Lake Como, Italy. Japan is heading for a full-blown solvency crisis as the country runs out of local investors and may ultimately be forced to inflate away its debt in a desperate end-game, one of the world’s most influential economists has warned.

Olivier Blanchard, former chief economist at the International Monetary Fund, said zero interest rates have disguised the underlying danger posed by Japan’s public debt, likely to reach 250% of GDP this year and spiraling upwards on an unsustainable trajectory.

Speaking Monday (4/11) at the Ambrosetti Forum of world policy-makers on Lake Como, he said, “To our surprise, Japanese retirees have been willing to hold government debt at zero rates, but the marginal investor will soon not be a Japanese retiree.”

“If and when US hedge funds become the marginal Japanese debt, they are going to ask for a substantial spread,” he told me.  Analysts say this would transform the country’s debt dynamics and kill the illusion of solvency, possibly in a sudden, non-linear fashion.

Prof. Blanchard did not elaborate on the implications of Japan’s woes for the global financial system, but they would surely be dramatic. Japan is still the world’s third largest economy by far. It is also the global laboratory for an ageing crisis that the rest of us will face to varying degrees.

I’ve been trying, I really have, to give a flying flatulence about Paul Burrell, former butler to the late Princess Diana, having some shares in an offshore trust based in the British Virgin Islands called Black Dragon.

But I’m afraid I find myself caring as much as I do about the Lithuanian shoe polish industry, maybe. No, I exaggerate. Not that much.

What we should care about very much though, I think, is the way that this “Panama Papers” story is being a manipulated to a particular end by politicians and the left-leaning media.

Look at Sen. Bernie Sanders – or try to without laughing, for after all his initials are BS.  The leftie media is now proclaiming that the Panama Papers are his keys to the White House.

For it plays perfectly to that notion Socialists like Sanders are obsessed with these days: that there’s a corrupt, uncontrollable elite who can only brought to account by a good old fashioned dose of the kind of hard-left politics which worked so well for Cuba, East Germany, and the USSR.

The secret world of offshore banks and money-laundering has been under the microscope ever since the financial crisis. Now it is the turn of lawyers, registrars, and the hidden network of facilitators.

The treasure trove of 11.5 million documents leaked – or more precisely stolen - from the Panama law firm Mossack Fonseca lifts the lid on the extraordinary practices of the global elites, and on the alleged services of off-shore legal cabinets for terrorist organizations, drug cartels, sanctions busting, and front companies of all kinds.

The files on 213,000 firms first slipped to the German newspaper Suddeutsche Zeitung and then shared with the International Consortium of Investigative Journalists (ICIJ) is the biggest data leak in history. It will have long-lasting ramifications.

The avalanche of allegations has barely begun. The red-hot dossier on US citizens has not even been released. Yet the scandal has already triggered a string of criminal investigations around the world, kicking off in Australia and New Zealand within hours. 

The Panama firm has responded:  “We believe there's an international campaign against privacy. Privacy is a sacred human right that is being eroded more and more in the modern world. Each person has the right to privacy, whether they are a king or a beggar.”  Mossack Fonseca has a point.

The late Sir George Martin, “the man who made The Beatles,” created substantial British exports.

Had the import of his music to America been banned to save the jobs of US musicians, Britain would have missed out on some revenue but the American consumer would have been the biggest loser, missing out on the music. Trade benefits the importing country: that’s why it happens.

Frankly, we might as well be living in the 17th century, so antiquated are our current debates over trade, both here over Brexit and in America over the presidential nominations. Many current assumptions about trade, such as Mr. Trump’s, were debunked more than two hundred years ago and then tested to destruction in the mid-19th century.

In the 17th and 18th centuries European governments were in thrall to “mercantilism”.  They sought to restrain imports with tariffs and bans, while encouraging exports with monopolies and gunboats.

Along came Adam Smith and made a different argument, that mercantilism punished consumers and the poor, while rewarding protected producers and the rich; that imports were a good thing because they raised people’s standard of living by giving them what they wanted at lower prices. It’s a shame Donald Trump never read Adam Smith.