Richnorth - Here's my interpretation.
The predominant factor in the Asian bubble has been the excessive liquidity of the yen. Interbank rates of .5% provided a powerfull incentive for Japanese banks to reinflate by lending money overseas where they could get higher rates of return. The effects have extended to Western shores also, where Japanese investment has helped to fuel the rise of US debt and equity markets.
Another factor: the long term decline of the dollar vs the yen and the instability of exchange rates inspired many Japanese companies to relocate themselves offshore, where they could do business in countries whose currencies were pegged to the dollar. Why? Because the long-term increase of the yen vs the dollar made it a losing proposition to repatriate profits. Doing business offshore meant that profits could be carried and reinvested without currency-exchange losses. And it provided a strong incentive for other Asian countries to peg their currencies to the dollar, to attract offshore investment from Japan, Europe, the US. As more Japanese companies moved offshore, their suppliers followed, further depressing the domestic Japanese economy.
As with many modern day "plots", I see the current crises not as the dastardly result of nefarious men conspiring in secret, but as the inexorable outcome of thousands, millions of individuals acting in their own percieved self interest, responding to simple and understandable economic incentives. As it has been throughout history, in endeavoring to solve the immediate crises, we sow the seeds of the next. And so it goes.
Best regards - Tom |
