 trillion USD is now 2,000 trillion Yen. So, attempting to pay back the money in inflation will not work long term and could lead to hyperinflation. I'll take a default over a hyper-inflationary event.
OMG, the backround music is terrible.
Oh good I thought I was the only one. I seriously can't watch it. The music makes me anxious.
thnx God i'm not alone
i am not alone!!! the beat kept stopping and giving the wrong vibe and i was suffering from the god awful music
i guess thats wot its supposed to make u feel
You can always push the close captions button.
I'm an economics major and I'm ashamed to say that i have no idea what this guy is talking about. (the horrendous music didn't help either) :(
Its called quantitative easing. If you really want to understand something read, don't watch
ichuisaac123 Spending more than they can afford.
Yeah me too
Money is more distributed among the people in Japan and Japanese banks hold their money. More than 80% of Japanese bond is held by pension funds and banks so I can say the government debt is Japanese people's savings. Japan does not default as far as they do not withdraw all their money very sudden.
The real problem is that Japan's fertility rate is lower than replacement level. As a result Japan's population is shrinking, the number of workers is decreasing, the economy is shrinking, and the elderly are growing as a segment of the population.
Mostly because of technology, it's 'mor culture' and how women when married have to become house wives and treat the husband like a child.
Honestly even if Japan didn't have the aging population it did, it would still be in serious trouble. This fact just speeds up the inevitable cancer of uncontrolled public spending.
The population would have to grow EXPONENTIALLY in order to create enough tax base, and that's just untenable since we have finite space on earth.
Economy needs growth. Lower population = less growth.
Import more workers or run current account deficits...Japan is Monetarily Sovereign and has complete control over its sovereign finances and all of the laws and regulations related to its finances (fiscal/monetary policy)...
Not even anime, manga, or weird food could help save Japan's debt problem. :(
+Boogster Su dont forget porn...
+Bejho Uhuy
Hentai?
+Boogster Su awesome food mmmmm sushi
+Boogster Su I guess japan will have to invade china again
Bob Breckur Funny, Japan is a pretty small country with not as much testing land as China, yet they stand a chance. A pretty small one, but a chance nonetheless.
Every year I rewatch this video and understand it a bit more. I reckon on 2 more years I will fully understand it
The music is annoying
yes
PINGPONGROCKSBRAH I like it
They settled on it due to budget cuts.
PINGPONGROCKSBRAH very
And yet Japan's debt problem is not as bad as the US'. Because most of Japan's debt is held by it's own citizens.
***** and 95% in Japan. No, the US is not in a better position and will end up like Greece. One of the few reason it has not done so sooner is because the US is a lot bigger.
*****
Public debt is 17 trillion and personal debt is 14 trillion but there is only 4 trillion fed notes world wide. What are banks lending? Who is buying 17 trillion dollars worth of bonds when there is only 4 trillions in hard currency? What particular coinage act made the electronic money legal tender?
*****
Most of the money for financing was created out of thin air by banks. This means that when a person borrows money to buy a house, the bank simply creates the money there and then with a few keystrokes. The general public believes that the money is originating from savings but that is simply not true.
se7ensnakes
There is a legal reserve money that banks must possess. From the money they have lent, they are obliged by law to have, say 10% in the vault. When a country prints money they already account for that.
Thats not correct The bank create the money they loan. They look for the reserves later.
Has someone actually ever paid you money via paypal?
Nope, not yet.
I'm starting a financial literacy channel. I could use some of your animation styles. I manage a local Branch of a big four bank here in Australia. I am not good at graphics and only ok at post production. If you are good at either I would love to know more about you. PM me if you're interested jmdyason@gmail.com
Addogram I bet if you used bitcoin you'd receive a lot more
Dean Masley Thanks for the tip Dean. Now accepting bitcoin.
Addogram let me know if you have any questions! Amazing animations!
I'm sure if you post your talents in /r/jobs4bitcoins on reddit you'd receive some good responses (and maybe a job!)
I've been doing minor graphic design this way and I wouldn't look back. Bitcoin. Is the freaking best. Get paid from anywhere in the world and then cash out to your local currency (if desired!) Through your regular setup
8 years after, Japan still lives on.
Yet the video is more relevant than ever. Inflation is at 4% now, soon they will have to increase interest rates, high chance of disaster.
6:30 What comes after this "game over"? Please explain!
If a "game over" ever happens that probably means the economy collapse. Plus, some riots and angry protestors occur.
Look to Greece as an example, however Germany ended up bailing them out. More than likely the aftermath would be to a higher degree though
+Axel Rosalewski Take a look at the US
-> printing money
-> going to war to bring "democracy" to countries which are thinking about not using US-Dollars as their trading currency for oil (as the US heavily depends on the fact that the world is trading in USD or at least was, EUR and other currencies are getting heavier use nowadays)
-> Hoping that other countries belief in you or force them to say that they belief... (the US would be "game over" or more precisely bankrupt for quite some time now...)
