Thread,
A couple of interesting excerpts containing some facts/comments about the Asian crisis from the bear, Bill Fleckenstein. One compares our banking crisis to Japan's banking crisis AND the other about the level where the devaluation of the yuan (Chinese$) started the entire nightmare rolling. Economist believe the fuse was lit when China first devalued (suddenly made all of Japan's overseas investments struggle to compete), and the dynamite exploded when the Thai baht fell. Neither excerpt below is truly comparing apples to apples, but thought the numbers were of interest.
First, when the US had a banking crisis, rates were much higher than they are currently in Japan. Bad debt is easier to finance, when Japan's rates are so incredibly low. Something others have often stated on this thread.
Secondly, the Tigers were still strong (financed by Japan) back in 1993. It made more sense for China to devalue back then. Today a devaluation just furthers the massacre of the Tigers. Which won't help China a whole lot. Like beating a dead horse and shooting themselves in the foot. Devaluation can't do much more damage to the Tigers and further weakens Japan (China's biggest market). Of course, all IMHO.
MikeM(From Florida)
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July 30th Market Rap: "Stories are surfacing that Japan's bad debt is closer to $1 trillion than the $500 billion they had previously admitted to. Let's put this in perspective: That is close to 30 percent of GDP. When we had our S&L fiasco in the early 1990s, we created the Resolution Trust Corp. (RTC). We had an approximately $300 billion problem, or 6 percent of GDP. Their (Japan's) problem is five times the size of the one we had. Their whole region is in trouble, and now they have politicians in charge of the economy who have proven to be particular skilled at doing nothing.
Things are going to get worse in Japan before they get better. But this could be good in the long run, because if their economy really hits the skids, Japan will be forced to face facts. They can then begin to extricate themselves from the sinkhole they have created. American investors don't pay much attention to world events these days, but they should take note of the seriousness of the problems in Japan."
July 31st Market Rap: "Another development is that the Chinese Yuan, compared with the yen, is now priced almost where it was back in 1993 when they devalued their currency. There is now gargantuan pressure on China to devalue, which will be very important because Japan continues to be a basket case. Expect this to have a major impact on Asia, and consequently our markets as well."
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