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

To: Ramsey Su who wrote (5942)	6/20/1998 8:41:00 PM
From: Jess Beltz	Read Replies (1) \| Respond to of 10921

Ramsey, first off, I don't think $500 billion touches the problem. I think the number is way up in the trillions. I heard the number $30 trillion last night, but I don't remember now if that is the bad debt or the total debt package. In any event, even if that is the total amount of debt, I would be surprised if less than 10% (ie 3 trillion) is bad debt, and more is on the way as SE Asia goes down. I do not think the Japanese government can simply buy the debt at face value from the banks and give them a clean slate. If they can, they should do it NOW. There was some legislation passed in Japan back in February that stipulated that the government would buy some of the debt, but the amount, the percentage of par, and the mechanics of the buyback were all to be determined in the future. Your scenario assumes that Japan has absolutely inexhaustible coffers, and I personally have no idea how much they have. the fact that this obvious "all Japanese" solution has not been implemented seems to me to indicate that either (1) it isn't feasible, or (2) it's political suicide for the person implementing it. Second, even if they could "buy" their way out of the bad-debt banking sector problem, that doesn't stop the problem of the sliding economy. The economy is in decline because Japan has an aging population that is not composed anymore of young consumers. GNP and GDP have been in decline for years now. Major Japanese manufacturers have left Japan in droves due to (1) the pressure of American and European governments demanding that the Japanese build plants on their soil, and (2) the flight of those very manufacturers to countries with much lower labor costs. And as long as the economy is in decline, the yen is going to lose value, and as it does, the whole SE Asian economic problem worsens, and that in turn worsens the situation in Japan. It is now a very vicious cycle feeding on itself. I think your solution is in effect exactly what the Japanese themselves are saying, ie basically, there is no real economic problem. I assure you that there is. And you can watch the people taking their yen out of Japan and infer from that that a lot of people in Japan think there is too. jess.

To: Ramsey Su who wrote (5942)	6/21/1998 10:15:00 AM
From: Mason Barge	Read Replies (1) \| Respond to of 10921

One difference in Japan and US/Chrysler and US/RTC comparison. Both bailouts (the RTC certainly an expensive one) involved putting the business on a sound financial basis by dramatic restructuring. In the case of the RTC, that involved closing the doors of an enormous number of institutions. The comparison in fact might be valid -- in facy, your plan might be close to what eventually happens -- IF Japan insists that the responsible banks go out of business!! Japan certainly has the money to bail out its banks. The Postal Savings reserves are over $1 trillion. But this wipes out the savings of millions of older Japanese citizens. Why would you do that, if the banks were going to get into the same fix in the future? This isn't just money. A Japanese minister who participated in the wasting of the country's savings would have to commit suicide. The Japanese may lack the political willpower to fix its financial mess, but they aren't stupid. The Postal Savings are their safety net. If they tried to tap it, without real change in the banking sector, the Japanese people would rebel. You would have to think that there would be run on the Postal Savings fund. So, given the near political impossibility of a Japanese gov't killing (or radically reforming, including firing their buddies from) a couple of big banks and paying off the depositers, and the realistic impossibility of massive cash infusions without reform, what can they do? I think they are frozen in the headlights. Things in Japan are just going to have to keep getting worse until the people eventually speak at the ballot box.