Jeeeeb comments

Posted in: Pepsi and Gundam join forces to deliver new drink See in context

So basically they've developed a new way to promote obesity and diabetes?

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Posted in: South Korea could be model for Japan’s economic development See in context

@Koko1

Government debt doesn't depend solely on GDP growth, but GDP growth IS a major factor, which you conveniently dismiss.

No I don't. The statement "Government debt doesn't depend on GDP growth" said in response to the statement "Japan’s GDP growth rate is -5.2%, which means Japan’s debt is still increasing." is quite correct. Japan's GDP growth rate being -5.2% doesn't =mean= the debt is increasing. Drawing such an inference is completely incorrect. That said it is almost certainly a contributing factor.

know in Japan is not the case. As the author points out, Japan has a 200% debt to GDP ratio which means growth must be greater than 200% of its current rate just to break even - not likely in the near future.

Japan doesn't have a "debt rate" of 200%. Its =total debt= is around 200% of GDP. Now I believe what you're referring to is the idea that if the rate of growth of the debt is less than the GDP growth rate then year by year the debt will decrease as a percentage of GDP and therefore be sustainable. This would require the government to decrease the deficit.

I didn't look up wikipedia, but again, Korea's growth rate would have had to increase faster than its debt rate, all things being equal.

This is just plain wrong. There's no rule that says the debt growth rate has to be less than the GDP growth rate. In fact the exact opposite happens all the time.

Now whether this is sustainable or not is a different question. The sustainability of debt depends on the governments ability to refinance it on a yearly basis. This depends on the size of the debt relative to the size of the budget which depends on GDP and tax rates, bond rates (yields),and the structure of the bonds already held. For example if the government has most of its debt held in 30 year bonds, even if bond rates hit a temporary high they'll have much less debt to refinance and so could theoretically wait for bond rates to drop.

As a generalization of this there is a theory that if the debt grows at less than GDP grows at in the long term then it is sustainable.

Keeping expenditures low is effective for debt reduction (supply side), but also requiring less taxes is necessary for growth stimulation (demand side) - BOTH factors are essential.

This is why Japan should not raise taxes, as the author said - taxes lower the debt rate, but at the expense of the growth rate.

More of this lower taxes and economic growth will magically go up stuff. It's possible, but it's also possible for the exact opposite to be true. The US went through a golden-age of solid economic growth, real income growth and low government debts in a time when taxes where much higher than they are now.

In accounting terms, you would be increasing assets while increasing liabilities - pushing on a string.

This is also just plain wrong. A Liability in accounting terms is something you have to pay. Even assuming it did lower the growth rate that wouldn't create any liabilities.

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Posted in: South Korea could be model for Japan’s economic development See in context

And both economies have been characterized by large family-owned mega businesses with strong political and banking ties, with the “chaebol” in Korea and the “keiretsu” in Japan. The similar nature of these two countries’ economic cultures makes them ideal for comparative analysis.

Zaibatsu were Japanese family owned mega-corps (Mitsubishi .etc.). They got were broken up after WWII. Keiretsu is an ambiguous word referring to vertically and horizontally linked groups of companies. Most horizontally linked Keiretsu were formed by the remnants of the old zaibatsu forming partnerships. They're not family owned and aren't even actual corporations (They're corporate partnerships) and have been decreasing in relevance. Vertical keiretsu refers to the habit of some large Japanese manufacturers of splitting their production processes into wholly owned subsidiaries.

And while Korea’s GDP growth is slightly positive at 0.2%, Japan’s GDP growth rate is -5.2%, which means Japan’s debt is still increasing.

Government debt doesn't depend on GDP growth. The economy can be growing and government debt increasing (America and many other countries) or shrinking. It depends on whether the government is willing to keep expenditures low so they can pay down the debt. For the record a quick look at wikipedia shows a government deficit in Korea despite solid economic growth in 2009, meaning that Korean government debt actually increased, contrary to the implications of your statement.

The government’s first priority should be to stimulate its economy, not to pay off its public debt. Prime Minister Kan could stimulate growth by lowering taxes to encourage consumer spending, which could reverse the deflationary spiral that created the debt in the first place.

The government has been doing that for 20 odd years. That's why they ended up with this huge debt in the first place! While stimulating the economy would be nice they also need to consider the risk of a loss of confidence in government bonds.

Finally for the record, Korea has a lower birthrate than Japan. Once the current generation starts retiring, things will be looking a lot less rosy for them. The pain Japan is going through now is coming soon for Korea.

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