-> the US indirectly declared their bankruptcy in 1971 (long story short: they refused to exchange USD to gold which was a clear sign of bankruptcy at that time) nothing happened
-> in 2011 the US was bankrupt for some days before they found new debt holders (or creditors ? I'm not a native speaker, so I'm not quite sure which one is the financial English version...)
-> in 2013 the US had to "shut down"... as the budget was extremely tight (other countries would have had to declare bankruptcy the US hat other ways, which included 800,000 state employees which were "given" unpaid holidays
-> i could make this list way bigger as there were "almost bankruptcies" before 1971 and also way more in recent times...
=>> the way the US solves this problem: they just increase the debt limit
+Michael Amann you know that saddam euro theroy was disproven right? the wiki-leak documets show that iraq was not some master plan to get oil, it was really a lot simpler and sadder. wiki leak documest show that geroge bush was planning hte ivasion since he first got into office, becase he wanted to remove saddam hussien, to improve his fathers legacy. also i dont think you undersnatd what the debt limit is. or US finaces at all
+anamarvelo i have never said it was to get oil (allthough interestinly countries with oil always need the US type of democracy...) Husseins decision to change to EUR was the trigger....
Also i understand the US debt limit... it is a artificial limit, but it represents the willingness of countries to lend the US money quite well...
first of all, unlike USA central bank - Federal Reserve, the central bank is belong to government, secondly it is domestic debt, thirdly debted moeny, no way you are reducing debt without affecting money circulation
Central banks belong to the government? Dont make me laugh. Central banks are owned by a few rich families.
emad gholam what i mean central bank of japan is not privately owned
not in many countries. USA is an exception not a rule. Not that this is a good thing, as one bad government can fuck it up big time. See Nigeria.
emad gholam Please don't preach your crazy conspiracy theories here. skeptoid.com/blog/2014/04/07/busting-some-rothschild-family-facebook-memes/
Why's Japan's Debt a problem, but the US's is a crisis? To me it looks quite reverse. A lot of the debt the US gvmt owes is to itself(borrowing against social security). Which sucks, but it's a way easier problem to handle than Japan's Debt. Especially given that we have a much larger, more robust, and less stagnant economy.
The video also casually asserts the debt to be around 80k per capita....but never addresses whether those investors are capable of paying it down themselves(eating the losses). Which is precisely because they *are* capable of doing that, and Cato Institute's not so subtle biases(agendas) are showing through. Video is only entertaining whether the government or the broader population should make a sacrifice for the good of the country. Not whether the investors(who benefit the most from all of that borrowing in the first place, since it's typically used to subsidize and grow industries they own or invest in) should be the ones to bite the bullet. The investors are also the ones who stand to lose the least from such a sacrifice, since they have distributed assets beyond just the bonds. None of them are going to be destitute from such a loss. But the government would collapse, and the population would be left SOL if either were required to personally take the hit.
Anguel Roumenov Bogoev How about you fix it?
Surely when the government defaults, that's precisely what happens? And after that, who wants to invest? and those that do will surely charge higher rates because of increased perceived risk?
Teppishc Smith Of course it's not *good* in any of the circumstances.
The point was to briefly highlight deliberate oversights and simplifications in the video. Situation isn't as straight forward as their deceptive metaphors frame it, nor is it such a foregone conclusion that everyone's simply fucked.
Michael Van Wagenen I tried, but the populace saw fit to go a different direction with their votes. Only so much an individual or small group of people can do, ya know?
Bank of Japan is the main holder of the Japanese debt, along with other national investors, to about 90%.
In the case of the US, a tremendous part is held by foreign investors (~30%).
Social Security funds represent a way smaller part.
what is this nonsense? Japan is a creditor nation. It's 'debt' is in Yen, which means it really has no debt.
When Japan lost the war in 1945 the Allies power inflicted a debt system on them: Private Commercial Banks create money out of thin air but the government has to borrow it. The people are not educated fully on the problem with fractional reserve lending and so the problem continues.
Japan is a quadrillion yens in debt. Russia is no exception as they are also captured. The USA's banks control every aspect of society starting with Woodrow Wilson Opened who opened hells gates.
Today the Federal Reserve's policy led to "investors euphoria" and Liars loans and to a bust which cause many foreclosures. The Family median networth dropped 40% to $77,300 in 2010 from $126,400 in 2007, the Fed said in its Survey of Consumer Finances which is released every three years. Presently there are 19 million homes and 8 million homeless. Tomorrow if your children decide they want to own a home they are going to labor most of their lives to pay a 30 year mortgage on a home that the bank got for free.
The funny thing is that the mainstream media that are reporting these are actually owned by these SUPER ENTITIES.
