To whom should I address this note - Is it "Kevin" Bevans or just Boddi
Bevans?
Anyhow, I've enjoyed your comments about the Japanese situation.
In the Sunday NYTs "Week in Review" there is a chart showing the Dow (up +800%
since 1980) vs. the Nikkei (up about 180%). The author, David Sanger,
suggests that the US and Japan have traded places in the 1990s and perhaps the
ascendant "US model" may be in the final stages of a blow-off. In another NYT
article of 3/31/98, it is noted that almost 57% of Japanese individual
financial assets are in the form of bank deposits, with stocks only about 6.4%
(35% of fin assets are in the form of "trusts and insurance"). The article
also claims that Japanese savings now total about $9 trillion dollars.
Are these figures accurate?
Anyhow, it seems to me what Japan has is a new kind of extreme Keynesian
liquidity crisis - people have lost confidence in the banking system and are
moving their money into their mattresses. With long-term interest rates down
to about 1.75% and profitability to continue to fall it seems that we have
some type of replay of the 1930s, however, what is "different this time" is
the rapidity and integration of financial markets (at least in the OECD). I
agree that if the arbs and speculators "vote with their feet" and hammer the
yen, the small savers will lose even greater confidence in their banking
system.
It is interesting that degrulation of Japanese financial markets is not being
used to argue for lower interest rates, rather for greater efficiency. It
seems that Japan needs to re-gain the confidence of their citizens - and
offering free market dogma is clearly not going to improve the siutation.
Any comments?
jason hecht
