Ausnahmsweise einen Auszug aus dem neuen Privateer...

verfasst von Boyplunger, 28.10.2001, 19:32

MOODY JAPAN
Moody's Investor Service, the global ratings agency, is now on the verge of downgrading Japan's international debt rating. Not before time. If Moody's lowers Japan's rating by just one notch, it places Japan's debt rating at the same level as that of"Slovenia". Where's Slovenia? We had to consult a good atlas. It's in northern"Yugoslavia" just south of the Austrian border.
Truth Be Known:
With the arrival of Japan's new Prime Minister, hopes blossomed that now, finally, Japan would actually do something about its huge financial mess. Nothing has happened! Well, not quite nothing. Moving through the tortuous inscrutable oriental processes of Japanese budget making is, wait for it, another"stimulative" budget. This one, as everyone from Mr Koizumi on down assures us, will be the"last" one.
After the previous TWELVE such"stimulative" budgets (several of which were also the"last" one), this thirteenth and also"last" such budget is merely a tiresome continuation of a decades-long process of failing to deal with economic facts. Japan's basic problem is as HUGE as it is simple. The problem is that the collateral underpinning the gigantic loans issued by Japan in the 1980s has crashed in value, taking the"soundness" of the loans with it. The collateral was land.
Land prices in Japan soared in the 1980s, especially in the period between the global stock market crash of October 1987 and the end of the decade. These prices were pushed along by what was actually a comparatively mild credit expansion. But Japanese bankers made full use of the expansion, happily lending up to 90% of the value of the land. It was looked on as being as"safe as houses".
After all, while it lasted, the value of the land was climbing fast, making the loan against it look even sounder. But in the last half of 1989, the Bank of Japan (BOJ) raised rates three times, the credit expansion began to slow down. A year later, land values were falling, and they have been falling ever since. Land values have now fallen by 70-80% since the end of the 1980s.
The real problem here is that the loans outstanding are still there. They are the source of the famous"bad loans" on the books of Japan's banks. For example: A loan of 90 million Yen was made against land having a value of 100 million Yen in 1990. Today, that 90 million Yen loan is still outstanding, but the value of the land has fallen to, say, 20 million Yen. The difference - 70 million Yen - is the"bad loan".
Government To The Rescue:
Interest rates were slashed. When that didn't work, they were cut to effectively ZERO. Of course, anybody in Japan promptly refinanced whatever loans they had, cutting the cashflow to Japan's banks on loan issues to almost zero. So, Japan's banks stopped lending and the Japanese stopped borrowing. Who would borrow with a 90 million Yen loan standing against an"asset" worth 20 million Yen?
In addition to this sequence, starting in 1992, Japan's central government began its orgy of deficit spending. Deficit spending requires borrowing, and now the government stands with debts that are only serviceable at current near zero interest rates.
If Japanese interest rates rose to, say 2.0%, the entire tax revenue of Japan's central government would be consumed in servicing its present debt level (close to 150% of Japanese annual GDP). If Moody's lowers their Japanese rating, almost HALF of Japan's debt paper falls below"investment standard". Global investment houses are not allowed to hold paper which is below"investment standard".

The U.S. Collateral Foundation:
Of all the bad economic and financial news being defied (so far) by U.S. stock markets, the news about U.S. real estate is the worst. In August, U.S. existing house sales hit a record 5.54 million units. In September, existing U.S. house sales fell by 11.7%! In San Francisco, house sales were down by 26% from their levels of September 2000. Worse, median house prices across the U.S. fell by 3.6%. In the northeast, the ONE MONTH decrease in median house prices was 13%!
In our last issue, The Privateer reported that U.S. retail sales fell 2.4% in September - TRIPLE expectations. Now, we can add a stark turnaround in real estate sales and prices in September to that figure. It has long been acknowledged that consumer spending is the one CRUCIAL ingredient in U.S. economic"growth". It has long been obvious that consumers have been extracting the wherewithal to continue spending by re-financing their mortgages. But if U.S. house prices start FALLING, and they have, that source of consumer spending will dry up. The problem for the U.S. is that there is no other source available.
To get a firm picture of what this means, please re-read the Inside Japan page in this issue. The prime cause of Japan's decade-plus recession was not the stock market collapse in the early 1990s, it was the collapse of REAL ESTATE values. Here is exactly the same thing happening NOW in the U.S.. When Japanese real estate values followed the Japanese stock market down, the entire Japanese economy collapsed. There was nothing that the Japanese government could do about it. Now, all the evidence is in place that a repeat performance in the U.S. is imminent. No stock market can withstand that.


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gesamter Thread:

• Ausnahmsweise einen Auszug aus dem neuen Privateer... - Boyplunger, 28.10.2001, 19:32
  • Guter Text. Zum Downgrade von Japan: stehts um Slowenien tats. so schlecht?-) (owT) - Ghandi, 28.10.2001, 20:10
  • Re: Ausnahmsweise einen Auszug aus dem neuen Privateer.../ Jawoll! - JüKü, 28.10.2001, 20:11
  • Re: Auszug aus dem neuen Privateer... ---------- Rückfrage - André, 28.10.2001, 20:36
    • Hi, vermutlich ist die Adresse: www.the-privateer.com (owT) - Ghandi, 28.10.2001, 20:47
      • Re: merci (owT) - André, 28.10.2001, 22:17