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To: H James Morris who wrote (127562)	6/30/2001 5:40:03 PM
From: craig crawford	Respond to of 164684

>> Japan's central bank can help the nation's banks dispose of their huge bad loans by using monetary policy to prevent deflation and stabilize the deteriorating economy, the economy minister said yesterday. << false. they should not try to prevent deflation. they should let prices seek equilibrium at a lower level and not interfere. of course this will cause bankruptcies and higher unemployment, so it is not politically viable, but unfortunately sometimes medicine has to taste bitter to work properly. >> Economic Minister Heizo Takenaka said falling prices pose a problem for banks trying to wipe out their sour loans because it hurts corporate profits and depresses land values. That could force more companies into bankruptcy, inflating banks' already enormous bad loans. << the problem is these idiot politicians and bureaucrats always think they have to be doing something to fix the economy rather than letting it fix itself. it's mostly because they are bowing to political pressure by the public who can't tolerate high levels of unemployment and economic contraction. japan needs to let it's banks fail so the debt can be wiped clean. they need to let prices seek out their natural (lower) level which will eventually stimulate economic activity by consumers. i mean think about it. if you are a japanese consumer and you see prices steadily deflating year after year what is your incentive to spend? you have a greater incentive to hold onto cash, which increases your purchasing power as prices fall. only when you think prices are done falling will you want to spend your cash. so the best (albeit most painful in the short-term) solution is to let the economy have a crash landing. you will have plummeting prices and massive bankruptcies which is a good thing, because then whatever is left standing will be free of debt burden and will not scare investors money away. you can't instill confidence in consumers and investors by saying here, let's print some more money and take on more debt to get economic activity picking up again so we can pay off the massive overhang in debt that was already there to begin with. that kind of logic is like you saying to your spouse, honey the solution to our mounting credit card bills is to just get another additional credit card so we can pay off the first card with the second. then we will get another 3rd card to pay off the 2nd, and so on. eventually it has to all come crashing down. of course the longer you prolong the inevitability, the worse it becomes. it would be much wiser to just bite the bullet and do whatever is necessary to pay off the first credit card. >> "If the Bank of Japan can use monetary policy to control prices, it should consider it," he said. "But that is up to the central bank." << once again, totally backwards. they should keep their cotton pickin mitts of the economy and it would right itself. >> Higher unemployment is particularly worrisome as it dampens consumer spending, a key growth engine for an economy slowing because of declining exports and shrinking industrial output. << stupid idiots. the japanese people have plenty of savings, they are just afraid to spend it or invest it (at least in japan. they don't have a problem sending their money over here). no incentive as prices gradually fall because they want to implode but the government keeps trying to prop them up. best to let prices fall to rock bottom levels and then money will move in like you wouldn't believe. i mean this is logic a 5 year old could understand. why don't you invest a significant amount of your money in japan hj? because their stock market and their real estate just keep falling. if the politicians had the courage to let prices fall to whatever level is necessary, and bankruptcies occurred and assets were liquidated and returned to creditors, then you would have a country with no debt problem and a ton of national savings. as long as the government doesn't over-regulate and there is technological innovation (japanese have proven that), it would be a great place to invest! of course this is simple to talk about. to walk the walk is another matter. because the market will crash hard and it will appear that politicians aren't doing anything to stop it. but politicians backing away and letting the market run it's course is exactly what is needed. we are repeating the same mistakes japan made. greenspan should have let the markets collapse years ago before they ever got so high to begin with, because now investors have grown so accustomed to returns in the stock market that he is under immense political pressure to ease credit to cure what ails us. of course that is exactly what we don't need. what we need is one fell swoop where stocks like amzn that have flawed business models go belly up and the strong survive. prices need to fall to where they have been trying to fall for years now. of course every time they try to fall greenspan dopes us up with another shot of heroin and says keep spending! it is such an obviously flawed strategy. greenspan and all his pals at the fed willingly admit that consumers need to spend to prop this economy up. consumers are up to their eyeballs in debt and can't afford to take on more when they are worried about losing their job. in layman's terms mr greenspam is essentially saying, i know you have 3 credit cards maxed out already, but here i want to offer you another no annual fee gold card at a low apr. please go on a shopping spree courtesy of your friendly fed bankers even though you are in fear of losing your job and are worried you can't pay it off. does that even sound remotely logical? why of course not silly rabbit. trix are for kids, not for savvy market participants. that's why 6 rate cuts later at zero real interest rates our markets aren't any better off just like with japan. in fact they are even lower than when he started cutting rates. the market is bigger and wiser than any one person, including alan greenspan.