According to The Swiss Federal Institute (SFI) in Zurich released a study entitled “The Network of Global Corporate Control” that proves a small group have global economic control:
www.sg.ethz.ch/media/medialibrary/2013/12/james_glatteth-2007-02.pdf
The funny thing is that most of the mainstream media that are reporting this are actually owned by these SUPER ENTITIES.
CNBC
www.cnbc.com/id/45018010
A core of just 147 firms - many of them financial companies - control 40 percent of the wealth of 43,060 transnational corporations. A broader core of 737 control 80 percent, according to the theorists.
HUFFINGPOST
www.huffingtonpost.ca/2011/10/24/super-entity-147-global-economy-swiss-researchers_n_1028690.html
A Swiss study appears to have uncovered what anti-capitalist activists have been claiming for years -- that the global economy is controlled by a small group of deeply interconnected entities.
NEW SCIENTIST
www.newscientist.com/article/mg21228354.500-revealed--the-capitalist-network-that-runs-the-world.html#.UxF0CJUX7zs
"AS PROTESTS against financial power sweep the world this week, science may have confirmed the protesters' worst fears. An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy."
FORBES
www.forbes.com/sites/bruceupbin/2011/10/22/the-147-companies-that-control-everything/
Three systems theorists at the Swiss Federal Institute of Technology in Zurich have taken a database listing 37 million companies and investors worldwide and analyzed all 43,060 transnational corporations and share ownerships linking them. They built a model of who owns what and what their revenues are and mapped the whole edifice of economic power.
*****
You cannot bet on something that has already occurred, unless you find people that do not see the inherent problem. However, If you believe that Iam here to happily dwell on the failure of the American experiment you are sadly mistaken. i have lived in America for a rather long time and I can readily tell you that there has been a revolutionary change for the worse. I believe that the USA is in capture.
Any significant law is the result of lobbyist. That local government as well as the federal government is fully engulfed in corruption. That the wars that we are engaged in is as Smedley Butler described, a racket. We are exporting more death machines by far more than any country in the world: www.sipri.org/research/armaments/production/Top100. Our money is manipulated by private owners of banks in secret conference rooms. These Banks perpetuate business cycles using counterfeit money. And the job market is dismal.
We are not leaving a nice situation for the people of the future. I wish I could be as optimistic as you.
Are you kidding me? You missed out on a lot of things. First machine flight, radio, television, ford assembly line, Thomas Edison with his variety of patents including the light bulb. On the side of Politics we had great presidents like George Washington, Andrew Jackson, Abraham Lincoln. Yet today we are dominated by a shadow government that is the same for nearly every country.the world. Our jobs are migrating to japan and many people here are unemployed. Many people lost their homes in the last asset bubble, and the ownership of major corporations appear to be monopolized.
What more we are leading in an escalating race to build the most destrutive weapons in the world: Rail guns, scramjet hypersonic thermonuclear missiles. i wish we get a president of the vision that JFK had with space exploration.
All this and just are scarce, 78% of our income goes to pay taxes, health insurance and debt.
the central bank is not private it is a division of the government in most countries and in most countries private banks cannot print money
do you have a non bgm version? im fine with voices, but this noise is out of the question.
I'd watch this video if there were no BS music lol
OMG yes that bgm music is terrible
jack Wilkinson on the cam
It would be cool if they made an updated version of this for 2016-2017
I miss this channel so much
I really tried to understand this but the music makes it impossible.
I don't exactly know how, but it does.
This video is really informative and well made but the music is obnoxious and really loud
really hard to listen to
This seems to complete ignore how this really works. There is literally zero chance of a government defaulting on debt it owes in a currency it controls. As long as bonds are denominated in Yen, they always have the option of monetizing their debts ("printing" enough money to pay bondholders.)
This has consequences, of course: declining exchange rate and domestic inflation. But if it's true that Japan has been stuck in a deflation spiral, then domestic inflation is desirable. In a deflationary environment, people will put off a purchase because it will be cheaper later...bad for the economy. Higher inflation also increases nominal revenues, making payments on existing debt less onerous.
Similarly, if your economy is struggling, a declining exchange rate is also desirable, since it makes your exports more competitive. All in all, this is a win-win for Japan.
Note that if the central bank is targeting a higher inflation level than currently exists, its method of achieving target inflation is to lower interest rates, including those on government bonds. If there isn't enough investor interest to achieve its target, it can use open market operations to buy bonds directly. Either way, interest rates don't go up unless inflation exceeds the target, which this video tells me is a long ways off.
If the point of the video is that you should avoid buying Japanese government bonds, the point still holds. The effect on an investor's pocketbook is the same whether it's a haircut (partial default, Greek-style) or a declining exchange rate. But if it's trying to convince me that Japan is on an economic precipice because of high government debt...that's just not the case.
