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To: Chip McVickar who wrote (210)	6/18/1998 9:12:00 AM
From: Mark Myword	Read Replies (1) \| Respond to of 3536

>> re: Japan:This process works as long as new vehicles and credit can be created. The problem has been the risk takers themselves do not know the risks. What they will lack in the moment of truth is Liquidity<< Chip - good post, lot of truth in what you say. That's why I feel the yen is going much lower eventually, because they will have to provide liquidity and inflate the bad assets. The intervention yesterday was , IMO , a desperation strike to quell the rising tide of pessimism and awareness of the gravity of Japan's mess. It is a stopgap to buy some time and prevent a quick unravelling of the Asian economy. The heavily-ingrained Japanese propensity toward isolationism, old-boy networks of business and financial profiteers, and sheer pride in their own "economic invincibility" will be extremely difficult to crack, and I think we'll see another disappointment as a result of all this. I hope Rubin doesn't throw too much of our tax money at it - we owe Japan no favors. Hashimoto is just an expendable pawn, even his own people think he's worthless , so he may soon be out. After all, the usual pattern is to fire the scapegoat and bring in a new face, which then is "given a chance" to effect reform. I doubt real change is in the cards; the bureaucrats most likely think this is just another storm to weather.

To: Chip McVickar who wrote (210)	6/18/1998 9:36:00 AM
From: Henry Volquardsen	Read Replies (2) \| Respond to of 3536

Chip, I think your analysis is pretty good and worry about the implications. I think it is a bit extreme to say Japan is bankrupt but they certainly face the prospect of having to write off a significant portion of their wealth. At this point I believe we can not yet tell which way the system will move. Left to their own devices the markets would eventually force the fire sale liquidation of Japanese and Asian assets. That is what the currency depreciation is all about. The question will be if a global policy mix can be found that will reliquefy the Asian markets without generating an even larger global asset bubble. This answer may be a bit quick and I will consider the situation more over the weekend. Right now I haven't decided what steps to take as it is not clear which way the system will swing. I suspect I'll be spending a lot of time monitoring the news for the next few weeks. Henry

To: Chip McVickar who wrote (210)	6/18/1998 10:51:00 AM
From: Bucky Katt	Read Replies (2) \| Respond to of 3536

CC--You summed up my thoughts also. Debt in and of itself is one thing, but the liquidity needed to maintain the Ponzi scheme is the root. Think what may happen here, in the US, if residential real estate drops a mere 15% across the board? Those 125% mortgages will really cause problems, mainly for the mortgagee. Mortgage derives from Latin, and literally means dead debt! "Tempus omnia revelat"