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Politics : Dutch Central Bank Sale Announcement Imminent? -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (2830)	12/25/1998 3:34:00 PM
From: sea_urchin	Respond to of 81011

Zeev "...Gold is violating your dollar/gold relationship recently, we have both going down simultaneously in the last two months, any explanation? " Gold price is still between the parameters on my regression equation against currencies. At the moment, the top parameter is about $335 and the lower one is about $270. POG does not track the US dollar on a daily basis, just over time within fairly wide limits. Probably the best available, currency-neutral index of the true "price of gold" is its value in Special Drawing Rights (thanks to Hutch for drawing my attention to it). pacific.commerce.ubc.ca Draw a log plot from 1995. Looks like it's about to make a selling climax (big, final down-spike). That would explain why POG and US$ are both falling.

To: Zeev Hed who wrote (2830)	12/26/1998 12:08:00 PM
From: Ahda	Read Replies (1) \| Respond to of 81011

Why do you feel this? , I believe we might once more creep to the high of last year (it was if memory serves 146, not too far from that 150) during the second half, but will not get there probably until 2000.

To: Zeev Hed who wrote (2830)	12/27/1998 6:53:00 AM
From: ForYourEyesOnly	Read Replies (2) \| Respond to of 81011

JAPANESE ECONOMY IS IN THE DUMPS By JOHN DIZARD -------------------------------------------------------------------------------- MY speculator friends have more or less the same attitude as the rest of the country towards the impeachment spectacle: annoyance, occasionally interrupted by momentary curiosity. Every so often they call up the Washington fixers they have on retainer to find out if anything real is going on. The commentators' talk about momentous events doesn't seem to ring true, because nothing much seems likely to change in terms of material reality. But a seismic shock went through the speculative and investing world last week. On Tuesday the Japanese bond market crashed in a huge way when the Trust Fund Bureau of the Ministry of Finance announced it would no longer be buying government bonds in the open market. Given that Japanese agencies have been buying between 60 and 80 percent of all government bonds for the last couple of years, that is not good news. Especially when you consider that Japan's government is going to run a deficit of about 10 percent of the country's total economy next year. That is four times larger than what the devastated Russian government will incur. Not surprisingly, then, the MOF announcement led to a bounce in the interest rate on the standard Japan Government Bond, from around 1.5 percent to 1.9 percent. The endless purchases of government bonds by controlled agencies has been one of the magic tricks that has kept the Japanese economy from disintegrating thanks to its establishment's mismanagement. Lots of people were all in favor of this holographic illusion of prosperity. Larry Summers - sorry: Dr. Lawrence Summers - formerly of Harvard, now the Deputy Secretary of the Treasury, has been lecturing the Japanese for some years now about how they have to stimulate their economy with more deficit spending. Summers had less to say on last Tuesday, when the benchmark long-term interest rate paid by the Japanese government rose by around 27 percent in one day. The immediate problem is that the tubercular Japanese banking system is coughing up its red balance sheet thanks to this week's bond crash. The banks have been pulling back from lending, creating a severe credit crunch. Instead, they've been putting the money into government bonds and using the hundreds of billions - or even trillions - of yen in profits to stay afloat. That's much the same strategy Alan Greenspan and the U.S. banks employed to fix our financial system in the last recession. Only last week their year's profits from government bonds disappeared. Gone. And the Japanese finance officials have another year 2000 problem: A lot of the trillions of dollars' worth of deposits the public has in the Post Office's in-house savings bank mature, and are likely to be withdrawn to be placed in higher-yielding instruments, such as American bonds, for example. Who will replace them? A central banker friend of mine says things are so bad that the Bank of England, not an easily panicked institution, has been telling its European counterparts that "Japan is at the point of economic and financial collapse." By collapse, the Bank means that the country's output next year could drop by 5 percent or more, and that the ability of the Japanese government to finance itself over the long term will be called into serious question. That is not great news for us, since even in its present state, Japan is still the second-largest economy in the world. But its government deficit and society-wide bad debts are compounding out of control. The Japanese establishment could reform and deregulate, but that would mean they would lose their own positions. They're not eager to give them up. As responsible Wall Street people looking on this disaster, and the tragedy it holds for the hard-working (etc., etc.) Japanese people, we have to ask: What's in it for us? In the short term, you want to buy Japan Government Bonds (JGBs). Ideally, if you're one of the "global macro" speculators with a credit line left after this year's disasters, you want to buy them with borrowed short-term yen. That way you are hedged against currency exposure, which is a good idea, because the yen is going to be another brightly printed brand extension of Charmin over the next year. The reason for the approaching bond rally is the Bank of Japan's coming massive purchases of this paper, which is necessary to keep the banking system from downsizing to the point of nonexistence. Eventually the bond crashes again, but we'll be long gone. The other really good long-term strategy is to be an American. Then you get to take the rest of the world's money, and spend all your income on fun stuff for yourself and presents for your friends. The critics of our society, and the gloomy researchers at the Federal Reserve, are right: We're not saving for the future. Why bother, when we're the Roach Motel of the world's capital? The Japanese sometimes refer to what's happened to them in recent years as the Second Pacific War, which they now figure they've lost. They have a point.