In India an elderly English woman in about the year 1910 wondered where her toast was one morning. She waited. She waited. Her tea was on the table but her toast was missing. Outside the day was beginning to eat up and no cook appeared at the breakfast table bearing her slices of morning toast.
The Englishwoman waited. Finally, taking matters into her own hands she ventured into the compound to root out cook who had worked for her for many years and who was slacking off badly. She had never before ventured into the cook house, actually a sort of thatched shack which was now emmiting copious amounts of smoke.
Shielding her forehead from the glare of a very bright Bengali sun she reached the cookhouse and looked in. There was cook. He was hunkered over the fire making her morning toast. Once slice was already toasted the next was being worked up. The second slice of toast was at that momnent clenched in the cook's toes, his right foot actually between his big toe and the next toe.
For a moment the English woman stared at cook and then she said quite deliberately, "Well...I suppose bad habits once learnt are impossible to give up."
My goodness. 641 posts on this thread in my absence of six weeks. You certainly have been busy. Like the English lady I suppose reading this great thread is a habit it is impossible to break. It is a real treat to read all your thoughts. How long will 641 posts take to read? Bernie and Stitch: I have to note Sidby $.53 today. Zeev how I've missed your turnips. Thomas how are you?
In the meantime let me pass on to you all the latest from Stratfor.
In case you missed this.
Copyright Stratfor(C)
For Private Use only.
Global Intelligence Update
Red Alert
August 17, 1998
World Markets Show Regionalization -- Not Globalization
Last week, the world once again focused on the stock markets. All of the
world's markets shuddered under the stress of the ongoing Russo-Asian
financial crisis, and everyone was asking three questions: Would the break
in the Russian markets destroy what is left of the Russian financial
system? Was there any bottom under the Asian markets? Were the American
stock markets about to plunge, turning a regional crisis into a global one?
We never give stock market advice, since if we were that good, we would not
have to work for a living. However, there is an emerging pattern in the
global markets, revealing important underlying geopolitical trends that
need to be taken very seriously.
There is a great deal of talk about the globalization of the world
financial markets. Our financial markets are certainly global in scope and
there are certainly powerful interactions taking place between financial
markets. But there has not been a homogenization of international markets.
Quite the contrary, markets have behaved in a regional rather than a global
manner. The Hong Kong and Tokyo markets, for example, have tended to
resemble each other in the past year and have differed markedly from the
U.S. market. Indeed, over the last year, U.S. indices have behaved with an
extraordinary indifference to Asian markets, which tended to move together.
European markets have also tended to follow their own course, although with
much greater internal divergence than in U.S. or Asian indices. Yet, on
the whole, what we have seen is a pattern of intensifying regional
synchronization of markets along with growing interregional divergence.
The world appears to us less as a singular interdependency than as three
regional blocs, each driven by internal factors and each irritating the
others, without actually definitively influencing the others' courses. The
United States, East and Southeast Asia, and the European Union are
increasingly self-defined entities, following their own courses of
development. The assumption that an Asian meltdown would inevitably drag
the American boom down with it certainly hasn't taken place as yet. Nearly
a year into the Asian meltdown, the NASDAQ stands 250 points and 16 percent
above where it was a year ago, even after falling about 200 points in the
recent sell-off. Now, there is no reason to assume that the U.S. markets
won't fall. The current expansion is about six years old, and one of the
signs of a healthy economy is its ability to generate periodic recessions
to cull the weak. But if the U.S. market sells off and if the U.S. economy
goes into recession, it will have more to do with the internal dynamics of
the American economy than with the effects of the Asian crisis. For what
little it's worth, we do not see the U.S. economy weakening as yet, and
are not convinced that the current expansion is over.
Let us reiterate the view we expressed several years ago in our 1995-2005
Decade Forecast:
"The decade 1995-2005 will be seen as a golden age, comparable to the last
century's turn--and for many of the same reasons. However, obviously not
all nations will benefit equally:
The United States is by far in the best financial and demographic position
to capitalize on this tendency. Interestingly, the national deficit, which
is declining as a proportion of GDP, has not had the effect feared. The
primary problem of the deficit--that it crowds out private borrowers and
raises interest rates--has simply not happened and it will not happen.
What it has done is cripple the Federal government's ability to finance new
social initiatives. The key structural issue -- the U.S. deficit with East
Asia -- is primarily a political rather than economic problem, and will be
dealt with as such.
The European Union's enjoyment of this period will be limited somewhat by
Germany's ongoing digestive problems--absorbing the old East Germany--and
an inability to create a Monetary Union. On the one hand, the reluctance
of major powers to abdicate sovereignty to Brussels makes negotiations
difficult and subject to collapse and breakdown. On the other hand, the
fact that the EU contains both net creditor and debtor nations makes the
creation of a single, integrated fiscal policy--the precondition for
monetary union--difficult to imagine. The idea that Greece or Portugal and
Norway or the Netherlands will share fiscal strategies is a bit difficult
to imagine. As the EMU frays, European integration in general will be
questioned. The great reversal of 1997 will resonate through the next
decade.
