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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: Clarksterh who wrote (4674)	2/2/1998 6:59:00 PM
From: Jess Beltz	Read Replies (1) \| Respond to of 10921

<<<offtopic>>> Clarke, last year the Japanese Ministry of Finance decided to devalue the yen, for two reasons. The first was to stimulate their economy, which they hoped to do on the back of export trade to the US, and obviously, a weaker yen would help in that regard. However, a second and ulterior motive was to help out their banking sector, since lowering interest rates (the monetary tool used to devalue the yen) would also significantly lower the banks' cost of funds and improve their profitability (even if the banks didn't make profitable loans, they could invest in US Treasuries and chalk up the spread.) The improved profits were then to be used to help gradually offset the mountain of bad debt. There was, however, a disastrous and unforseen consequence to this action. Almost all of the regional currencies were tied (through the various central bank defense mechanisms) to the value of the dollar. Weakening the yen strengthened the dollar, and as the dollar soared in value, the regional currencies were less and less able to stand with it (with the Thai Bhat going first.) The result was the series of currency devaluations that brought all of the economies crashing down, in the end cutting off Japan's exports to it's SE Asian neighbors, which Japan can ill-afford now. Once again, however, and this is the main point, the Japanese government, in direct cooperation with the banks, was involved in a scheme (any scheme) designed to avoid recognizing the bad debt problem. jess PS - I should give credit where credit is due: much of the above assessment is Nobel Lauriate Merton Miller's idea. I listened to him give an address on htis very topic (the Asian Financial Crisis) last week. I happen to agree with him. jb.