This article actually never explains how Japanese debt could wreck the world economy. In addition to relying on a debt/GDP ratio that we've said is bogus, it also seems to rely on a model of high public debt combined with (relatively) high interest rates (and a current account deficit)--i.e. the U.S. in the 80's.(Or is this just rhetoric from start to finish--i.e. big debts are bad.) (And as if that were a danger--isn't widely recognized that the U.S. deficit spending actually drove the world economy for a moment in the 80's?) There doesn't seem to be any problem in the market with selling JGBs with .96% returns. And Adam Posen has recently argued that the perception of huge public spending outlays is actually that--perception. Actual expenditure has been about a third of what's been budgeted. He also argues that a real domestic demand stimulus is what's needed to restimulate normal rates of GDP growth in Japan. (Asahi Shimbun today says that Japanese consumption went down by 1.2% last year--the seventh straight year of decline.)
So I wonder what the scenarios of world-economy wrecking these guy are imagining. Anyone got any ideas?
All best Christian