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Gold/Mining/Energy : At a bottom now for gold? -- Ignore unavailable to you. Want to Upgrade?

To: Ahda who wrote (1419)	7/15/1998 2:15:00 AM
From: ahhaha	Read Replies (1) \| Respond to of 1911

Japan is in a "rate trap". Changing rates, in particular lowering them, doesn't bring about the desired behavior. Why do I want to do more business if the loan rate goes from 1/2% to 1/4%? Interest rate levels are not effecting business. How much security purchases of short governments does it take to lower rates? Practically none. It is done there almost by fiat. This guy walks out and writes the new rate on a chalkboard. They don't have a borrow and spend economic orientation like we do. They have tons of money even though the perception is the banks are starving for money. Some are. They're the losers in the Japan miracle which refuse to die. The problem is what to do with the mountain of money. A mountain of money if not employed is transiently worthless. Japan can no longer do business through a one way door. They have to start trading, buying abroad, if only because the yen has become the Asian reserve currency while its competitors have become large and viable just like what Japan did to us. Japan forced us to improve the quality and cost of output. The rest of Asia is doing that to Japan. The dollar fell while we were grossly uncompetitive. The yen is falling because Japan is becoming so. Japan has to compete with other Asia for new business and they have to buy American. They have to change their Japan-centric neo-mercantilist attitude, open their economy, and get back to work. You start this process by confidence. Aggressive monetary policy gets it going over night. Surprise. Aggressive purchases of short governments by the BOJ would cause the market to raise the interest rate on the marginal yen supplied! I estimate rates would rise from 1/2% to 2%. You and the most astute economists have to remember that the supply of money and its cost undergo different degrees of elasticity including negative elasticity.