Japan will share least in the new prosperity. The follies of the 1980s,
when Japanese corporations sacrificed profits to market share in order to
maintain cash flow and pay enormous debt service, will continue to haunt
Japan. Promises of recovery will come and pass away. In the meantime,
pressures on Japan from other East and Southeast Asian economies will
whittle away at Japan's comparative advantage, while the U.S. will continue
to dominate in the areas of technical innovation. Increased unemployment,
unfulfilled promises of prosperity, a sense of opportunities missed, will
increase social instability in Japan. To understand Japan in the next
decade, look at Japan during the 1920s, rather than at Japan in the 1980s.
We strongly feel that the last decade's surge in East Asian economies will
be peaking early during the 1996-97 cycle. Korea and Taiwan are both
reaching climaxes, marked by surplus cash fleeing the country, searching
for safe havens. The current Korean investment boom, followed closely by
Taiwan's, represents a peaking--followed by substantial economic problems.
China itself is facing deep structural problems, particularly a shortage of
skilled labor and falling rates of return on investments. We find it
extremely unlikely, political considerations not withstanding, that China's
current growth spurt will continue."
The general global prosperity is, in fact, intact. Even Asia's financial
crisis has not wiped away a generation's economic development. Asia is
surely better off today than it was in 1960. But beneath the general
economic well being, what we are observing is a profound regional
divergence that will have tremendous political consequences in the years to
come. Asia's structural weakness makes it increasingly difficult for it to
survive in a world dominated by the dollar as the basic denominator in
international trade. The inability of Europe to synchronize its markets,
while distinguishing it from other regions, means that its hopes for
integration will remain thwarted. Most important, the continuing increase
in American economic power, coupled with unchallenged American military
power, means that the United States is entering the 21st Century in
extraordinarily good shape. Indeed, we would argue that the United States
has become the center of gravity of the international system.
This leaves Asia as the increasingly frustrated afterthought. What will
drive Asia in the next months and years is a technical matter: the
difficulty of maintaining inter-Asian trade denominated in dollars. The
sheer scarcity of dollars will unnecessarily depress regional trade. The
smaller Asian powers will demand the creation of a regional reserve
currency that would facilitate trade and the creation of lending facilities
without dependency on the U.S.. The only currency that can serve this
cause is the yen. Japan will resist this, since it is highly dependent on
U.S. dollar-denominated trade, and has much to lose from decoupling from
the dollar.
However, Japan will fail to solve its internal economic problems. It will
therefore become less competitive in the United States because of the
effects of under-investment and under-capitalization. In due course, and
rather quickly at that, Japan will succumb to the vision of leaders like
Mahatir of Malaysia, who has seen this unfolding process more clearly than
most. The consequences of this move, while unintended, will be enormous,
creating a regional bloc whose interests are inherently opposed to those of
the United States. The next Japanese election will inevitably turn on
technical issues such as the creation of an Asian-Yen, which in turn will
have profound, and undiscussed, political consequences.
In the meantime, a vaguely coherent Europe will continue to try to form a
single currency in spite of the fact that the business cycles of its member
states haven't been synchronized. One is reminded of a similar bloc of
states attempting to federalize their economies through a single currency,
in spite of the fact that their economies were fundamentally different and
out of synch with each other. The inevitable result was that the American
South tried to secede and was defeated. As a result, it suffered nearly a
century of relative poverty at the hands of fiscal and monetary policies
that were indifferent to its needs.
Of course, there is no central force that will compel European states to
remain in the Union when monetary policy wreaks havoc on their national
economies. It is difficult to imagine an Abraham Lincoln arising among the
Brussels bureaucrats. An integrated Europe achieved without bloodshed
would mean that various European nations would voluntarily permit
centralized monetary and fiscal policies to wreak havoc on them, for the
sake of the principle of European integration. An economy that can't even
synchronize the British and German stock markets isn't going to go very far
except at the point of a gun.
Thus, when we look at the world's stock markets, we see things differently
than most. We see a growing regionalism of three blocs: East Asia, North
America, Europe. We see East Asia's stock markets pointing toward an
abandonment of the current international monetary system out of self-
defense. We see Europe's stock markets pointing to an inherent inability
of the Europeans to create an integrated European economy, and we therefore
anticipate endless conflicts in a state without a nation and a government
without power. And we continue to see the United States remaining
profoundly unaffected by the other regions, rumbling through its business
cycles like a powerful economic locomotive.
We never predict the market. But sometimes the market points in directions
of more lasting significance than tomorrow's market close. These markets
are pointing us toward a new world that will be defined less by
globalization than by regionalization. And that will be a very different
world than most expected just a few years ago.
A question to Mike M or anyone: Does anyone know the amount of money in private/corporate pension funds in Japan?????? As opposed to the
postal savings money??? |
