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Old 25.11.2019, 15:17
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Currencies and national debt

I know that a few people on here work in the currency markets, so maybe they can help explain to me the following:

1. Japan has huge debts, mostly domestically held. The Yen remains a 'safe-haven' currency. Japan has done what looks like monetization, yet everybody seems relatively sanguine about it. Why?

2. Do these factors also apply to the US? While the US seems earlier in the journey, you could imagine the policy of QE (or not-QE, wink wink) to continue to apply and debt growing as a proportion of GDP. Yet the USD remains quite high. Interest rates are also 'high' (let's call anything not close to zero or negative 'high' for now ) though maybe if a recession hits that will change.
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Old 25.11.2019, 17:50
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Re: Currencies and national debt

Huge debts is one thing, being considered reliable in paying them off is what actually counts and Japan and the US have no problems paying what they need to pay. And if needed they could quickly get extra billions by raising taxes or cut in some spendings so there is no worry and their coins are considered trustworthy.
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Old 25.11.2019, 18:17
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Re: Currencies and national debt

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Huge debts is one thing, being considered reliable in paying them off is what actually counts and Japan and the US have no problems paying what they need to pay. And if needed they could quickly get extra billions by raising taxes or cut in some spendings so there is no worry and their coins are considered trustworthy.
About half of US federal public debt is held by... "Federal Reserve and intragovernmental holdings". I.e. the money printing press.
Taxes and spendings are a mere means to decide who pays how much and who gets the money, but the feral gov't has effectively appropriated the decision how much of GDP it can spend.
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Old 25.11.2019, 18:50
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Re: Currencies and national debt

Back in the middle of the last recession Ireland's debt per capita was at 124% of GDP... I Swiss work colleague of mine was very enthusiastic about Irish bonds and was pushing them to all his clients with a simple argument - Ireland was a net exporter and had been for over 25 years, on that basis he figured that as long as you were selling more than you were buying you will eventually work your wait out of any problems... well he was right and those that listened to him did very nicely - today Irish debt per capita is down to 63%.

Ability to repay debt is a big factor, although it had a few bad years recently, generally speaking it is a net exporter and most of it's debt nationally held, so it is in a good position.

I personally feel faith in the US is misplaced and is more based on tradition than cold hard facts. It has not produced a positive balance of trade in over thirty years and it's economy is heavily depended on the sale of debt to third countries such as China. Were OPEC to start trading oil in sterling or Euro or China to start dumping US treasuries.... things could go very nasty for the US....
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