The official U.S. unemployment rate is 9.1% but underemployment is probably between 25 and 30%.
Interest rates have been low in Japan since at least 1995.
So I ask again, how is Japan doomed? How is the U.S. doomed?
Many people seem to think that high levels of debt-to-GDP will lead to doom, but there is no evidence of that in Japan.
What does lead to doom? Either not having your own currency or not having control over your own currency appears to lead to doom.
We’ve all heard about the PIIGS (Portugal, Italy, Ireland, Greece, Spain) and their economic troubles. However, none of those countries have their own currency and so can’t be compared to either the U.S. or Japan.
Germany in 1914 may at first glance appear similar to the U.S. today. As you can see from the article linked below, it had just abandoned the gold standard and had a relatively strong currency (German Mark) which traded at around 5 German Marks to one dollar.
So it was Germany’s massive deficit spending which led to hyperinflation, right? It doesn’t look like it. Instead, it looks like Germany effectively lost control of their currency because they were forced to pay war reparations in gold.
No one is militarily strong enough to force the U.S. to repay our debts with some real, physical asset, so the U.S.’s creditors will have to take our paper money as repayment. Germany of course had many other issues that the U.S. doesn’t currently face due to the fact that it just lost World War I and also due to its geographical location.
I don’t see any evidence that a high debt-to-GDP ratio leads to doom. As long as a country has its own currency and can repay its debts with that currency, high debt-to-GDP ratios do not appear to lead to doom.
The U.S. and Japan might continue to do just fine with much higher debt-to-GDP ratios. 10:1 debt-to-GDP anyone?