+Neil Carey You know, "putting off a purchase because it will be cheaper later" used to be known as "saving". It included the awesome capability of being able to fund your own retirement comfortably :) Don't let yourself be fooled - the ones that profit from inflation are the government and the ones closest to the "printed" money (banks, subsidy receivers, ...). Everyone else suffers. It's not a coincidence that governments have always found ideas of people like Keynes and his predecessors very enticing - it gives them more power, at the expense of the people.
Have you ever seen the computer market? It's one of the most deflationary industries of modern times. And yet, it seems like you do in fact own a computer. How is that possible when you know that you can get a better computer cheaper the next year? How come everyone around you _also_ has a computer, as well as a smart phone... why not just buy them later, when they're going to be cheaper?
+Luaan I am sorry but you should not be fooled, Luaan. Mr Carey seems to really understand this topic and by your comment I can tell that you have not really expertise when it comes to macroeconomics. The concept Neil was talking about is not "saving" and in no way similar. Saving refers to financing and his point was about consumer price expectations. Further, you cannot compare decreasing microeconomic prices to macroeconomic inflation. I can suggest you some really good economic books in case you want to educate yourself on this topic.
Btw, I agree with you that inflation is bad for most people, most of the times.
+Neil Carey thank you. Finally someone.
+Loki Ronin Is inflation bad for most people most of the time? I would posit that high inflation is good for debtors, which in most advanced economies is a sadly large proportion of people. We should all be as lucky as the baby boomers who saw high inflation just after they got their first mortgages, only to see it drop substantially once they entered the high savings part of their lives.
+Neil Carey You're a big keynesian shill!
Tha fuck made the tray wider like that? Kind of an important detail to gloss over...
I guess the height of tray is level of interest, and area of tray is amount of money borrowed, so if you borrowed 100$ at 5% interest you will have to return 5$, but if you borrow 200$ at the same interes you will have to return 10$.
This is how I understand this, anyone else have any idea?
The total debt amount = tray width. So the more $ the government borrows the wider the tray.
Interesting, but a little over my head. Complex economics confuse me. Well done though.
It's confusing because it's actually wrong.
When you hear talk of foreign investors coming over and investing in your country without any talk of where they might exchange their currency for your local currency, it is then that you know that the person speaking knows very little about what is actually going on.
I suggest you look up some names to get a better idea: Stephanie Kelton, Warren Mosler, Randall Wray, Michael Hudson. They have talks on TH-cam.
A Word In the Wind
Thanks for the tip.
*****
Can you explain why? In the classes I've taken (which is only a few) relating to economics, any bank note/Yen that is created that is printed without the value created in the economy to back it up causes inflation. In other words, if the markets of japan only create, let's say, one million Yen worth of goods/services, then the value of one Yen would go down if 1.1 million Yen was printed. Is that not true?
You are assuming that if Japan can create one million Yen worth of goods/services...that the demand for those goods and services stay the same. Demand is the other moving factor used to determine price and ultimately inflation.
smoke more weed jastroyer, smoke more weed.
Downvote for awful too loud music
+Dan Howard downvote for being a little bitch
Christian Saldana Downvote for being a fucktard ass chewer.
***** You're the type of person who would call the manager at McDonalds.
Christian Saldana You're the type of person... you're not a type of person. You're a fucken hatched troll.
+Dan Howard o nice one
The proportion of foreign investors in Japan is 8% and around 50% of the holders are government-related organizations such as JP, BOJ, and GPIF who are very unlikely to sell their bonds at anytime for systematic reasons. The rest are owned by domestic Japanese banks etc. This is an exceptional situation amongst other developed countries like US. For example, in US, more than 30% of government bonds are owned by foreign investors, most of which are Japanese and Chinese. But still I think we have to consider the possibility very carefully.
I give you a thumbs UP. I'm not sure if what you written is correct, but what you look like is very nice ;)
JP, GPIF do not own the bonds they hold. They are holding bonds on behalf of retirees who will increasingly be cashing out. It is not what they want to do, it is what they can do. JP & GPIF have fiduciary duty to manage the portfolio to the best interest of the owners, not to freely subsidize an over-spending government.
Absolutely. The strength of Japan Sovereigned Bonds.. the US simply does not cut out now with total $30× TRILLION debts
Most of Japan's debt is held by the Japanese people in Japanese yen, not US dollars.
In the case of Japan, even if the debt is high, the government can print money to solve the problem as much as it wants.
This is debt, but it is not debt.
And Japan has the largest net worth in the world.
While many countries, such as Argentina and Turkey, have defaulted on their debts and gone bankrupt due to ballooning debt, Japan's situation is different. The U.S. is in a similar situation to Japan.
Are you suggesting that Japan can print as much money as they want without negative consequences? And if so, why doesn't the Bank of Japan just print enough money to make all the Japanese citizens millionaires? Or better yet Trillionaires?
