July 16, 2015
- Greek Debt/GDP Ratio is currently around 180% and, more importantly, the Greek Government Debt/Government Tax Receipts Ratio is 600% (6 x). These debt ratios will, of course, rise further after the bailout.
- Greece is close to primary budget balance (it was 1% in primary surplus late last year and has a cyclically adjusted primary surplus of approximately 6% of GDP). The Greek 10 Year Yield is around the 12% level.
- Greece has a current account surplus.
- Japanese Debt/GDP Ratio is currently 230% and, more importantly, the Japanese Government Debt/Government Tax Receipts Ratio is 2200% (22 x).
- Japan has a primary budget deficit of 7% of GDP and a cyclically adjusted primary deficit of 6% of GDP. The Japanese 10 Year Yield is 0.44%
- Japan has a current account surplus.
Japanese Debt is approximately 22 x government tax receipts while in Greece it is 6 x government tax receipts. Japan also runs substantial structural deficits. This raises the question, why is Greece in crisis and Japan, with yields near zero, not?
Simple, monetary autonomy – having your own central bank. The chart below shows the benefit of this.
The Bank of Japan is accumulating vast amounts of bonds, it has gone from owning 7% of the outstanding stock two years ago to almost one quarter today.
So much for monetary autonomy, you truly can pretend there is no problem when you have a friendly central bank to buy your debt…
MONOGRAM CAPITAL MANAGEMENT