[J_]

One could argue that you're the one that's brainwashed.

>Japan's currency will never inflate because it's always been that way

I think you're going to change your tone very quickly over the next year or so. Japan's government has never set targets for inflation until now. They are sitting on the largest debt stack to gdp in the world right now at ~245%. They spend almost half their revenues on debt service ALONE.

What happens when inflation hits two percent? What do you think all of these people holding JGBs bringing in 60bp are going to do? They're going to run, not walk.

There was a day and a half when not a single person bought a Japanese government bond because the government wasn't purchasing. The government is buying ALL and I mean ALL the bonds right now.

They are printing as much money as the fed in an economy that is a third our size (~70 billion USD per month). They are going to double the monetary base in two years.

This is clearly unsustainable and the yen is in for some serious devaluation in the very near term when people start running from JGBs.

[crdoconnor]

>>>Japan's currency will never inflate because it's always been that way

Why are you quoting me? I NEVER said this.

In fact, I said the OPPOSITE - inflation is already rising in Japan and it is likely to continue to rise.

It's hyperinflation that I ruled out.

>This is clearly unsustainable

No it isn't. It's been said that it was unsustainable 20 years ago as I said above. This is why the ratings agencies IDIOTICALLY predicted Japanese default in 1997. Cue 20 more years of zero percent interest rates. They were a little bit wrong.

It wasn't unsustainable then which is why it continued for 20 more years. And it's not now either.

[J_]

I was paraphrasing. I'll quote you directly:

"How many more decades of zero inflation / deflation are needed"

That's pretty much what you said.

So what if predictions 20 years ago have turned out to be incorrect? That's really not relevant. Japan's government has never said they will do anything to achieve 2% inflation before.

It's going to be a lot messier than you think.

[crdoconnor]

>I was paraphrasing.

No you weren't. You created a straw man and then set it on fire.

>So what if predictions 20 years ago have turned out to be incorrect?

So you're making the SAME predictions based upon the SAME model that the last 20 years has proven to be utterly wrong.

We've already proved that 20 years of deficit spending and the highest public debt in the world doesn't automatically cause hyperinflation. It doesn't even necessarily cause inflation at all.

If your model cannot sufficiently explain why that happened then your model is wrong. And it can't. If we went back in time, you'd be making the exact same predictions in 1997.

>Japan's government has never said they will do anything to achieve 2% inflation before.

Japan started inflation targeting in March 2001. Is 13 years enough time?

[J_]

> No you weren't. You created a straw man and then set it on fire.

I just quoted your exact words and you said exactly what I summarized. You're being a bit ridiculous.

It's actually a pretty simple explanation. The market can remain irrational for a long time, and Japan has never had a monetary policy as insane as its current one.

They are going to DOUBLE their money supply in TWO years. I'm not sure that you understand that massively monetizing your debt has consequences.

It's a massive experiment that is going to end badly.

[Pitarou]

Is Kyle Bass standing over your shoulder? ;-)

I think it's more like 25% of revenues, not 50%, but otherwise you're spot on. BTW, the bond futures market froze up last week, too.

But what you're forgetting is that our friend crdoconner has no problem with the idea that the government can print money and then lend it to itself at whatever interest rate it chooses. (Either that, or he doesn't understand the difference between benchmark interest rates and government bond prices.)

[J_]

Hehe. I love Kyle. He's really good at explaining himself.

I think you would have been right a couple years ago. Japan is projected to spend $257 billion on debt service this year. They bring in about $500 billion in revenues.