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To: Defrocked who wrote (20477)	2/19/1999 9:49:00 AM
From: yard_man	Respond to of 86076

>>the world is awash with excess capacity in computer chips<< Somebody tell this to those geek analysts hyping the POS into expiry today!

To: Defrocked who wrote (20477)	2/19/1999 9:56:00 AM
From: yard_man	Read Replies (1) \| Respond to of 86076

Do you think printing more yen or whatever will fix this? I guess that's where the rubber meets the road ... I don't think it will. >>A good way to detect this is to look at countries' “output gaps”: the difference between actual output and output at full capacity. Japan's output gap is forecast to widen to a record 7% of GDP this year. The country is on the brink of a vicious deflationary spiral, with falling prices swelling companies' real debts and keeping real interest rates high. The rest of East Asia also has huge spare capacity. Even if growth resumes this year, Thailand's GDP is unlikely to regain its level of 1996 until 2001. If so, output will in total have fallen by almost one-third relative to productive potential (as measured by the economy's trend growth rate of 7%). Meanwhile, China has 40% excess capacity in manufacturing. None of this excess capacity is likely to be shut down quickly, because cash-strapped firms have an incentive to keep factories running, even at a loss, to generate income. The global glut is pushing prices relentlessly lower. Devaluation cannot make excess capacity disappear; it simply shifts the problem to somebody else. But in the process, global demand will contract as emerging economies are forced to raise interest rates to deter capital outflows. <<