Title: How Japanese Hyperinflation Could Turn the Dollar Into Toilet Paper
Headings: How Japanese Hyperinflation Could Turn The Dollar Into Toilet Paper
How Japanese Hyperinflation Could Turn The Dollar Into Toilet Paper
How Japanese Hyperinflation Could Turn The Dollar Into Toilet Paper >>
Nobody expects Japanese hyperinflation...
Even though it could turn Japanese yen into toilet paper...
It would slam global markets...
And could even trigger an American debt crisis.
The problem is, Japanese debt has exploded into completely uncharted territory.
Spending has been out of control for years, well beyond the Japanese government's income.
Money has been blown on all kinds of make-work, uneconomic, 'stimulus' projects.
By historical standards, Japan should already be experiencing hyperinflation.
But it hasn't happened yet. Some people say it's because Japan is 'different'.
They say that Japanese government debt is mostly held by locals. Only 6.8% is held by foreigners, so it's okay.
But here's the crisis trigger -- Japan's population decline means less people to buy debt.
See? Already Japanese households' debt holdings have stopped growing.
Japanese household wealth is even declining as retirees work down their savings.
Also, there are fewer and fewer working age Japanese paying taxes. Thus more debt is needed to fund things.
A declining population thus means that more debt is needed for funding, but fewer Japanese are able to buy it.
Foreigners would demand higher interest rates to fund Japan -- rates Japan can't afford.
The yen would rapidly depreciate as it became clear Japan was at risk of debt default.
Now the American crisis -- America would be in trouble since it would probably lose its second largest debt buyer.
U.S. bonds yields would rise and the dollar would be under pressure.
Higher interest costs could prove impossible for the U.S. to manage.
Thus Japanese hyperinflation could turn dollars into toilet paper as well.
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Content: Mr. Bernholz noted that prices begin to skyrocket once government deficits as a share of government expenditure rise above a 33% and then stay there for multiple years. Japan's already there. Hyperinflation has followed such instances, historically. But it hasn't happened yet. Some people say it's because Japan is 'different'. Beset by deflationary forces ever since the bust of its property and stock market bubble two decades ago, Japan has been able to get away with ultra-low interest rates for years, despite its two-decade debt binge. They say that Japanese government debt is mostly held by locals. Only 6.8% is held by foreigners, so it's okay. But here's the crisis trigger -- Japan's population decline means less people to buy debt. "Japan's ability to avoid a funding crunch to date despite its rising indebtedness does not prove that it will not at some point see a funding crunch.