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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Micawber who wrote (14979)	11/11/2003 7:22:01 AM
From: Wyätt Gwyön	Respond to of 306849

How do you service a loan of several hundred million dollars with sales of $100 per year this is the problem with a Ponzi Scheme. the whole notion of commercial loans divorced from cash flow is intellectually bankrupt. banks would literally loan their customers new money to service old debts, or just allow them to go unserviced. so there are cos that deserve to go under but are still alive because of such arrangements. they are called "zombies" because they are literally the walking dead. imagine if Japan actually wanted to deal with their bad loan fiasco. what would it cost? a cash injection of trillions of dollars which are not already on the books of technically insolvent financial institutions. where are they going to get trillions of dollars? oh yes: they have a net foreign investment position (the amount they own of "us" vs what we own of them) of more than 3 trillion dollars. how 'bout calling some of those chips home to Papa? the yen would soar and the dollar would tank. they need the money to deal with problems at home, but doing so would cause such an upward spiral in their currency, probably over half the manufacturers would be technically insolvent on a c/f basis. this happened briefly in 1995, when the yen hit 80 to the dollar. many, many cos lost money on every unit they produced, on both fixed and variable costs. but if they did this, it would set off a collapse in the US as well with spiraling interest rates and a tanking dollar. they could literally destroy our economy overnight if they had the attitude of, say, the French. of course, the Treasury Dept might intervene by freezing their accts, but i doubt the international community would look kindly on that. interesting to note that China is now following Japan's path of huge forex accumulation in order to suppress their currency value.