Tim A.,
this is very bad but not unanticipated news.
Jess Beltz, a poster on another thread, made a very interesting observation a few months ago that I have no ability to verify. He stated that the current Japanese bureaucracy lacks economics know-how and leadership. There are no Rubin or Greenspan types who can lay out a plan with authority and garner broad support from the masses. Thus the reason for the wishy washy on again off again recovery plans. His theory is now proven true.
From Indonesia to Korea, all the western plans a la IMF deal with theory, totally ignoring the social issues. There has to be a value placed on social stability.
The only reason that Korea has any chance of a "quick" recovery is how much support Kim Dae Jung can garnish to fight the forces of the Chaebols. The only chance that Indonesia can avoid sinking into deep depression is how fast Heibibi (or anyone) can cease power with full support of the military leaders, which he does not have right now. China's chance of success is totally resting on the shoulders of Jiang Jeming and Zhu Rongji, to the extreme that if these two die in a car accident tomorrow, China will go down in flames with them. In contrast, the president of the US can die tomorrow and life goes on as usual for the citizens.
Such is the case of these people oriented governments, vs a system oriented government of the US.
Japan is now going to be fragmented. There will be a new round of debate, lobbying, arm twisting, trial balloons and unfortunately, hotel suicides, before any plan will pack the support required for it to have a chance of succeeding.
Just so that I am not labeled the total bear, I actually think this is not necessary bad for Japan and for us. I am not convinced that no action is not the best action for Japan right now. While all the attention and pressure is on Hashimoto and Japan to do something, the private sector is quietly doing something. The big bang reforms have laid the ground works for a free market solution to Japan's problems. With the opening up of many Japanese financial market this years, corporate Japan are making changes to compete internationally, this time not for their products but for investors. The long demanded transparency and full disclosure may finally come voluntarily, if they want to keep the yen from flooding to the ML or MS accounts now available to the average JoeSan in Japan.
Short term, I think this will give the US bubble another shot of hot air. The yen will continue to add to liquidity that we don't need. FOMC mind as well cancel their meetings because they no longer have any control over the rates. They can change it all they want, be it up or down, but the market has taken over. Interest rates will remain low as long as the demand for dollars continue at current pace. When the reverse occurs, rates will go up to just to finance our national debt, regardless of the state of our economy.
There will be such wild swings come up that "video game" investors should have the ride of a lifetime. Long term investors? Well, load up on Rolaids.
Just my 2 cents.
Ramsey |
