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Saturday, October 20, 2012
20/10/2012: Is there a WW3 going on somewhere?
Is there a war of major proportions the US fighting somewhere?..
And may be Japan and Europe are all fighting for something pretty big too?
The econblog world has to start netting the total govt debt levels as permanently having Japan appear as the worst offender is highly misleading when you consider the number is almost halved when you aggregate with government entity's assets... which most others, like the Irish, dont have. Furthermore, lets aggregate with private debt and corporate debt where Japan has relatively low debt.
On aggregating debt levels: http://trueeconomics.blogspot.ie/2012/10/10102012-irish-real-economic-debt.html
On netting - I am not a fan. The issue is what defines a state asset - valuations can be dodgy, liquidity politically constrained, etc. A better proxy for economy's debt costs is net factor payments abroad. That said, have to be careful of how carry trade-financed investments are entered and also the issue of distribution of the burden of payments out and the benefits of payments in. Net factor payments metric assumes efficiency of re-distribution. However, as some recent research (more on this on the blog later today) shows, distribution is very skewed, especially in crises: one group carries the burden of debt repayments, another group carries the gains.
The econblog world has to start netting the total govt debt levels as permanently having Japan appear as the worst offender is highly misleading when you consider the number is almost halved when you aggregate with government entity's assets... which most others, like the Irish, dont have. Furthermore, lets aggregate with private debt and corporate debt where Japan has relatively low debt.
ReplyDeleteHi Jonathan, thanks for the comment.
ReplyDeleteOn aggregating debt levels: http://trueeconomics.blogspot.ie/2012/10/10102012-irish-real-economic-debt.html
On netting - I am not a fan. The issue is what defines a state asset - valuations can be dodgy, liquidity politically constrained, etc. A better proxy for economy's debt costs is net factor payments abroad. That said, have to be careful of how carry trade-financed investments are entered and also the issue of distribution of the burden of payments out and the benefits of payments in. Net factor payments metric assumes efficiency of re-distribution. However, as some recent research (more on this on the blog later today) shows, distribution is very skewed, especially in crises: one group carries the burden of debt repayments, another group carries the gains.