In my view, whilst the analysis in this video might feel convincing in some ways, it actually relies on a way of thinking that is now very much outdated. Governments of developed countries that control their own currency do not *need* investors (foreign or otherwise) to buy their debt. The vast majority (over 90%) of new Japanese government debt is now bought by the Bank of Japan (BoJ), not by investors, and the BoJ is completely insensitive to the interest rate it pays for it. The interest rate need never rise due to lack of investor confidence, because the BoJ will always offer to buy the debt at 1% or whatever they set the rate at. If necessary the BoJ will simply buy 100% of all new government debt, investors are not required.
The Japanese government and the BoJ can keep doing this indefinitely. Additionally since the BoJ is part of the government, really the Japanese government owes all this money to itself. The interest on the debt collected by the BoJ simply goes back into government coffers anyway. Additionally Japan has a balance of trade that is roughly zero, it exports about the same as it imports. So overall this situation seems stable to me, Japan does have a demographic problem but that's not totally unsolvable. Of course, it's very different to how it *used* to work, but the world has changed.
Eh mate, you mind giving this another watch and tell me if all this meant that the citizen lost ~17.5% a pay check and an extra 9% on stuff like groceries? I'm a little confused on it
@@mechoilwcaman2034 I've rewatched the video and I'm not quite sure what you're asking. The video doesn't talk about a 17.5% cut in pay checks, or a 9% increase on the cost of groceries. Perhaps you could rephrase your question?
But whenever the BoJ buys, it's new money coming into circulation, right? Whereas if investors bought, it'd be already existing money. So there's a fundamental difference of who funds the dept. Wouldn't MMT (which is what I assume you're advocating) cause inflation?
THE MUSIC IS SO DAMN LOUD
I'm sorry, but the music you picked for this video totally distracts from listening the narrator. Or, you could have lowered the volume of the song.
The background music literally gave me anxiety . Love it
The government debt owned by the government subsidiary is not real debt. The government debt is mostly owned by the Japanese central bank which is a part of the Japanese government. The interest payment directly goes to Treasury Department.
who are they going into debt to.....themselves?
the entire monetary economic system is garbage
+SoldierCyfix Investors mainly. In Greece and the U.S.'s case they owe to other countries. The U.S. owes money to China, Japan, Corporations, Banks, oil exporters, social security, and other countries and Greece owes a ton of money to Germany and the EU.
the planet is in debt to itself ?
In the grand scheme of things, yes. Thunny thing is, is that the majority of European countries are in debt, except for Switzerland, Norway, and a few Eastern European nations. All of them that are in debt are part of the European Union
I was just trying to point out the absurdity. when you look at the world from a realistic standpoint. all the countries being in debt to each other (all the planet in debt) is very nonsensical
+SovietTenkDestroyer That's one thing people need to be aware of. Net debt is rarely listed, only outstanding debt. So both US and Japan have much less debt as % of GDP than some sources list.
Whenever there's a debt, there's an equivalent surplus. So how come no one ever examines the fiscal surpluses underpinned by Japan's debt? Probably, because they don't know how the system really works (like the people who made this video).
A big chunk of it is in pension funds. Unless the government can confiscate the surplus it won't help them. Politically it is easier to devalue the currency.
richrdroma Yep, pensions, institutions, individuals...the debt service payments are income and revenue in the private sector, which supports consumption that drives the economy. "Devalue the currency"? The yen remains one of the world's strongest and most stable currencies.
Not forever. There's only three options to get out of a big debt like this: inflate, default or austerity. Now which of these three options is the easiest to sell to the public? In fact the selling to the public part has already happened and BOJ are already doing their best to make inflation happen.
richrdroma You forgot the best and most common way out: GDP growth. Tax revenue flows in once the economy grows, even just a bit. The US had 114% debt to GDP after WW2. All was paid down easily by higher GDP, not by any of the measures you mention. That's what Japan's stimulus is aimed at doing.
Geoff Botting Yes you are right. With austerity I basically meant spending less than they make. If they increase revenue that will be easier to do. But with Japans demographics this will be tough.
There is a trick to Japan's debt.
The government borrows money from the Bank of Japan for public works projects, but the Bank of Japan borrows money from the people.
The Bank of Japan borrows money from the people. Japanese people save money without spending it, so there is a lot of money in the bank. The banks have to lend out the money to pay interest, so the government spends more and more.
In other words, the Japanese government is not borrowing money from abroad, but from the Japanese people.
Japan also has the highest net foreign assets in the world. In fact, it is the richest country in the world.
If you really think Japan could turn into Greece...Hold your horses. IOU bond holders(Investors) in this video are actually mostly Japanese local banks->individual investors...You get the picture? This video didn't explain well enough about the importance of where the investors are from.
