Bosco,
Armstrong's opinion is interesting and I've generally perceived his logic as plausible, but not always unalterable. There are just too many influences and agendas tugging at one another seeking preeminence in all politics.
However, the Japanese are a very honor-bound people. They do like to take blame or admit mistakes due to the grievous loss of face they suffer. Thus, they look to other potential scapegoats rather than admitting error and immediately taking corrective action. This avoidance of assuming responsibility until the facts become blatantly evident is likely the greatest impediment to a quick Japanese economic recovery.
Another point. The Japanese realize (through much prodding by the US Treasury) that they MUST monetize their debt (print money) and create inflation that will force consumers to spend. But this must be done in a controlled manner and gradually.
There are strong forces in Japan that fear that such monetization and weakening of the Yen will open up their economy to corporate raiding by US companies picking up their competition "on the cheap". I opine, what better way to maintain the independence and protected status of their companies and financial institutions that to blame foreign entities for their problems??
But what Armstrong points out is that over the next couple of years about those post office bonds is incredible:
"The Nikkei is clearly becoming over-extended. Unless a monthly closing ABOVE 18,775 can be accomplished, the outlook becomes extremely, extremely bearish! With the Postal Savings Fund redemptions coming in 2000 of massive proportions, that fund is insolvent. The finance minister testified before the Diet in February 1999 warning that the government would have to cover the short-fall. He refused to put a number on this loss publicly. In reality, the 10 year deposits that come due in 2000 are paying 7% annually. There is no way the government could have covered that level of interest guarantee through investment.- At 8%, you double your obligation within 10 years. How big this shortfall will be is something we are trying to get a handle on at this time."
For more on the Japanese PSF, here are a few links.
numen-lumen.com
businessweek.com
Can you imagine if the US gov't suddenly told holders of T-Debt that they could no longer pay it back without printing money to the tune of $2.8 trillion??
That's what Japanese leaders seem to be facing.
There will be political "hell to pay", that leadership will look for any and all viable targets upon which to cast blame.
Regards,
Ron |
