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

To: energyplay who wrote (59937)	2/3/2005 3:24:32 PM
From: Snowshoe	Respond to of 74559

>>maybe Transdinestria<< I had to look that up... en.wikipedia.org Transnistria or Transdniester (Russian: ????????????? (Pridn'estrov'ye), Romanian Transnistria, referred to as Stânga Nistrului (Left Bank of the Nistru) by official Moldovan sources). Transnistria is a region in eastern Europe. The name comes from it being the area of Moldova east of the river Nistru (Dniester).

To: energyplay who wrote (59937)	2/4/2005 11:58:20 PM
From: TobagoJack	Read Replies (4) \| Respond to of 74559

Japan: Commercial Paper and 'Technical' Problems Feb 04, 2005 Summary The Bank of Japan repeatedly has failed in its attempts to inject cash into the banking system during 2005. That is not the only thing that has failed. Analysis The Bank of Japan (BoJ), the Japanese central bank, proposed to the country's banks Feb. 3 that it purchase some 600 billion yen ($5.8 billion) of the commercial paper they hold. The BoJ theorizes that paying Japan's banks cash for enough items, such as government securities, discount bills and commercial paper, should provide the banks with additional cash that they can use to make low-interest loans to clients. Cheaper, more plentiful loans make expansion easier for firms. Increased expansion on the part of firms ought to yield more growth, which -- in theory -- should end the past 15 years of Japanese economic malaise. Less than 45 percent of the BoJ's offer was filled. BoJ Gov. Toshihiko Fukui said that such failed efforts to inject cash are a "good thing" since they indicate there is sufficient cash in the system. According to his logic, failures to inject more cash represent mere "technical problems." They are not. Japan's banks do not need more cash. Interest rates in Japan already are at 0 percent. Zero-percent rates in effect allow banks to literally borrow cash from the central bank for nothing. That makes any other BoJ actions to increase banks' cash holdings -- such as calls for commercial paper -- pointless. The failed Feb. 3 commercial paper purchase was the 20th unsuccessful BoJ attempt at buying bank assets to give them more cash since New Year's. The financial sector's problem is not a lack of cash -- BoJ policies ensure they are drowning in the stuff -- but lack of will. In Japan, the development model is one in which credit is provided at an artificially cheap rate to ensure maximum growth and employment, profitability -- and even loan repayment -- be damned. After all, cheap money means one can simply take out new loans to cover old loans. Most Japanese banks, therefore, have their portfolios concentrated in the same handful of large clients that they were founded to serve. Terrified that new loans to new clients could potentially make their balance sheets worse than they already are, the banks largely refuse to lend to non-core clients, including Japan's ever-stunted small and medium-business sector. This allows Japan's zombie-esque superfirms to continue lumbering forward while smaller, potentially more dynamic firms starve in the shadows because they cannot raise capital for expansion, upgrades and sometimes even payroll. The BoJ accordingly faces a complex problem. It no longer can keep pushing the banks to take on more cash; they just do not want it. Continually offering unwanted cash would be to forge ahead with failed offering after failed offering, thus spotlighting the BoJ's inability to combat Japan's endemic economic problems several times a week. On the other hand, if the BoJ declares success and slows its cash-pushing efforts, the markets would correctly recognize a de facto tightening of monetary policy, the first step on the road to higher interest rates; that is, rates above zero. Any increase in interest rates -- or even the threat of an increase -- would disrupt the entire low-cost credit system that has been keeping much of Japan on life support the past 15 years. Such an increase is something that already is high on the public mind. Fukui stated Jan. 28 that the 1993-2003 BoJ policy of low interest rates has cost Japanese depositors some 154 trillion yen ($1.5 trillion) in lost interest. Putting a specific yen amount on what government mismanagement has cost the citizenry might not represent the smoothest move, but the BoJ has never established itself as an overachiever at monetary guidance, much less public relations. Japan's entire social contract is based upon lifetime employment and a sustained quality of life. The slow-motion breakdown of the Japanese corporate world already has exposed the danger to lifetime employment, while Fukui's verbal slip up has indicated that quality of life could be much better. Thus, the BoJ remains trapped between a policy that does not work and one that would shatter Japan's economic backbone outright. Copyright 2004 Strategic Forecasting Inc. All rights reserved. Reprint Rights: Articles from Stratfor may not be reproduced in multiple copies, in either print or electronic form, without the express written permission of Strategic Forecasting, Inc. For mass reprint permission or content licensing, please e-mail marketing@stratfor.com for more information. stratfor.biz