Whither Japanese Debt?

["John Gelles" <johng@xxxxxxxxxx>]

        If Keynesian principles mean anything, they mean
        Japan can monetize its debt and live happily until
        they have to do it over and over again.

        The story that seems to be prevalent here is that
        Japanese firms, bank and government are awash
        in debt. The story says some of the private debt,
        borrowed againts real estate and stock that is
        valued today below the debt for which it was
        collateral, needs to be resturctured:  exchanged
        for equity, written down, or transferred to
        government to be monetized along with the
        latter's other debt.

        If the above clears out non-performing debt
        from the private sector, and banks can then
        resume financing profit oriented opportunity,
        then some rational progress will be made to
        return to competition with other market
        players without undue pressure on that sector
        to limit necessary borrowing.

        Assume the above remedy returns Japan to
        far less growth and prosperity than before its
        capital assets bubbles burst. What shoud it do
        at macro level to get back to full employment,
        lifetime economic security, etc., and even
        greater growth than ever?

        It should applaud its saving habit -- not try to
        change it.  It should print new money, not
        borrow it, to bring down the yen and clear all
        government debt from the books.

        Then government should continue to spend on
        public infrastructure, environmental, R&D, and
        all other real needs that the private sector avoids
        for lack of profit opportunity.

        The more its people save, the more government
        can spend on need, without causing hyperinflation.

        The lower the yen the greater the opportunity for
        the private sector to profit from exports.

        In matters of real wealth, Japan can advance in
        ocean mining and ocean agriculture. It can go
        completely nuclear to end import of fossil fuel.
        It can develop a 100% safe nuclear industry
        based on smaller individual plants wholly immune
        to earthquake -- if necessary floating in
        protected bays and inlets.

        To ask Japan to finance prosperity via consumer
        spending is idiotic. The less private spending the
        better. Public spending can ensure profits, full
        employment and production of sensible end
        products.

        And as new debt build up again and capital
        assets again inflate, the next time their bubbles
        burst a cure will have already been found.

        Meanwhile private postal saving can be indexed
        for inflation in essential living expenses (food,
        health, shelter, etc.) and lifelong economic
        security can be experienced by one generation
        after another.

            John Gelles