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

To: Bosco who wrote (6859)	10/1/1998 8:43:00 PM
From: Michael Sphar	Respond to of 9980

Well you've certainly given the thread an assignment. I'll toss out my observations for whatever they are worth. Rubin makes the case for this being a substantial crisis but misses the obvious by not crystalizing its impact with a suitably noteworthy name: "But the third major contributing factor was something that has not changed over time -- the basic dynamics of markets, and in particular their tendency to go to extremes. This has been a subject of enormous attention back through the centuries during other famous global crises -- such as the Tulip Crisis in Holland in the 17th century, or the South Sea Bubble crisis of the 18th century, and the Depression of the 1930s. The dynamics of markets, as a very wise man said to me early in my years on Wall Street, are rooted in the human psyche." Holy moly Rob! How do you expect to be remembered ? We need a name for this commensurate with the "tulip crisis" or the "south sea bubble" and I don't consider the "rubin sandwich" as acceptable. Neither is "Asian Contagion" for it seems to have become more worldly than even that great and diverse region. Again, Rubin misses a strategic point: "Going forward today, Japan must urgently implement strong effective measures to lead to strong, sustained demand led growth, critical not only for its own benefit, but also for recovery from the global crisis." While this is all well and good to espouse in the largest consuming nation on earth, expecting growth of demand from Japan ignores the obvious fact that Japan unlike the US is not an accreting nation of diverse cultures. I've never heard anyone accuse Japan of luring the best and brightest of other nations to its country to enrich and rejuvenate its work force and help grow its inherent demand. On the contrary, Japan is a homogenous culture with an aging population. And as those of you who have aged will recognize, consumption declines over time with age. Japan can't and won't become a great consumer society because its population is aging and they are more inclined to save for their older age, than consume, a la the changing attitudes regarding fiscal matters for the baby boom generation in this country. One final comment: "Let me now outline four additional concrete, mutually reinforcing areas for action. They are: (1) increased openness in the international financial system; (2) strengthened national financial systems, particularly in emerging market economies; (3) promotion in industrial nations of more soundly based capital flows; and (4) developing new ways to respond to crises, including greater participation by the private sector." Sounds like Rob's got a rough vision but...not sure he really sees how we're all gonna get there from here. For instance, Japan banks valuing securities held at cost rather than marking to market is an example of which of the above areas ? #4 perhaps ? In summary, I'd have to give Rob a C-, partly for missing the opportunity of forever naming this crisis and missing the more obvious flaws in his analysis of the second largest economic nation on earth, but also for not really seeing how to get us out of it eventually, the above "areas for action" notwithstanding. A good start, but needs work. Caveat: I'm probably a harsh grader, coming from an old school.

To: Bosco who wrote (6859)	10/2/1998 11:56:00 AM
From: Sam	Read Replies (2) \| Respond to of 9980

Bosco, Thanks for posting Rubin's speech. I found it interesting, but he didn't focus directly on what I take to be root problem, that the structural model of export driven growth that the Asian countries adopted is fundamentally flawed, and will of necessity result in over capacity when too many countries of collectively sufficient size do it. He does obliquely refer to it when he says, <<Our belief in markets stems partly from the capacity of markets to discipline governments to pursue the right policies for solid growth. Our goal should be a strong market-based financial architecture which induces sound decision-making by investors, encourages capital to be used productively, and rewards governments that pursue sound policies.>> Perhaps he was just being diplomatic, I don't know. But if they don't adopt policies that encourage a strong middle class and basically free trade, along with the accounting standards and transparency that Rubin calls for, and if they continue to try to direct subsidized investment from on high, encouraging a small extremely wealthy class with some trickle down consequences, they will continue to destroy the industries that they invest in, and capital flows will continue to be distorted. I guess you might say that they are sort of like Republicans on the issue of Clinton: with their current structure, they don't know when to stop.