it's a paper bug's dream ..., page-12

"Someone please wake me up when you can find evidence of overall debt in this country is contracting... it's been transferred to the public sector in the form of outright bailouts and guarantees"

Chief, you could be asleep awhile, it's what the Japanese have been doing for 20 yrs... and they haven't had runaway deflation or inflation of consumer prices (but no-one's doubting their asset deflation, right?).

Private savings have funded Japan's deficits, which is now drying up as people retire and sell their bonds for food. So Japan will need to look overseas, meaning much higher interest payments... with debt default a distinct possibility.

In the case of a Japanese default occurring, Ctindale would then be correct about debt eventually contracting... but the process can take such a LONG time. A Japanese default would be bad for the Yen but ironically good for the country I think as the Government is finally forced from the economic stage.

Will America follow the Japan route? According to a poll reported on Mike Shedlock's blog, 83% of Americans are really angry about Obama's deficits, the power of unions, government employee pension entitlements etc... In other words, debt default could happen much sooner in USA if Americans rebel against never-ending deficit spending.

Rowingboat