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Discussion and Debate
Discussion and Debate
Politics
General Political Discussion
Economic Impact of Debt.
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<blockquote data-quote="Richard T" data-source="post: 77524848" data-attributes="member: 408298"><p>I was going to say that Japan's debt to GDP ratio was much higher than the USA, over 200% versus the USA at 120%. Thus, at a glance it would seem that Japan will falter first or that at a minimum the USA will have more room to run deficits. This still could be the case, as Japan's currency is devaluing pretty fast. This article looks under the hood though at the comparison and states the USA situation is likely not similar. <a href="https://www.stlouisfed.org/on-the-economy/2023/nov/what-lessons-drawn-japans-high-debt-gdp-ratio" target="_blank">What Lessons Can Be Drawn from Japan’s High Debt-to-GDP Ratio?</a></p><p>Inflation likely is going to be the way out. Even ten percent for a few years and the debt becomes easier to pay off. Japan too basically refuses to raise interest rates, so the interest payments are low while inflation eats away at the bigger numbers. One could perhaps engineer an easier path, but this could only be done if we (or Japan) would lower the annual deficits to a more controllable number. There is no will to do this, so it seems at some point we will have some serious pains. Your author is right too that defense will either suffer or if there is a war where defense spending is ramped up, the situation will be far worse.</p></blockquote><p></p>
[QUOTE="Richard T, post: 77524848, member: 408298"] I was going to say that Japan's debt to GDP ratio was much higher than the USA, over 200% versus the USA at 120%. Thus, at a glance it would seem that Japan will falter first or that at a minimum the USA will have more room to run deficits. This still could be the case, as Japan's currency is devaluing pretty fast. This article looks under the hood though at the comparison and states the USA situation is likely not similar. [URL="https://www.stlouisfed.org/on-the-economy/2023/nov/what-lessons-drawn-japans-high-debt-gdp-ratio"]What Lessons Can Be Drawn from Japan’s High Debt-to-GDP Ratio?[/URL] Inflation likely is going to be the way out. Even ten percent for a few years and the debt becomes easier to pay off. Japan too basically refuses to raise interest rates, so the interest payments are low while inflation eats away at the bigger numbers. One could perhaps engineer an easier path, but this could only be done if we (or Japan) would lower the annual deficits to a more controllable number. There is no will to do this, so it seems at some point we will have some serious pains. Your author is right too that defense will either suffer or if there is a war where defense spending is ramped up, the situation will be far worse. [/QUOTE]
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