The Next Country To Collapse Isn’t In Europe!

• The Next Country To Collapse Isn’t In Europe! 
  by Joseph Hogue, http://www.streetauthority.com/home 
  Despite the recent market correction threatening the four-year bull market, investors should be partying like it’s 2006. Easy-money programs from the world’s central banks and a recovering global economy could push stocks and other assets higher. So why is the comparison to 2006 relevant?
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  September 2006 was two years before the collapse of Lehman Brothers and a 28% drop in the markets in the span of less than a month. And two years is about the amount of time we may have until the next great market crash.
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  So what will be the proverbial straw that breaks the market’s back? Europe? China? Market contagion from a collapse in commodities prices?
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  None of the above. While the rest of the market worries about those issues, there is a bigger threat that could pull down world markets and change the way we measure safety investments.
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  The next great collapse is unlikely to come from any of these problems. It is more likely to come from a country that has been a haven for investors for more than 30 years and accounts for nearly 10% of world growth.
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  A look at this country’s debt situation, especially relative to the United States, is truly amazing. This country is paying 21% of government revenue on interest payments to support a 236% debt-to-GDP ratio. With annual spending twice as high as its revenue, the government is running a deficit of $455 billion a year and adding to its $11.2 trillion debt. This is all before the monetary stimulus programs announced recently by its central bank.
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  If you thought the United States government was a financial basket case, Japan is exponentially worse. A collapse in the yen and the stock market is all but certain — the only question is when.
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  The recent easy money program by the Bank of Japan gives us a good idea of the timetable. The announcement by the Bank of Japan to buy 7.5 trillion yen (about $75 billion) in bonds per month and double the monetary base during the next two years is exponentially higher than anything the country has tried in the past two decades. If you think U.S. Federal Reserve Chairman Ben Bernanke and the Fed’s $85 billion monthly purchases is extreme, consider that Japan’s economy is a third the size of the United States’ and that its growth has stalled in the past decade.
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  So the bank wants to increase inflation to 2% from its current negative rate of 1% deflation. If they are even partially successful, interest rates on the government bonds could jump. If inflation increases to 1% and the rate on the 10-year bond increased to just 1.5%, the government would need to pay out 65% of revenues just to service the interest.
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