And So It Begins

Dig this from the Wall Street Journal.

TOKYO—A leading credit-rating agency issued a dire warning to Japan's new government about the country's massive borrowing, threatening to downgrade the nation's sovereign debt unless policy makers find a way to pull the economy out of its deflationary spiral while curbing public spending.

The blunt statement from Standard & Poor's on Tuesday was the first formal declaration of concern from a ratings company about Japanese borrowing in the months since investors began to raise questions about the sustainability of government debt, estimated to have reached the size of the country's entire economic output for the year ending in March—the highest level in the industrialized world.

Mystifying to me is the statement, "unless policy makers find a way to pull the economy out of its deflationary spiral while curbing public spending."

Huh?

The Japanese economy (and ours, too) is like a colossal flywheel going in the direction of massive government spending. Getting the thing to turn around or stop or even just slow down will take an incredible amount of force. It's not like they can simply flip a switch and the problem will be solved. In fact, they're so far in debt that much of their spending is beyond even the realm of non-discretionary entitlements - it's interest on their loans.

Where was Standard and Poor's 10 years ago? That's when the alarm bells should have been sounded.