The Japanese people are so fortunate to have a government that actually cares about infrastructure and the public sector. Without these essential services, Japan would rapidly become a 3rd world country, with dirt roads and total anarchy. Government spending creates jobs, stabilizes the economy, and gives people something to believe in.
the beat is so good i got distracted like twice
Negative interest rates make investors in Japan pay for security, and incentivise investment elsewhere. The Central Bank can buy the debt using QE and effectively delete the debt. This can continue ad infinitum without necessitating inflation.
the background music makes it hard to pay attention
So basically they used a strategy that worked only temporary for certain purposes, but they never changed their way of functionning and kept it for who knows how many years and are now completely fucked
Justin sénéchal Basically.
and that's before you even look at Japans demographics. they're going off on a kamikaze mission of below replacement levels of births because the women are over educated and do not want to start families because they would lose their *independence*. There's also the high cost of living which is counter to starting families. Independent, educated women don't have children. Problem?
hotfreshrider Starting a family, is to be dependable to each other, I feel like too many people don't know that.
Justin sénéchal That might be so but in this hyper-individualized world we've created, we don't actually need each other anymore, just money, what you're saying rings hollow. I'd start a family if I could see a point, and that she wouldn't divorce me, take my kids, become a welfare queen while society eggs her on for being independent. 50% of marriages end in divorce, 80% initiated by women. #sexodus #mgtow
hotfreshrider true
Video's getting some relevance now.
TOKYO (Reuters) -- Japan's net external assets hit a record amount in 2021 as the nation retained its position as the top creditor for 31 years in a row.....
Debt is 'just delayed taxation'
-Jacob Rees-Mogg
Ewan Haas
Or inflation or just not having what one could be having.
You basically made it more complicated than it is, with your "visiualisation" .. congratulations.
Still relevant 10 years later…
"There's little chance of it ever being paid back." 0:22 Was that Japan's national debt that you were referring to, or America's?
+John Karavitis Japan's is much worse. He explained that it is over 200% of their GDP. The US is about 100%
+David Darling But it's a lot more clever and edgy to make snide remarks about America.
+John Karavitis The U.S. can be solved easily. One of the ways is to cut military spending...
+David Darling The day the US debt isn't solid is the day the world's economy literally collapses upon itself. And thus we have much worse problems; its literally an outside context problem.
+John Karavitis
The US is the best house on a bad block.
Well, aside from Switzerland, I guess.
But none of this has come to pass! Yes, inflation is up, but interest on the government debt hasn't changed. Japanese debt as a percentage of gdp is going down! The government is buying up government bonds on the open market with printed money and cancelling them! The debt ratio is down from 230% to 220% and will continue to go down. This is called "monetizing" the debt. It's basically printing money.
Exactly.
The Japanese government is basically printing money to purchase and cancel it's own debt, this leads to inflation. It's not good because it devalues the money already in circulation, but it's better than your economy collapsing, ala Greece.
Well having some inflation after quite a time of deflation doesn't seems like so bad. Yeah, you're losing a little of adquisitive power, but not completely...
Even thought, it depends on how much of the debt is paid by money printing...
Inflation is a good thing when you're the one with high debts. It's bad if people owe you money.
The acquisition power for the government only changes in terms of import. If everything gets more expensive by 5%, the governments income is likely to increase by around 5% too, due to taxation, which is usually a relative and not an absolute value.
Also a cheaper currency makes your own products more attractive on the international market, while making foreign products less attractive on the domestic market.
It also has strong downsides but it really depends on your interests and who you are.
BobTheTrueCactus Dude u realize you just found a way to implement what the argentinian government wants to do
Koh Wants to do or has done?
The music is ok it just needs to be lowered in volume by 50% so its ambient background music.
A lot of what's been said in this video doesn't make any sense. First of all, even though Japan's debt-to-GDP ration is the highest in the world at 229% of GDP, they are paying their debt back. This is happening continuously. It's not like investors are not getting their money back. It's just that right now, the country is accumulating more debt than what's being paid back. Plus, there doesn't appear to be any concern from investors that they won't get their money since the interest rate on a 10-year government bond is at 0% right now.
Second, lowering interest rates isn't just simply another way of saying the central bank will print money. When a central bank is lowering interest rates, it's simply lowering the interest rate that banks have to pay in order to borrow from the central bank. This does require money creation, but central banks are loaning money to banks all the time whether or not they lower interest rates. Central banks are only doing some serious money creation when they're buying government debt which also known as quantitative easing. Theoretically, the central bank could just buy up all of the government's debt. Of course, if the central bank buys more and more debt, this means that inflation could become a problem. However, right now inflation is hovering around 0% despite the fact that the Bank of Japan is conducting a massive debt buying program right now so this doesn't appear to be a problem for now.
Thirdly, yes, the balance of trade has been declining in Japan, but it actually has gone up recently and Japan's current account surplus has gone up as well so there is still plenty of money out there for the Japanese government to borrow despite the fact that Japan has an aging population.
Following a concept you already understand but your audience doesn't with some graphics is not necessarily going to help visualizing it. You gotta make sure every visual clue happening (size changes, arrows pointing, symbols changing place) has a clear explanation to its connection with the subject.
