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When the financial world tries to anticipate the next meltdown, all eyes turn to Europe. Greece needed a bailout, then Ireland did. Talk is that Spain will follow, though the country denies that it has a problem.But a few contrarians think everyone is looking in the wrong direction. Forget Europe, they say. Check out Japan instead. "A global fiasco is brewing in Japan," predicted Societe Generale analyst Dylan Grice in a recent report. "It's like the Titanic has already hit the iceberg and you know it's going to sink, you just don't know how long it will take to go down," said Vitaliy Katsenelson, a Denver-based money manager, in a recent interview that was printed in well-known analyst John Mauldin's newsletter. One hedge fund analyst I spoke to recently noted that Japan has had no fewer than nine finance ministers in the last 4½ years—one of whom apparently committed suicide after resigning.
Is Japan the next major world economy to tank? - By Bethany McLean - Slate Magazine (http://www.slate.com/id/2278792/pagenum/all/#p2 - broken link)
I'm betting on China. That is a Ponzi scheme with about 1.4 billion people involved. The Chinese Government is cooking its economic books, with posted annual rates that economists such Lester Thurow believe are roughly twice the true numbers. What's more, all those gleaming skyscrapers you see on the reports about the New China are typically 25-30% occupied. And yet they keep building more? Why? Because construction is roughly 50% of the country's GDP right now. The country is like a gigantic bicycle in that way. If they stop building, the country topples over.
Guess who will be holding the bag though in China's situation? Foreign investors.
Japan hasn't exactly been growing much, so a reversion to negative growth just won't have that big of an impact. The country has a declining population scenario to deal with, they already know what troubles are in front of them.
Shocks and pain come from UNEXPECTED changes and economic concepts. A country which has become accustomed to growing 4-5% a year dropping to 1% suddenly is a far bigger crisis than a country growing 1% a year dropping to -3% a year. When growth isn't a given or expected, a downturn is much easier to absorb since investment already contemplates potential bad scenarios. This was clearly seen in the late 90s when all over SE Asia currencies and investment collapsed when the seemingly endless boom in growth came apart for less than a year.
When the financial world tries to anticipate the next meltdown, all eyes turn to Europe. Greece needed a bailout, then Ireland did. Talk is that Spain will follow, though the country denies that it has a problem.But a few contrarians think everyone is looking in the wrong direction. Forget Europe, they say. Check out Japan instead. "A global fiasco is brewing in Japan," predicted Societe Generale analyst Dylan Grice in a recent report. "It's like the Titanic has already hit the iceberg and you know it's going to sink, you just don't know how long it will take to go down," said Vitaliy Katsenelson, a Denver-based money manager, in a recent interview that was printed in well-known analyst John Mauldin's newsletter. One hedge fund analyst I spoke to recently noted that Japan has had no fewer than nine finance ministers in the last 4½ years—one of whom apparently committed suicide after resigning.
Is Japan the next major world economy to tank? - By Bethany McLean - Slate Magazine (http://www.slate.com/id/2278792/pagenum/all/#p2 - broken link)
It's very hard to predict...but clearly, Japan is in a lot of trouble. So is most of the developed world, for that matter. Most developed countries are headed toward debt oblivion. How it all plays out is just minor details.
It's very hard to predict...but clearly, Japan is in a lot of trouble. So is most of the developed world, for that matter. Most developed countries are headed toward debt oblivion. How it all plays out is just minor details.
"Debt oblivion"? How does that work? Debt is just pieces of paper saying I'll pay you back. What if these countries just say sorry, I can't pay you back at the terms we agreed on?
In Japan's case it won't mean much. They will stiff their own citizens and then finally get to the point where they are forced to accept more liberalized trade and finance regulations with the rest of the world in order to access capital the government rarely bothers with at the moment.
"Debt oblivion"? How does that work? Debt is just pieces of paper saying I'll pay you back. What if these countries just say sorry, I can't pay you back at the terms we agreed on?.
The consequences of that would be severely unpleasant.
Quote:
Originally Posted by Willy702
"In Japan's case it won't mean much. They will stiff their own citizens and then finally get to the point where they are forced to accept more liberalized trade and finance regulations with the rest of the world in order to access capital the government rarely bothers with at the moment.
The citizens of Japan have already been stiffed for 20 years. Taking that to a new level doesn't sound so good to me.
This thread is interesting now as a result of the nuclear disaster in Japan.
Yes, the earthquake clearly increased the chances of Japan's economy totally taking. Their government debt, even though it's financed at very low interest rates, is a time bomb waiting to go off because it's 200% of their GDP and rising fast.
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