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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Stitch who wrote (5785)	8/23/1998 1:20:00 PM
From: Frodo Baxter	Read Replies (3) \| Respond to of 9980

Dude, Every day, I hear more and more b.s. from everybody and his brother about policy prescriptions to get Japan out of its mess. This is nonsense. Let's get real and dissect what really happened. Japan is in many ways an imperial, almost medieval culture. The Japanese worker in the post-war regime did everything asked of him, but the incentive structure and the financing was ALL WRONG. Domestic firms were coddled, freely financed, and never developed any competition. International firms were coddled, freely financed, and sought increasing exports at the expense of all else. The phrase "seeking marketshare, not profit" is an euphemism for "loosing money hand over fist." Is it any wonder that their banks are technically bankrupt but protected by opacity? So what do we have? Zero productivity growth and huge leverage. Incredibly, nobody noticed this, assumed that Japan Inc. had awesome productivity growth and leverage wasn't a problem. This caused an asset bubble, Japanese triumphalism, hubris, and the purchase of American assets at the top. Now the house of cards has been exposed, and a strong draft is blowing in. And all the geniuses come in with whacked-out theory about how Japan can fix itself, if only the Japanese bureaucrats were as smart as the geniuses. Most of the recommendations are less than useful, on the order of Sunbeam can fix itself if it just sells more grills. But while most people think that Sunbeam is beyond repair, somehow Japan can be "fixed." Japan is a pauper in rich man's clothes. The only way to fix Japan is to devalue, that is to make its people, assets, prices, and wages more aligned to international standards. Beggar thyself. Friedman and Krugman are correct that Japan is in a liquidity trap, but their solutions (put more money into circulation) are just oblique ways of saying the evil word "devalue." Funny thing, the yen traders already know this. And doesn't it really suck that the only solution, by its nature, causes more contagion?