Friday, March 04, 2011

Japan and the Limits of Keynesianism.

Japan's budget is in a truly terrifying state. Reading about the government's behavior reminds me of the worst accounts of compulsive spenders on the verge of personal bankruptcy--a sort of "What the hell, we're screwed anyway, so let's not think about it and maybe go to Cabo for the weekend." The budget's structural position is what is known technically to economists as "completely hosed"; borrowing now exceeds tax revenue, and debt service costs now eat up almost half of the tax revenue the government collects. "Unsustainable" is too weak to describe the situation; I don't know how they're doing it now.

A cautionary tale.

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