Japan's Money Is Collapsing

The developed, undeveloped, Argentina, and Japan.

And that's because Japan has broken every rule of economics and still somehow got away with it.

Because Japan has more government debt relative to the size of its economy than any developed country in the world.

Over 200% of GDP.

Basically, that means Japan has more debt than Greece when Greece collapsed.

They have more debt than any country that's ever hyperinflated.

So any textbook would tell you a country like that should have collapsed decades ago.

But Japan somehow did not.

Now, in the 1980s, Japan was what they called a miracle economy.

Because at one point, the land under the Imperial Palace in Tokyo was worth more than all the real estate in California.

And then, in the early 90s, that bubble popped.

And Japan went into something that no modern economy had ever experienced, which was three decades of deflation.

The price of stuff did not go up.

And their incomes didn't go up.

So to fight it, the Bank of Japan lowered interest rates to zero and basically left them there for 30 years.

Money in Japan essentially became free to borrow.

And when money's free to borrow, a 200% of debt to GDP doesn't really matter because the interest cost of having that debt is basically nothing.

Now, there's a second reason why Japan never collapsed, which is because of who Japan owes all that money to.

You see, when Greece collapsed, they owed money to foreigners.

When Argentina defaulted, they owed money to foreigners.

Foreigner countries and investors, they panic.

When they panic, they sell their assets.

And that's when it's game over for that country.

But Japan owes the money to Japan.

The Bank of Japan itself holds about 48% of all Japanese government bonds.

The developed, undeveloped, Argentina, and Japan.

And that's because Japan has broken every rule of economics and still somehow got away with it.

Because Japan has more government debt relative to the size of its economy than any developed country in the world.

Over 200% of GDP.

Basically, that means Japan has more debt than Greece when Greece collapsed.

They have more debt than any country that's ever hyperinflated.

So any textbook would tell you a country like that should have collapsed decades ago.

But Japan somehow did not.

Now, in the 1980s, Japan was what they called a miracle economy.

Because at one point, the land under the Imperial Palace in Tokyo was worth more than all the real estate in California.

And then, in the early 90s, that bubble popped.

And Japan went into something that no modern economy had ever experienced, which was three decades of deflation.

The price of stuff did not go up.

And their incomes didn't go up.

So to fight it, the Bank of Japan lowered interest rates to zero and basically left them there for 30 years.

Money in Japan essentially became free to borrow.

And when money's free to borrow, a 200% of debt to GDP doesn't really matter because the interest cost of having that debt is basically nothing.

Now, there's a second reason why Japan never collapsed, which is because of who Japan owes all that money to.

You see, when Greece collapsed, they owed money to foreigners.

When Argentina defaulted, they owed money to foreigners.

Foreigner countries and investors, they panic.

When they panic, they sell their assets.

And that's when it's game over for that country.

But Japan owes the money to Japan.

The Bank of Japan itself holds about 48% of all Japanese government bonds.