I was listening to Paul Krugman and realized why the GOP wants the U.S. to default on its debt

[grantcart]

42. Well atleast your consistent.

Consistently factually wrong, completely off point and filled with nonsensical jibberish.

1) You don't source your graph but I am certain that it is combined savings rate and not personal household savings

Here are the official OECD figures which form the industries accepted baseline data. It shows that Japan's personal household savings has remained at a rate of twice that of the US for some time.

http://econ365.files.wordpress.com/2008/10/gross-savings-rate.pdf

While it is true that the Japanese rate is consistently twice or more than the US it has declined.

Here is a graph that shows that the rate of the Yen has also declined and if you look at the rate of decline in personal savings in Japan it matches identically with the decline of the strength of the Yen. The correlation between the decline in personal savings (still at twice the rate of the US) and the strength of the Yen proves my point.

http://www.indexmundi.com/xrates/graph.aspx?c1=JPY&c2=USD&days=5475

2) The following statement "Japan pays low rates because they are sovereign in their currency" is typical jibberish that we have become so accustomed to in your posts. All currencies are "soveriegn" and Japan's is no more or less soveriegn than any other country that has a publicly traded currency.

3) And then there is this

(Japan has) a strong central bank

Of all of the silly statements I have read by people trying to make serious statements and grasping for a series of words that they think sound like something informed and significant but are complete and utter rubish this one has to take the cake. Japan is well known for the central bank and the ministry of finance colluding to allow banks to maintain unrealistic levels of non performing loans. It is understood to be one of the unchangeable cultural problems of the national banking system in Japan.

I like Japan. My corporation had a majority of Japanese investors in it. I am aware of no one, until this post, that has ever argued that Japan has a strong national bank. One of the main causes of the "lost Japanese decade" is that because bankruptcy is such a drastic social event (one of my customers was the largest Japanese furniture stores in Tokyo. He sold the rights for what was to be the McDonalds in Ginza for a million dollars. I visited him once and the local tax authority was giving him an award for being the most cooperative businessman in that district for the year. Two years later the economy slumped and he lost everything. I mean everything. Not only did he lose his home and all of his assets he had to move his family into a relative's home under what was akin to house arrest. Letters I sent to him were returned and I was only able to send him a Christmas card.) Because suicide is so high among people going bankrupt the Japanese national bank has allowed the banks to carry non performing phantom assets for a decade. It is the primary reason why our recessions are so hard and fast going down and so quick (by world standards) to return.

But let's not take my anecdotal personal experience of the Japanese banking system have any weight, let's see what google brings us under "weak Japanese national bank"

http://entire.fxclub.com/dj-forex-focus/review3914/

Japan Suffers For Having A Weak Central Bank. By Nicholas Hastings

Currency markets are one place where reputation matters.

And Japan is finding this out the hard way.

The country is currently under the kosh with growth forecasts being cut and exporter share prices tumbling sharply.

Why?

Because the yen is at the strongest level it has been against the dollar since the Second World War and there is nothing the Japanese can do about it.

http://web.econ.keio.ac.jp/staff/masaya/dl/forthcomingpaper/sbc.pdf


This paper investigates theoretically and empirically why Japanese banks
continued to extend bad loans during the 1990s. The discretionary enforcement of
minimum capital requirements is found to be the primary reason for this perverse
lending behavior by Japanese banks. Our theoretical analysis shows that when the
government imposes high capital adequacy standards but banks can easily
manipulate regulatory capital, poorly capitalized banks tend to roll over bad loans
in order to maintain their regulatory capital ratios. This managerial incentive is
strengthened when banks are allowed to issue subordinate debt as a part of
regulatory capital. Our empirical results are consistent with the hypothesis that
three tiers of agents – the government, banks, and borrowing firms – faced soft
budget constraints. Japanese banks were induced to bail out firms by exploiting the
discretionary enforcement of minimum capital requirements, which eventually
prolonged the non-performing loan problem.
*

The recent Japanese economic experience has been dismal. Growth has
collapsed, deflation has taken hold and the financial system is in shambles.
We begin our story by documenting the macroeconomic troubles that
appear to have triggered the collapse of Japan’s financial sector. We argue, however,
that the macroeconomic factors alone are not likely to explain the full extent
of the problems in the Japanese financial system.We then turn to the sector-specific
factors that are facing the Japanese banks, insurance companies and government
financial institutions, which together constitute roughly three-quarters of the financial
system.

. . . .

What explains the ever-greening? One explanation is implicit or explicit
pressure from the government not to force their customers into bankruptcy, where
significant job losses are expected. Tett (2003, chapter 17) describes the pressure
that Shinsei Bank received from its regulators to support a number of distressed
companies.

. . .

Banks in Japan are known for their
propensity to underreserve against recognized bad loans. For instance, they have set
aside reserves sufficient to cover between 40 percent and 60 percent of bad loans
over the last few years, whereas U.S. banks tend to hold closer to 160 percent in
reserves (Fukao, 2003a). Fukao (2003c) estimates that Japan’s banks are currently
short at least ¥5 trillion in loan loss provisions. As we discuss below, a bigger
problem is that Japan’s banks have more bad loans than the banks have revealed—
although considerable disagreement exists over the size of the underreporting


We see the Japanese financial system as being in very dire condition. Our lower
bound estimates suggest that the taxpayers will ultimately end up spending at least
another ¥20 trillion to clean up the banks—and quite possibly as much as
¥40 trillion. Several more major insurance companies appear to be poised to
default on their promised payments to policyholders. The government sponsored
Fiscal Investment Loan Program is hemorrhaging cash and is probably going to
leave the taxpayers owing at least another ¥78 trillion.

Not only is the BOJ criticized for its lack of action but that when it does act it does it secretly

http://seekingalpha.com/article/312901-bank-of-japan-s-stealth-interventions-amount-to-secret-yen-peg

The problem for the Bank of Japan is that its previous efforts to curtail the surging yen have been largely ineffective. True, the yen dropped precipitously in the immediate aftermath of Japan's late October $100 billion direct intervention. However, it began to creep back up shortly thereafter in the face of safe-haven buying attributable to rising international fear regarding Europe's spiraling debt crisis. Faced with a decision between raising the ire of its G7 partners by opting for another mammoth unilateral intervention and further frustrating Japanese manufacturers by allowing the yen to resume its ascent, the Bank of Japan has instead opted for a series of 'stealth interventions' in which it acts "secretly and keeps the amount small" according to Reuters.

Most recently, in what might be viewed as an act of desperation, the Bank of Japan is reaching out to banks in an effort to convince financial institutions to intervene on its behalf through their overseas branches. According to the Wall Street Journal, the new tactics are a way for the BOJ to "undertake 'secret' intervention during European or North American trading hours."

Well the ineffective, weak, colluding Governors of the Bank of Japan will find that they now have one admirere, lol.