Both sides of the equation are subject to wildly varying interpretations, many of them decidedly arguable against the accepted norms of economists and globalist thinking.
Japan, a victim of its own hubris and misguided principles in banking and governance for the past forty years is widely believed to claim ownership of most-indebted developed nation on the planet status. Its running Debt:GDP calculus falls in the range of 266%, by far the highest among developed and emerging countries.
In other words, if the government of Japan endeavored to pay down its debt or to retire it altogether, It would require more than 2 1/2 years of the entire country's gross production - all sales, transfers, payments in both the private and public sectors - to do so. It's an absolute absurdity to consider. The total cost of every plate of sushi, every circuit board or car or government payout for anything would have to go toward debt payment.
It's obvious to anyone who's ever tried to balance a budget that included a job, a mortgage, car payment and maybe some credit card revolving debt that to do so would require an impossibility. You would not be able to buy food, pay for utilities, or spend any money on anything other than debt owed. After a week, you'd be unable to proceed for the simple fact that you'd be dead. So it is with a nation's debt. It's simply not possible to pay it all back quickly, if at all. In fact, the debt of all developed nations continues to grow, not contract. There is not a single developed or emerging economy that is even attempting to address these odious debt loads.
They cannot ever be repaid, thus, they never will be. They will only grow and grow until the interest alone, even at a paltry 0.01% becomes an unbearable burden. While Japan may be the worst-case scenario, the EU, USA, Great Britain, India, and China are on the same pathway of economic destruction. The ability by central banks to conjure money (currency) out of thin air and then lend it at interest to any interested party - usually a government entity or multi-national business concern - has put the entire planet into an untenable condition of insolvency from which there seems to be no escape.
The calculation of Debt:GDP is, however, only the beginning. What's not included in that formula is personal and business debt. Most people, whether they own a home or rent, are insolvent. A seemingly successful family with two-wage earners living in a tony suburb are probably in over their heads with a massive mortgage on their property, probably car payment, maybe a student loan and possibly even some outstanding credit card debt. They're underwater. Should one of them lose their job, the result would likely be the loss of their home and most of their good intentions. There simply wouldn't be enough money to pay all the bills. The result, likely after months if not year of struggling to make ends meet, would be a visit to the bankruptcy court, whisking away all the debt by yet another government fiat, ordering your debts dissolved.
The same is true for many of the largest companies listed on the various stock exchanges. When measuring a company's net worth, one will find, invariably, that the amount of debt exceeds the company's equity, usually expressed as shares of stock, plus retained capital in various assets. While these companies routinely return some shareholder value in reported earnings, their bottom lines are a disaster common to the business world. In Wall Street parlance, this is known as debt to equity. Many firms are overweighted in debt. When they payments come due, they borrow more. The Federal Reserve and other central banks enable such behavior by buying up the debt of even the most egregious debt offenders.
There are some, though not many, companies that aren't underwater, that have large cash hordes above and beyond their debts. These would be the Googles, Apples, Berkshire-Hathaways, and Amazons of the world. They accumulate cash at such a mind-boggling rate that they don't need to borrow at all to meet payroll, normal operating expenses or even business expansion. They, and the central banks effectively own the world.
Taking into account all the individual, business, and government debt (right down to state and local levels), the total level of indebtedness for any country dwarfs the oft-cited Debt:GDP formula making the complete condition much worse than the superficial analysis touted by experts and TV talking heads lead the public to believe.
Japan's situation is at the leading edge. The government is completely insolvent, though their investments cover the spectrum of financial instrument madness. They own debt. They own mortgages. They own stocks. The Bank of Japan (BOJ) owns a piece of just about everything. They cannot collapse because the result would be a global catastrophe, but the reality is that they are the linchpin of the financial system. Their hands are tied into every aspect of modern life, with emphasis on their own population. The Japanese people, surprisingly, are savers, not spenders, which is cited often as a major reason the Japanese economy has stagnated for so long.
That may or may not be true, but the fact of the matter is that many astute Japanese households don't trust the financial system and are invested in hard assets beyond the currency of the yen, primarily gold. Some individuals in Japan are like the "preppers" in the United States. They've prepared for what they see as the inevitable decimation of the global financial system.
There's a certain mathematical probability to all of this and the Nikkei 225 is a proxy for the world's bankrupt, zombified status. Should the Nikkei break down, so with it goes the economy of Japan, and like dominoes, the rest of the world.
Those of us in the United States or Europe focus on our own stocks, our own trades and economy, our own problems, but it would be wise to keep a jaded eye on our neighbors across the seas.
Approaching the final trading day of April, stock futures have turned ugly, with the Dow sporting a -145 and NASDAQ futures off nearly 100 points. The Nikkei closed down 241.34 points, at 28,812.63, well off the February 16 high of 30,467.75, a 5.4% decline over the past 2 1/2 months. Should the Nikkei's losses extend to 10% or 15%, the effects will be felt far and wide. Stay tuned.
Tomorrow is May 1. Enjoy the Kentucky Derby at Churchill Downs and have a great weekend.
AT THE CLOSE, THURSDAY, APRIL 28, 2021:
Dow: 34,060.36, +239.98 (+0.71%)
NASDAQ: 14,082.55, +31.52 (+0.22%)
S&P 500: 4,211.47, +28.29 (+0.68%)
NYSE: 16,376.00, +53.87 (+0.33%)
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