Can Japan Get Away With A Debt Wipeout? (w/ Bill Fleckenstein) | Interview | Real Vision™


The idea is that Japan has an unserviceable,
unmanageable amount of debt. Their debt-to-GDP is twice as high as say
the US is and anybody else. And there’s no way this is ever gonna’ be
paid back. And I, and I’m sure others, have wondered
how will this end? And what we are seeing with the world turning
to QE and getting standing ovation for doing so, now the BOJ has 42% of the outstanding
debt. And at the rate their buying it, it wouldn’t
be difficult to see how they could get to 50%, or 60%, or some other big number. So, the question is, what would happen if
they said to the minister of finance, look, we don’t need to give this money back. We will exchange our JGBs for a 200-year one
basis point bond or a 200-year– 0%. Something that they could call an asset. Some people said this can’t possibly work,
because then BOJ’s assets would decline. Well, first of all, they have a printing press,
remember? It doesn’t matter. Everyone worries about some fixed asset that’s
forgotten. They all have printing presses, and they use
them, and no one seems to care. In a different environment, they might care,
but that’s not the one we’re in. So, let’s say they get an asset back that
they could say is worth 100 cents on the dollar. So, boom! Now, all of a sudden, let’s just take it to
its logical conclusion. They buy 100% or 70% or 80%. How to they get to 100%? Because at some point–
They just step on the gas. But they just say, right, we’ve got to 70%. We’ll take all the rest. Well, we could come up with all kinds of fanciful
stories. But let’s just say that we have
a financial asset in the world, and we can start QE again here. And it doesn’t really matter
how they get to that point. The point becomes if they get there, how does
it play out should they try to do that? And it’s a really fascinating question, and
I would love to have this discussion with every smart person I could find, because the
way I see it when I walk myself through the steps is, OK, let’s say they say, OK, we’re
going to tear this paper up, and now the BOJ has got a new 200-year, one basis point asset. The debt service in Japan is now totally manageable. So, there’s no fear of a debt-inspired deflationary
collapse. The first reaction, people would say, well,
the currency would be worthless. And I say, but why would it be worthless? Because first of all, these currencies are
all worthless.

4 comments on “Can Japan Get Away With A Debt Wipeout? (w/ Bill Fleckenstein) | Interview | Real Vision™”

  1. Mike R says:

    Austria already has a 100-Year bond that was offered in September 2017. My best guess is during the next crisis, central banks including the BoJ, ECB, and the Fed will buy enough debt across the entire curve and as the debt on central bank balance sheets matures it will be rolled over into 100-Year bonds (introduced by that time) and then central banks just let inflation over time destroy the debt on their balance sheets. After enough debt across the entire curve has been purchased by central banks, rates will be allowed to normalize to historically average levels that the governments will be able to service. If such actions cause any major currency to weaken enough to harm confidence and threaten the system, central banks will openly or covertly support each others currencies and maintain the status quo. I don't see an alternative for dealing with a sovereign debt crisis. Does anyone else have a more likely scenario? Thank you.

  2. AD says:

    "First of all, these currencies are all worthless"…..that says it all.

  3. Ben McClure says:

    So, we are supposed to give debt relief to all you selfish, stupid people who bought McMansions, Lifted 4×4, endless credit debit for 30 yr old whiskey and over priced NFL tickets while the few of us responsible citizens lived within our means and did not live a life of over indulgent lives like a Roman emperor Fuck Off, Let It All Meltdown and the strong will survive!,

  4. Askformoreinfo whichyouwontget says:

    The smart question to ask was: "Can USA get away with a negative NIIP (aka real debt vs Japans positive NIIP though they might have 250 debt to gdp)" Clickbait, misinformed, unseen, unread, unheard and downvoted.

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