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

To: Mason Barge who wrote (5190)	4/20/1998 11:25:00 AM
From: Joe Dancy	Read Replies (2) \| Respond to of 10921

Comments anyone? What is the probability of Japan dumping our debt, and what would be the impact? Joe ********* Copyright The New York Post April 20, 1998, Monday JAPANESE COULD DUMP U.S. BONDS BYLINE: JOHN CRUDELE BE careful what you ask for. That old saying seems to apply nicely to what the U.S. and the G-7 nations are asking of Japan. The rest of the world understandably wants the Japanese government to do something - anything, it seems - to get its economy out of a near-depression. Japan has considered tax cuts, interest rate cuts and hikes, massive government spending programs and, probably, a lot of things that the world doesn't know about. But the most obvious way for Japan to energize its economy would be highly detrimental to U.S. interests, as was witnessed about a week ago when Tokyo suddenly decided to protect its currency through the sale of an estimated $12 billion in U.S. government securities. The tactic worked. The yen was strengthened nicely and Japan's ego got a boost. But the Japanese move also caused interest rates to rise in this country by about a noticeable tenth of a percentage point. Consider the fact that Japan holds more than $300 billion worth of U.S. government securities. Those bonds were purchased mostly during the early 1990s, when the U.S. economy was faltering and Washington needed buyers of its debt in order to keep interest rates down. Back then Japan was flush with cash - king of the world, so to speak. Now the tables are turned. It would be highly beneficial to the Japanese to repatriate as much of that $300 billion as possible. The money could be invested in local projects that would create jobs and put some confidence back into the consumer markets. But if the sale of $12 billion worth of securities a week ago caused a large tenth of a percentage point rise in U.S. interest rates, what effect would a more massive sale of U.S. bonds by the Japanese have? Consider this: If the Japanese sell the bonds, someone would have to buy them. In order to find buyers, interest rates would have to rise to much more attractive levels. Eventually, interest rates would get to a level that attracts people now invested in the stock market. Stock prices will fall. This column has been warning for years that the U.S. has put itself in an impossible position by encouraging countries like Japan and China to buy massive amounts of our debt. It's a situation that threatens this country's ability to determine its own fate. If the Japanese get desperate enough, they probably won't care if their actions bother Washington. It's getting to the every-country-for-itself stage and Japan, the creditor, and not Washington, the debtor, is in a better position to make demands.