But this video is 3 years old - so there's that. I'll check some more recent ones! Looks like this went suddenly viral or at least is being recommended to multiple people for some reason.
(Money speculation is one hell of an efficient suicide method, holy crap.)
In a way it all comes down to the ageing population problem and a very low birth rate, which unfortunately the government is not addressing properly.
they try to but japan culture is very very pro work anti baby
collin ohlinger You should blame people for being uneducated and get satisfied by animation BS
collin ohlinger Well were not really that far behind, Japan is just a decade or so ahead of the rest of the developed world.
i can solve the low birth rate problem ;)
DJYVGTORONTO not THESE animations though, right?
Japan is a sovereign issuer of its own currency. It is not tied to another currency or a commodity (gold). It does not borrow money it creates money. An example: Japan spends a billion dollars on services and purchasing products. It pays these individuals and companies the billion dollars. For example at the end of the year Japan taxes this billion at 20%. There is still 800 million in debt. So they sell bonds to cover the debt. Now Japan is no longer in debt until the bonds mature. Japan pays the 800 million in bonds plus interest. If according to this video theory the only way Japan can get out of debt is to tax the 800 million and then in effect these people worked and sold good to Japan for nothing. Then it is a zero sum game. In actuality the 800 million is what Japan put into its economy for it to grow. That is what Japan has in savings. The same applies to the US. Governments are not like households or businesses or local governments who do rely on tax revenue to pay its bills.
Yes, but if inflation goes up for whatever reason, investors will sell their bonds until bond prices go low enough that they get a positive real return, meaning that the government won't be able to sell new bonds to investors without bumping up the yield.
The issue isn't paying down the principal, but paying off the interest rates when the debt is so large that interest payments are a substantial portion of the budget. When you are already in that situation where the government relies on low interest rates, you can't increase inflation without cutting deficit spending.
If you are stuck in a deflationary economy, stocks will be undervalued because risk-free assets with a fixed yield in currency gives a higher yield. This means that companies have a much harder time raising money by issuing new equity (which would dilute the stock) and end up having to borrow instead, or cut capex. Which makes the problem worse as you've now pushed austerity and liquidity trap problems over to the private sector as well, not just government.
There is no problem because it is a domestic government bond. There is no problem because more than 90% of the debt of the Japanese government comes from the Bank of Japan and private banks in Japan. It's like borrowing from your family, so it doesn't matter if you don't return it at worst.
You CAN bankrupt your own family and impoverish them
TL;DR: Japan has a ton of old people who aren't spending -- most aren't even working -- and like all old people, saving their money which isn't being circulated in the economy and inducing a savings glut. No income, corporate/enterprise, consumption, etc Tax, no money to run the government.
I'm ashamed to say I didn't understand half of it.
Econimics... damn
*****
econImics truly does, lol =P
The complication is on purpose. It keeps people from getting outraged over being ripped off. Central banks basically run a Ponzi scheme and all countries that are run by them will end up crashing eventually.
The Japan debt burden argument is so stupid. They have always had a relatively high debt/GDP ratio and yet the yen is a massive safe haven and they maintain huge net international assets. Why? Unlike the US where foreigners own most of the government debt, Japanese banks own most of Japan's debt and they are loyal to their daimyo masters (aka the LDP). They wouldn't sell their JGBs even if Hiroshima got nuked again.
heh
most of US debt is US owned..
As at March 2016 there was USD11,463.6b in total privately held US treasury securities, USD6,287b of which was held by foreign and international holders. That's over 54%. www.fiscal.treasury.gov/fsreports/rpt/treasBulletin/b2016_3.pdf
Tyler Schmidt You just cherry-picked data. Notice how it says privately held debt US Treasury securities. That's only a fraction of the total US Treasury securities (www.fiscal.treasury.gov/fsreports/rpt/treasBulletin/current.htm). Of the $19.5 trillion dollars worth of securities issued, $5.5 trillion is to government agencies, and another $3 trillion is to the Federal Reserve. That means 44% of the total debt is held by some form of government institution and 56% by the public. Of the public debt 54% is held by foreign investors, but that's only around 30% of the total issued. So you're argument is cherry-picked at best and fallacious at worse.
I was originally referring to the "debt held by the public" which you have incidentally conflated with the "public debt" in your statement. As that stands my statement was correct, as is my point: a massive amount of US debt is held by foreign holders.
The background music is too "trippy" and makes watching the video a mental challenge.
Don't worry.
Japan is the top net foreign asset holder in the world for 27 years in a row.
So you'd better worry about your own country.
Could you (or someone else) please elaborate on this? I'm finding it difficult to understand all of this.
@@tomlives They own around 300 trillion in assets globally.
How is Japan supposed to repay its debt if it has to rebuild Tokyo every time Godzilla attacks?
You can only export so much Hello Kitty merchandise and Henti porn.
