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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Bobby Yellin who wrote (293)	6/26/1998 9:57:00 AM
From: Henry Volquardsen	Read Replies (2) \| Respond to of 3536

Bobby, the issue about foreign control of the financial institutions is an ego issue. If the US banks bought a major stake in the Japanese banks it would do wonders for their economy. The bank system would be immediately re capitalized and the credit crunch would become a memory. The problem is ego. Think about how the US citizenry would respond if during the S and L crisis the Japanese had bought Citibank, Chase, Morgan, Goldman Sachs, Saloman and Merrill. THere was enought screaming simply because they bought some real estate, a movie studio and a golf course. And yes the Japanese person in the street has not felt the pain much yet. This is largely because of life time employment and top heavy demographics (not as many new workers). But this is gradually changing. And the big Japanese infrastructure projects of the last few years have been notorious for being undermined by political considerations. I saw a very interesting analysis of China's pattern of trade a few weeks ago. It argues strongly that China does not need a devaluation. The product areas where Japan and the other Asian tigers concentrate their export growth are very price elastic. Therefore they are very price sensitive and greatly effected by the currency value. China is exporting into a different market. They are much lower on the technological food chain. Their products are more basic and demand is constant and less price elastic. As a consequence their demand has held up better and it is arguable how much benefit they would get from currency depreciation. I don't know if I buy this arguemnt completely but it is interesting. Henry