Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Stitch who wrote (5838)	6/14/1998 7:29:00 PM
From: Jess Beltz	Read Replies (1) \| Respond to of 10921

Stitch: There is a bad combination of cultural and economic values that are coming together in Japan to thwart rational decision making. First, remember that the Japanese banking sector in Japan has a near monopoly on the market for debt funds there. The reforms we're talking about involve (1) the breaking of that monopoly, and (2) the loss of power of men in positions of great wealth and influence. It is natural, in one kind of economic way, that these individuals would try and maintain their positions to the end. There are also three (at least) very powerful cultural influences at work here. They are: (1) The Japanese (as a people) are very proud of Japanese culture and the Japanese way of doing things. Their degree of ethnocentrism may be greater even than the British (and remember that all cultures, including are own exhibit this feature to varying degrees.) To bring in Western banks (and more importantly banking practices) means an end to the Japanese way of banking. (2) It also means failure, and tremendous loss of face to the people in positions of power in the banking sector. You must understand that to these people this is not simply saying, "we were wrong, we need to correct this situation." It involves tremendous shame, and in some cases, the destruction of their personal identities. It would truly not surprise me to see some of the people involved commit seppuku as a result. (3) Because of (2), there is also a cultural "way of saving face" that is not just relevant to Japan, but ubiquitous to Asia. This is also perhaps the most pernicious cultural aspect with respect to addressing the real problems here, because in some very important ways, appearances are much more important than reality, because as long as appearances can be maintained, loss of face can be avoided. Therefore, at exactly the time when the facts need to come out so both the nature and the magnitude of the problem can be clearly understood, the Japanese will go to any lengths to bury the problem to avoid public shame and humiliation. And, unfortunately, loss of face IS more important than anything else to the people involved. That is what makes the problem nearly unsolvable. jess.

To: Stitch who wrote (5838)	6/14/1998 8:12:00 PM
From: Jess Beltz	Read Replies (2) \| Respond to of 10921

I would like to say one more thing about banking crises in general. Part of what's going on in Japan is not unique to Japan. In the recent past, it seems that banking crises are very difficult to resolve, for two reasons. (1) The economic issues involved in a banking crisis are often subtle and complex. Politicians are often legal creatures with little economic training. Furthermore, the crises involved are often the result of macro-economic shocks, and bankers always sing the siren song that if the government will just wait, when the economic conditions change, the banks will return to health. This is exactly the song sung by Charles Keating over and over again to Jim Wright, then speaker of the house and the 5 senators on the Banking Committee. Of course, while the government does nothing, the situation can (and usually does) worsen, making the problem more difficult to clean up. (2) While the bankers are singing this song, the politicians involved have a vested interest in believing them. That is because cleaning up a major banking mess almost always involves large expenditures of the publics' money, and guess where that money comes from: INCREASED TAXES. In any elected government, that is almost the surest way to get thrown out of office. Thus, cleaning up a major banking mess involves lots of economic issues that politicians don't often understand, and the one political reality that they do understand involving political/career suicide. Therefore, sadly, they will often do nothing. During the S&L mess, exactly the same kinds of political bullshit went on for two or more years while the situation worsened. To the government's credit, it did finally draw a line in the sand and say this has got to stop. The 64 trillion dollar question is: can the Japanese government do the same? jess