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Re: Asian Financial Meltdown?

Jun 24, 1998 08:24 AM
by Govert Schuller

I am posting this article to give all of you on this list a
little peek into the risks and dangers of the international
financial situation. It seems that the karma of collective
greed returned to our doorstep.


>Note: The June Issue of McAlvany Intelligence Advisor
focused on this issue
>- how the Asian financial meltdown is heading toward
America.  There are
>many other highly regarded economic guru's who are saying
the same thing.
>For example:
>   "I have never read of, or seen such a total economic
breakdown and
>massive destruction of wealth as has occurred, against all
expectations, in
>Asia in the last six months."  - Marc Faber, The Gloom,
Boom, and Doom
>Report (2/12/98)
>   "If China and Japan come unglued, you're looking at
something that will
>dwarf the depression of the 1930's."  - Doug Casey,
>Speculator (2/19/98)
>   "The excessive credit which the Fed pumped into the
economy (as they've
>been doing) spilled over into the stock market, triggering
a fantastic
>speculative boom.  Belatedly, the Federal Reserve officials
attempted to
>sop up the excess reserves and finally succeeded in braking
the boom.  But
>it was too late.  By 1929 the speculative imbalances had
become so
>overwhelming that the attempt precipitated a sharp
retrenchment and
>consequent demoralizing of business confidence." - Alan
Greenspan, 1966
>   As you may well know, World Wars I & II followed global
>debacles.  The power elite have been counting on economic
"leverage" if not
>financial terror to take over the huge new markets in China
just as they
>leveraged financial control of industries and markets in
Europe and Japan
>(Trilateral Commission) following World War II.  Keep in
mind that
>desperate fallen ones do desperate things; make the calls
to bind these
>forces of anti-Christ who would create and manage crisis
right into their
>New World "Odor".  - C.R.
>-------------------------------------------- article
>Inside Track On World News
>By International Syndicated Columnist & Broadcaster
>Eric Margolis <>
>By Eric Margolis 21 June 1998
>Asia's financial crisis, dismissed as `a glitch' only a few
months ago by
>President Bill Clinton, went critical last week, sparking
an international
>economic emergency that threatened to collapse world stock
markets and
>bring on a global depression.
>Japan's once mighty yen, down 40% in value over the last 12
>continued its sickening drop. Last Monday, it hit a new low
of 146 to the
>dollar, as speculators and investors dumped yen for US
>China issued an ultimatum. If the yen sank below the
critical red line of
>150, China would devalue its so-far steady currency, the
yuan, to keep it
>competitive with the falling yen and other sinking Asian
>Devaluation by China would ignite another round of
competitive devaluations
>by its Asian trading partners and export rivals, producing
rounds of
>ruinous devaluations economists call `beggar they
neighbor.'  Just such
>reciprocal devaluations caused the 1930's world depression.
>On Wednesday of last week, the US and Japan's central banks
>speculators. They bought US $4 billion of yen, driving the
dollar down and
>pushing the yen up 5%. Stock markets rallied. Anti-yen
speculators suffered
>huge trading losses. The most capable member of the Clinton
>Treasury Secretary Robert Rubin, had averted disaster.
>But Japan still faces the danger its painful recession may
turn into
>raging depression, or even financial collapse. Japan, the
locomotive of
>Asia's once vibrant economy, has run out of steam. Japan's
>bubble economy, based on rampant land speculation, reckless
loans, cheap
>money, shadowy accounting, and incestuous relations between
businessmen and
>politicians, burst eight years ago. Today, Japan's
shrinking economy is
>left with tottering financial institutions, huge debts and
domestic bad
>loans galore; industrial over-capacity; and tens of
billions of outstanding
>loans to bankrupt Asian nations like South Korea and
>Western financiers demand Japan effect sweeping structural
reforms that
>include liquidating insolvent companies, allowing foreign
institutions into
>its financial system, firing redundant workers, opening
domestic markets to
>imports, and conducting business and accounting by US and
European standards.
>Japanese are reeling under these assaults, and deeply
confused. When the
>yen was mighty, gaijin nations accused Japan Inc of being a
>Yellow Peril bent on buying up the world. Now that the yen
has sunk,
>foreign critics accuses Japan of wrecking the world
economy. Tokyo is being
>bombarded by conflicting economic demands and advice from
abroad.  Still
>emotionally crippled by its defeat in World War II, Japan
twists in knots,
>trying to placate all it critics.
>Prime Minister Ryutaro Hashimoto promises to close weak
banks and clean up
>their US $650 billion in bad debts, deregulate business,
and use tax cuts
>and public works projects to stimulate the economy. All
these remedies make
>sense, save public works spending, which only enriches
>politically-connected contractors.
>But nothing happens quickly in Japan, where bureaucrats,
special interests,
>local politicians, and custom, combine to frustrate change.
The idea of
>firing hundreds of thousands of unneeded workers, and
closing venerable
>firms, is simply anathema to Japan. At heart, Japan is a
farming village,
>writ large. Everyone tries to share the pain during hard
times - better
>less for all than none for many. Mass firings and business
>closings are personal disgrace for company directors, an
anti-social act.
>There's no place in Japan for corporate mass executioners
like America's
>`Chainsaw' Al Dunlop, who boasted of cutting 15,000 jobs.
>Efforts to revitalize the economy by stimulating consumer
spending are
>being thwarted by the deep conservatism of Japanese.
Japanese consumers.
>hate borrowing, and mistrust stocks and bonds. When times
are tough, they
>increase savings, putting the funds into Post Office
savings accounts that
>pay under 1% interest. Like farmers everywhere, Japanese
bury their savings
>in the ground.
>A depressed yen will cause US labor unions to renew charges
Japan is
>`flooding' American with cheaper goods, and demand trade
>Worse, Asia, which accounts for 40% of Japan's commerce,
has no cash to buy
>goods from Japan, or repay Japanese loans. Japan's imports
from Asia are
>down 15%. So , at best, Japan and Asia, with the important
exception of
>China, appear headed for a long recession.
>If Hashimoto's current rescue package fails and recession
turns to
>financial melt-down, as the Chairman of Sony recently
warned might happen
>-with startlingly un-Japanese candor, western stock
exchanges will stagger.
>If Japan's cash-crunch worsens, Japanese banks may begin
cashing in the
>hoard of US Treasury and Canadian securities they hold,
plunging North
>America into a monster liquidity crisis.
>Even experts don't understand the ramifications of our new,
>global economy, where financial storms race at the speed of
light, leaving
>ruin in their wake. Asia's banking crisis has undone
governments in
>Thailand, Indonesia, and Korea. Continued economic and
social stress may
>produce extreme political reactions across Asia - including
>Alarmingly, Asians increasingly accuse westerners seeking
to take over
>their nations by financial imperialism, blaming Wall Street
for wrecking
>the region's once soaring economies. The Nazis, recall,
came to power as a
>result of the 1930's depression, and the financial collapse
of German
>Bill Clinton, with Monica much on his mind, visits China
this week, right
>into the eye of the widening Asian financial hurricane.
Some glitch.
>Copyright eric margolis 1998
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