Guest Post: Japan's Perpetual Motion Debt Machine

"Japan's Perpetual Motion Debt Machine

Perpetual motion is impossible, but Japan has managed the illusion of perpetual debt for 20 years.

Perpetual motion--a machine which produces more than it consumes indefinitely, without any visible energy source--is impossible. So too is an economy which consumes more than it produces and fills the gap with debt. Yet Japan has maintained the illusion of a perpetual motion debt machine for 20 years.

Back in 2001 I wrote an article describing Japan's Runaway Debt Train: 40% of its annual budget was borrowed, and much of its tax revenues were gobbled up by interest payments on its mind-boggling public debt.

Nine years later, nothing has changed: welcome to perpetual motion. Japan's government approved a record 92.4 trillion yen ($1.1 trillion) budget for the 2011 fiscal year, of which 44 trillion is borrowed, 7 trillion is lifted from various trust funds and a mere 41 trillion is tax revenues.

So roughly half (48%) of Japan's Central State spending is borrowed.

So Japan has borrowed almost half its government expenditures for a decade or so. Even at super-low bond yields of around 1%, it now costs 21 trillion yen to service that ever-growing mountain of debt. So 23% of the government's budget is spent on servicing debt. Roughly half of all tax revenues (51%) are devoted to paying interest on public debt.

The more Japan borrows, the more revenue must be devoted to paying interest.

Japan's total bond issuance in fiscal 2011, including roll-over of existing bonds and the additional 44.3 trillion, is 169 trillion yen--184% of the entire annual budget.

Despite a decade of vast "pump-priming," prices are still declining in Japan: the core consumer price index, which doesn’t include volatile fresh-food prices, was 0.5% lower in November than in the year-earlier period. Compared to October, the core CPI lost 0.1%. (Apparently the Japanese government has adopted the useful legerdemaine of "core" and "non-core" consumer price indices.)

Has Japan really invented a perpetual motion debt machine, in which consumption can exceed revenues by 50% forever?..."

at  http://www.zerohedge.com/article/guest-post-japans-perpetual-motion-debt-machine?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29