Currencies and the Global Capital Markets Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Currencies and the Global Capital Markets

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Thomas M. who wrote (2177)	10/9/1999 4:26:00 PM
From: Henry Volquardsen	Read Replies (1) of 3536

not to diminish Marc Faber, I think very highly of him, but lots of people pointed out that the decline in Japanese bank lending was one of the main contributors to the Asian crisis and the delay of substantive bank reform in Japan was a major factor in dragging out the contraction. Even the US government was publicly pressuring the Japanese to address their banking crisis. We discussed this on this thread and the gold thread. I remember because there was one particular poster who made a crusade of arguing with me that there was no Japanese banking crisis. Fwiw the seeds of the Japanese banking crisis go back to the 80s. In response to the severe global banking crisis of the 70s and early 80s the major OECD nations agreed to adhere to a series of BIS sponsored measures designed to strengthen the banks. One of the main measures was to set minimum bank capital requirements for all major economies. It was very clear early on that, while many nations faced difficulties, the Japanese banks were dangerously undercapitalized. In addition they were counting unrealized stock market gains as capital which made them vulnerable to a stock market correction. Against this background the Bank of Japan moved in the late 80s to attempt to deflate the asset bubble. As the stock market began to decline it undermined the already shaky capital structure of the banks. The capital problems led to reduced lending. Stopping the supply of cheap easy credit revealed that the corporate sector was overextended and that there had been excess capital spending and real estate investment. There was excess capacity through out the economy. The unwinding of this caused loan losses which further eroded capital and forced even more lending restrictions. The government adopted stop gap measures to try to prop up the banks and the economy but they were fighting a tide. The vicious circle just kept getting worse. Only in the last year have the Japanese begun to make serious reform. I know this view of the cause effects doesn't get reported in the media. Probably because it can't be handled in a sound bite and requires a sense of the past, something that stymies the media. But it has been a pretty commone theme among bankers for quite some time. I can remember discussing this scenario as being inevitable back in the 80s. A lot of people saw the long wave coming. Catching the short term waves is a different issue :) Henry

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next