Tuesday, September 25, 2012

Japanese Ministry of Finance to Japanese Public and Bond Holders: "You are bankrupt! But don't worry!"


Wolf Richter is quickly becoming one of my favorite writers on his blog entitled, “Testosterone Pit.” Today he’s got a post that just shows us that Japan could be doomed sooner than imaginable. From Zero Hedge: Japanese Ministry of Finance to Japanese Bondholders: You’re Screwed!

This has got to be the icing on the Japanese cake. The otherwise bland website of the Japanese Ministry of Finance, more specifically the FAQ page on government bonds, has been catapulted to stardom on Facebook and Twitter. Not in a good way. As you flip through the MoF’s website, page after page, you will mostly see zero Facebook likes and zero tweets. Social media and the MoF ignore each other.


But go to the FAQ page, skip down past the categories of Budget, Taxation, and Tariffs to item 4, Government bonds. Under the second group, skip past Tax questions for individuals, Miscellaneous (Is it a crime if I make a copy?), Price and yield questions, and Coupons to the infamous question 5: “In case Japan becomes insolvent, what will happen to government bonds?“


Tweeted 1,652 times, liked on Facebook 3,828 times!


The question is asked, "If Japan goes bankrupt, what happens to our bonds?"
Answer: "The Japanese government will take responsibility. Don't worry!"

The MoF website isn’t some blog to be ignored (at your own risk) but the official voice of the most important ministry of the most indebted country in the world, whose debt will reach 240% of GDP by the end of this fiscal year. The country borrows over 50% of every yen it spends, and it spends more every year. With no solution in sight. Other than more borrowing. Certainly not cutting the budget, which would be too painful. It wouldn’t be enough anyway. Even cutting the budget in half would leave a deficit. And the recently passed consumption tax increase? It will raise the tax from its current 5% to 8% in 2014 and to 10% in 2015, way too little to deal with the gigantic problem, and years too late. Yet it won’t kick in unless GDP grows at least 2% per year—which has practically no chance of happening.


No, there is no longer a good solution. And everyone knows it. 


Read the rest at Zero Hedge

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