Didn't make any sense at all in the end. Once the percentage hits 4% it's game over? What...?
Basically, the interest on the debt (1%) already equals 23% of GDP ( the money japan makes). So if the interest rate rises to the normal 4%, then japan’s interest will equal 94% of GDP, meaning Japan will have no money to spend on stuff like hospitals and fire services so they will have to borrow anything they spend, making the problem even worse.
just means Japan is a ticking time bomb
then the interest accounts for 100% of the States anual tax revenue so they have no option to pay for schools healthcare, the military, infrastructure...
Vid Mix that's not what game over at 4% means. The debt can slow down if Japan does it correctly, but if it reaches 4%, it can't go back down.
just dont become a nother grecce
And now i see why this video is named "Problem visualized" instead of "Problem explained"
I really want to watch this... but I can't get more than 60 seconds in without going crazy from the background music. Like wtf is that?! And it keep starting and stopping, it's SUPER distracting.
I can't concentrate on what you are saying because the music is too good.
Dammit Majima, this is why you shouldn't have saved that guy on the street who was gonna go for sales taxes
LOL didn't he tell him to increase it though (which was the right thing to do?)
Cool video. Would be nice an update with negative interest rates.
whoever made this: the music is over-bearing and takes attention away from the voice over, learn to blend music. Also your music is flat throughout the video, use curves to lower the volume up and down to signal to the important parts of your video.
How about US? I am very curious. That country is already practically bankrupt.
the U.S is not bankrupt by any means.
20 trillion in debt with no indication of slowing down, most likely increasing rate of debt acquisition. Puts the USA at #16 in debt to GDP ratio (Japan #1, Zimbabwe #2). Couple that with the fact that the current economy is almost entirely based on access to cheap capital...
Yes, the US does have a debt problem and if we're not careful, then this can happen to us as well. This is what scares me when I hear of people wanting to take on even more expenditures like free college, Healthcare, etc. I mean, they're noble goals, but they just aren't realistic right now. We have enough trouble with social security, and if we can't get that straight, then we shouldn't be starting up any more programs like it.
Although, Nineveh is correct. Even with those issues, we're still no where near bankrupt. TopTech is right about the number, but I think he forgot that the $20T is overall debt, while $16T is yearly GDP. If we get our act together, we can definitely pay it off. Our current credit rating is AA+, so we get charged REALLY cheap in terms of interest. Japans is currently around A depending on who you ask. Keep in mind this is current standing. There are forecasts to take into consideration as well.
Don't take this as an expert opinion though. This is just what came up in my research.
I'd say a little over 100% debt to GDP ratio isn't too bad. The US economy is big enough to sustain such a high debt.
Joshua Lim
if we freeze the debt by balancing our budget, we can out grow the debt in about 30 years. The US has seen its GDP grow every year since the end of the civil war, even during the great depression.
all we would have to do is stop spending money we don't have. this is impossible for the dummies that live in our capital though.
A novel idea: Don't spend money you don't have.
Just don't do it.
Nah don't be crazy, there must be some complicated economic measures that can postpone the inevitable collapse a couple of years.
Snoot Snooterton if noone spent money they dont have the entire world economy would collapse because houses require loans businessness require capital therefore business require investors investors require lawa laws require governments governments require dealing with other governments
So close all schools and hospitals, disband military and let the infrastructure crumble?
If borrowing is what keeps a country alive, fed, safe and happy I'd say it's worth it -- even if you might not be able to pay back. This is different from a personal loan.
Hes a novel idea just dont get sick
Snoot Snooterton your novel idea let the citizens die
According to WB in 2017 japan only spent 11.5% of revenues on debt servicing
You start off with a blatantly incorrect notion. Japan will pay all of its current debt even if it never runs out of it. The only reason investors (including Japan's population) trusted Japan with such a large debt is that they have a spotless trackrecord of paying its debt back on time that stretches over 7 decades (it also helps that their economy is stable). The largest chunk of the debt Japan accrued by 2012 that is represented by the number presented in the video will be paid in 1-2 decades after the government borrowed it, with a small percentage of it stretching out farther than that. That is completely different to "never".
The creator of this video has no idea how central banks really work....
how do they really work?
I agree. It underestimates the options open to a central bank. Those options come with costs, thus are rarely employed.
That music was so obnoxious.
11 years later and Japan is still muddling along. Which suggests to me that the orthodox economics proposed are false. Japan’s debt is owned mostly as national debt, where China has pushed much of thier debt to provinces, and the EU has debt held by countries within the union and the US has debt at each tier of government (local and state and national). This has all happened at the same time that massive growth has. What’s going on? Read up on MMT and realize that the denomination of wealth must be produced as debt. Wealth=debt, it’s basic accounting, not rocket science. Double entry bookkeeping. Hyperinflation only occurs in already failed states.
If every weaboo donated money the glorious Nippon could be saved.