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I think that the annoucement of default by Yamaichi Securities right before the recent Asia economic summit was more than a coincidence, and that the annouced rescue plan is more smoke and mirrors. Where is the public money? If it's like the U.S. social security trust fund, it doesn't exist. At any rate it only covers depositors, and thus the ripple effect will continue. I believe that the Yamaichi default is a watershed event, and as other cases of the Asian flu it will be spread worldwide. An earlier post stated that a German financial institution has suffered serious losses from the Asia meltdown, and that heads are rolling. The markets of Russia, India, and Eastern Europe are all displaying flu symptoms. The last time I looked the U.S. stock market has still forgotten it's flu shot, and will pay for this due to it's high debt load which weakens it's ressistance. The losses of Yamaichi are larger than what is reported in the media, and are beyond the Bank of Japan's ability to cover, which is why only depositors are covered. With the huge derivative market so interconnected and Yamaichi's probable participation, this makes for a precarious situation in that their derivative losses are not covered, and that whoever is on the other side of the derivative trade also loses. The fact that the Japanese Central Bank is unable to come to the rescue with all it's asset base spells a liquidity crisis. Since they are the great lender nation, what we have is the beginnings of a global liquidity crisis despite all the overtime put in by various government printing presses. |
