John, I refuse to attend the Q shareholder's meeting unless surf's up big time in San Diego that week. However, I am very concerned for the rest of you based on Ramsey's choice of restaurants. The meeting's at, what, 9AM/10AM? So the SI thread is gonna go to . . . .. .a Chinese joint? Pot stickers for breakfast? Thanks anyway, but I'll stick with my normal dollop of napalm in the morning. If it's good enough for Robert Duvall, it's good enough for Surfer Mike.
Now with SEA cusine disposed of, let's turn to the SEA Thing.
Ramsey, great work--particularly the country by country run down. I learned a lot about an area that I really need to bone up on (no snarls, pup). I also think you've got it just about right in that we're in the quantification of damage stage and 2nd Qtr earnings will tell the tale.
Particularly bothersome that Japan is key to the whole bowl of rice and they have fumbled and stumbled for 8 years with absolutely no signs of leadership. I think it very likely that they could surrender their economic supremacy to the on-rushing Tigers, presuming of course that those dudes get their act together. I have previously posted about Japanese decision-making paralysis. Well, time waits for no country and the Japanese have already squandered a hell of a lot of it. Very worrisome.
My only real nit-pick with you is the solutions part of your essay. IMF Mexico medicine is wrong for SEA, IMO, because SEA is an overcapacity problem whereas Mexico was a financial problem. In SEA, you've got too few consumers chasing too many products. In Mexico, you had too many pesos in circulation chasing too few products. The classic solution for Mexico was to put on the brakes, shrink the money supply, restrain lending, jack up interest rates, run government surpluses, all that fiscal/monetary jazz.
SEA is a whole different kettle of sushi--the Koreans save 40% of their earnings. Most SEA governments already run surpluses. The Japanese are also huge savers. Those massive savings have been channeled into productive capacity--factories that are spitting out VCR's, DRAM's, ships, cars, steel, what not. That output is not being consumed domestically (cuz everybody is saving and not running their credit cards through the roof unlike those red blooded Yankees who wouldn't know a zero balance if it fell on'em) so they export their bim-bims off.
But as Thurow pointed out, that kind of economic mercantilism only works for a while and only in certain circumstances. (Remember the two guys stranded on an island who went in to business taking in each other's laundry?) Ultimately, each country has to develop it's domestic economy which means that we don't need IMF austerity in SEA, we need to get these guys saving less and buying more of their own stuff. We need to pump up the volume, not turn it down. If AMAT sells some fab plant their handy-dandy wafer slicer, the resulting chips should be put in to Korean PC's and sold to Koreans, with maybe 20% or so getting shipped back to the U.S. for our PC guys and gals. The way out for SEA is not massive unemployment with the sinners taking their medicine cause unemployed folks tend not to buy a hell of a lot and besides the workers were not and are not the sinners.
I'm all for letting a few factories go bust, particularly those that will never be viable cause they were built by some guy's nephew to build something that nobody will every want or need to buy. But, you can't let too many go and yes I think Thurow was right in this: we couldn't let Chrysler go down, and Korea can't let the big 5 take a powder either. So, stimulate aggregate demand, don't squelch it.
All in all, some rough times ahead. But if Japan can just avoid going over the cliff ( a big IF), then I think the industriousness and work ethic and education of the balance of SEA will pull the region through faster than now seems possible. Japan is the key with big time implications for the world and for the Q--wish those guys gave me more confidence. Regards, Mike Doyle |
