Krugman sez don't worry, the Japanese debt is 200% of GDP. He rigorously ignores that Japan has not yet collapsed because of the high Japanese savings rate.
Today, John Mauldin says,
"They can run such huge deficits and sustain the highest debt-to-GDP on record because they have taken their vast savings of the last 50 years to fund the government debt. But the country is aging and the savings rate will soon go negative. Couple that with recent trade deficits and the outlook is grim. They can either raise taxes and cut spending to close their 10% deficits, or print money. Or both. We can see from history how that turns out. Japan will be no different. There is no new math that will somehow enable them to avoid the fundamental consequences of too much debt. I think the yen is a massive short.
ate. Not the case in the US.
The US will have an election this fall, in part to determine how we deal with our own debt issues. If we get the deficit under control (on what I call a glide path to a balanced budget), and couple that with tax reform (see, I really am an optimist), we can avoid becoming eurozone Europe. That implies a much lower growth rate for much of the rest of the decade, for reasons I have written about at length (and that we cover in the book); but we should be able to avoid hitting the wall. If however we avoid the issue, we will turn into Spain faster than you can say spit. It will not be pretty. Ours will be a different type of depression than Europe's, but a depression nonetheless."
http://ce.frontlinethoughts.com/CT00021202NDMzMjIA.html
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