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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (4301)	6/5/2001 6:08:19 AM
From: smolejv@gmx.net	Read Replies (1) \| Respond to of 74559

Yeah, Jay, I have these numbers seating good and painful in my behind (sg - poor English language...). Since cca 98 - I'm a late developer;, but better late than never, see my history in INTC trader - I've been questioning the disparity between Nihon in deep s*t and US on goldilocks cruise control. My moral qualms did not keep me from making what I could out of the situation - still it looks to me like something's about to hit the fan and cover us all in fine, brownish mist(I guess I would make a perfect canary bird to sniff out methane and start singing down in the mines). Now that we are in the apocalyptic mode - somebody is about to appear with a bill (shining eyes, flame sword in his left hand and the tray with the check in the right one) "No, no plastic accepted anymore in this establishment".

To: TobagoJack who wrote (4301)	6/5/2001 7:15:02 AM
From: Crimson Ghost	Read Replies (1) \| Respond to of 74559

Jay: Comments? There was news today that China intends to open the Shanghai gold market on January 1st of next year. There remains a great deal of work to be done in this matter and I sincerely doubt that a free market will open at that time, nor any time in the foreseeable future. The latest "fly in the ointment" is the current 17% taxation on gold transactions, which will certainly cripple any attempts at a successful exchange. And there will be loads of other problems. Perhaps I am wrong (I often am....), but I see such official pronouncements as simply propaganda for some purpose only known to the issuing country, China. Leonard Kaplan

To: TobagoJack who wrote (4301)	6/6/2001 1:35:19 AM
From: TobagoJack	Respond to of 74559

Yeah, Jay, here is the article ... business.scmp.com QUOTE Monday June 4 2001 Crash with global repercussions becoming a reality as a result of massive government spending Agence France-Presse in Tokyo A new economic time bomb is ticking in Japan, according to analysts - one that threatens to cause more damage than the collapse in the early nineties from which the country is still recovering. The combination of swollen public debt and artificial near-zero interest rates has created perfect conditions for a bond-market crash that would have enormous global repercussions, they say. 'It is the biggest bubble in the world, more important than the one that exploded on the Nasdaq,' Ken Courtis, vice-president of Goldman Sachs Asia said. The dimensions of the problem can be summed up in a single figure. 'Japan's national debt is now nearly 18 per cent of global GDP' - the combined amount produced by the world in one year, David Asher, a specialist on Japan at the Institute of American Enterprise said. It is no secret how this enormous bubble was cultivated. Successive years of fiscal stimulus packages launched throughout the 90s by the ruling Liberal Democratic Party destroyed public finances. Direct debt held by the government at the end of March represented 146 per cent of GDP, according to calculations by Goldman Sachs. Sixty-five per cent of tax receipts retained by the central government are eaten up servicing this debt, while long-term debt exceeds revenue by a factor of more than 15. As Mr Asher argues: 'With those ratios, if the Japanese Government were a company, it would have a sub-par junk-bond rating at best.' However, international ratings agencies, despite showing recent signs of concern, still allocate Japan a high sovereignty rating. Even worried Moody's gives Japan a double A. And at 1.28 per cent for 10-year Japanese Government bonds (JGBs), long-term nominal rates are the lowest in the world. This paradox can be easily explained: 95 per cent of Japan's public debt is owned by Japanese investors and Japanese savings represent one third of the world's savings. As a result, successive governments in Japan have been able to dodge routine fiscal discipline enforced by open bond markets. 'We have not been able to ignite by ourselves the bomb that would have led to fiscal reconstruction,' said Masaaki Homma, an economics professor at Osaka university. The economic crisis has aggravated the situation by preventing investors from having any viable alternative as to where to put their money. Little trust remains in the stock exchange. In real terms, because of an underestimation of deflation levels in the official index, interest rates are higher than they appear, at around 5 or 6 per cent, Mr Courtis said. For Japanese banks - lacking creditworthy borrowers, flushed with cash and forced to shrink balance sheets devastated by bad loans - so called 'risk-free' JGBs appear like a ray of sunshine in the grey economic climate. The level of JGBs held by Japanese banks has risen 58.8 per cent to 73.4 trillion yen (about HK$4.78 trillion) in the year to March, according to the Bank of Japan. But Ryutaro Kono, chief economist at BNP Paribas Securities said: 'The market could lose confidence in the sustainability of Japan's public debt burden at any time.' On its present growth path, Japan's national debt would reach 290 per cent of GDP by 2010, a level nobody believes is sustainable. 'If the market were to become convinced that nothing will be done to correct the nation's swelling public debt, prices on government bonds would instantly collapse under the weight of risk premiums,' Mr Kono said. As bond yields move in the opposite direction to prices, interest rates would then rocket sky-high. Already out for the count, the Japanese financial system would implode, sending shock waves crashing over economies worldwide. Which is why Horst Koehler, managing director of the International Monetary Fund, said in Tokyo last week that a clean up of the budget was Japan's 'second priority', following close behind disposal of bad loans held by Japanese banks. The stakes are high for everyone. 'With a current account deficit well over US$400 billion, America would be particularly vulnerable to a surge in Japanese interest rates or a disruption of capital flows from Japan,' Mr Asher said. 'We are in the same boat, and I hope its name is not Titanic.' UNQUOTE