gold, page-219

No I'm not being alarmist - you questioned why people don't worry about Japan's government debt (I gave you a sound economic reason why - they are a creditor nation nor a debtor nation).

And in doing so I posed a similar question back to you: why are more Australians not talking about our own debts given that our are FAR worse?

I know the media is not great at feeding people useful information, but the reality is everything within a nation is interconnected and to look at any one thing in isolation (like government debt) doesn't offer the whole story.

Ie a government can only pay its debts by taxing its citizen and corporations, so if a government has no debt but its citizens and corporation have foreign debt up to their eyeballs then there is little capacity for the government to increase its debt position because it can't raise taxes to pay it back in the future and if any will need to bail out its citizens and corporations if they can't pay their debts.

On the other hand if a government has a high debt, but its citizens and corporation have low or no debt then the ability of government to service the debt is real.

It's the same as corporate profits coming from household and government spending, so if one or both of those entities has to reduce spending due to debt burdens then that affects corporate earnings.

It's all interconnected. Nothing is isolated.

Yet too many people look at household, government and corporate debt in isolation, when they actually depend heavily on one another.

In Australia's case low government and moderate corporate debt levels allowed Australia households to leverage themselves into being the most highly in-debt household sector in the world.

In Japan's case, yes their government has a large debt, but as a nation their citizen and corporations are wealthy and export a lot of capital to the rest of the world.

To work out who owes the world what a country's financial position is best indicated by its Net International Investment Position (because it takes into account the debt and equity of all the stakeholder).

In Japan's case, it has the world's largest positive NIIP, and Australia (relative to its GDP) has one of the worst in the world with the only countries being substantially worse than Australia are:

Iceland
Cyprus
Greece
Portugal
Ireland
Croatia
New Zealand
Australia

So not exactly great company to be in (and many of those are at least supported by a wealthier benefactor - ie Germany/EU).

That's why during the GFC (or any risk off environment like currently) the Yen surges (and the AUD falls), because creditor repatriate their money they have leant or invested abroad and those capital flows increase the value of their currency and weaken the currency of the country from which it left.
So I'm not being "alarmist", an Australian currency crisis may not be imminent or even eventuate (and it certainly helps when you're second largest gold producing nation in the world), but to avoid it Australia will need to state exporting a lot more goods and services of value to the world and cut imports markedly to start paying down our foreign debt (which as of a couple of months ago was officially over $1T!). This will be a big hit to the lifestyles we have been used to.

Owning gold as an Australian will likely hedge some of that impact.

These things normally become a more pronounced issue when the starts producing a twin deficits (government deficit and current account deficit), particularly if it exceeds 10% of GDP (which Australia is close to doing) as it become more apparent to the creditors at that point that the borrower is becoming high risk.

So it's important to keep an eye on our current account and the state/federal government deficits, which I'm not confident about given the recent contraction in commodity prices and maybe more importantly the major drop in real estate transactions volumes in the last 3 - 6 months (which state government depend on a significant amount of their taxes via stamp duties)...

Watch this space.