Events related to the Crash
April 28, 2000 [CNNfn]
- The Euro hit a third record low for the week, at $0.9031/Euro. A significant faction of
European economic analysts now believes that the Euro cannot strengthen without structural
reforms to tax, labor, and pension policies.
April 27, 2000 [MyCNN]
- Bank of Thailand (BOT) Governor Chatu Mongol Sonakul and Finance Minister Tarrin
Nimmanhaeminda have still not reconciled their policy differences regarding the use of
foreign reserves to bail out crippled financial institutions. There are fears that this policy
conflict could sabotage Thailand's gradual macroeconomic upturn.
- Daewoo's main plant at Pupyong, west of Seoul, is still paralyzed by illegal(?) strikes over the
sale of Daewoo Motors to foreign creditors.
- There is something seriously wrong here. The South Korean government is either:
- misrepresenting the illegality of the strikes, or
- is incredibly weak and incapable/unwilling to break the strikes and administer
appropriate legal penalties.
April 25, 2000 [CNNfn]
- Samsung Motors' creditors have approved a deal (U.S.$560 million) by Renault to form a
joint venture with Samsung Motors at the core. The arrangement is designed to prevent
Renault from buying Samsung Motors' debt.
- Police arrested 20 (out of over 1000) Daewoo workers who are staging protests (or are they
illegal strikes?) over Daewoo Motors' sale to foreign creditors. They want Daewoo to be
nationalized by South Korea.
- Japan's retail sales declined for the 36th straight month. They are not expected to significantly
recover until September 2000.
April 24, 2000 [MyCNN]
- The IMF is confident that Indonesia can meet conditions for a stalled loan by June 5, 2000.
The tranche was initially scheduled for April 2000, but Indonesia proved incapable of
coordinated required reforms in a timely fashion.
April 21, 2000 [MyCNN]
- Ecuador apparently cannot renege at all on its letter of intent with the IMF without risking
total isolation from the global financial community. Within Ecuador, there are fears that
doing so will result in total bankruptcy.
- Malaysia's Prime Minister Marathir has indicated that he must consult with Finance Dain
Zainuddin to discuss the Malaysian Central bank post before making a decision.
- The Tokyo branch of Credit Lyonnais Securities Europe-Swiss AG has been verified to have
broken Japanese securities regulations at least three times. Of the three incidents, two were
material:
- Donating U.S.$6040 in property gains to a customer
- Falsifying a report about a stock option transaction to a customer.
- Japan's bank lending did not increase or decline significantly Jan.2000-Mar. 2000 compared to
Oct. 1999-Dec. 1999. A significant increase would signal an end to Japan's macroeconomic
recession.
- Stanley Fischer, acting director of the IMF, noted that Ecuador's letter of intent with the IMF
is very demanding, and would affect everyone. He believes that whether Ecuador follows
through with the letter is a decision that Ecuador's government and people must make.
April 21, 2000 [CNNfn]
- Renault is apparently near a deal to purchase 70% of Samsung Motors. The takeover price is
expected to be around U.S.$550 million.
April 20, 2000 [MyCNN]
- Hong Kong's overall deflation rate, depending on the exact index, is ranging year-on-year
between 4% and 5% for March 2000. The energy sector inflated by 4% however, and
transportation costs essentially did not shift (0.3% inflation).
- The Euro was hovering near absolute lows against the U.S.$ [near U.S.$0.9750]. This
weakness was attributed to Austria's considering leaving the EU, and the resignation of Italy's
Prime Minister.
- Kenya now pays more in debt servicing each year that it receives in external loans. Not only
that: Kenya's debt service ratio is about 21.5%; debts to exports of good and services is at
217%; debt to GDP ratio is at 67.7%. Kenya's debt arrears have accumulated to U.S.$100
million, prompting an attempt to reschedule Paris Club debt. As if external debt was not
enough, Kenya is expected to pay U.S.$405.4 million in services its domestic debt obligations.
For perspective, in 1998 Kenya paid U.S.$96.1 million in debt service to the World Bank, and
is expected to pay U.S.$78.4 million in debt service to the World Bank in 2001.
- The Reserve Bank of Zimbabwe announced that Zimbabwe's parastatals owed about Z$45
billion to both domestic and external creditors at the end of 1999. Accumulated losses for
Jan. 1999 through June 1999 were Z$14.8 billion. Zimbabwe's government deficit exceeded
5% of GDP for 1999, and is expected to exceed 20% of GDP for 2000. One major point:
most parastatal debt is guaranteed by Zimbabwe's government, so any parastatal debt defaults
must either come out of Zimbabwe's national budget...or put Zimbabwe's government into
default.
- South Africa's Chamber of Business has announced the obvious: due to the Mugabe regime's
abrogation of property rights, and the refusal of all banks to extend credit guarantees, all
foreign investment in Zimbabwe is extremely unwise.
- Bolivia lifted its two-week state of siege today [much earlier than Bolivia had to lift it: Oct.
2000].
- Thai Petrochemical Industry [TPI] (Thailand's largest debt defaulter) apparently did not
understand that due to the way it went bankrupt, it had no control over how it restructured.
The Thai courts corrected TPI's incorrect opinions.
- Aside from a draft tax law (stalled in Parliament), Indonesia believes it will meet all reforms
at the next IMF deadline.
- Red China's debt-for-equity swap scheme, designed to clean up bad debts at Red China's state
banks, is proceeding fairly smoothly. China Orient Asset Management Corp., and three other
Red Chinese asset management corporations, are closely modeled on the U.S. Resolution
Trust Corp. that the U.S. used to clean up a massive banking sector collapse (savings and
loans) in the 1980's.
April 19, 2000 [MyCNN]
- Malaysia's central bank governor Ali Abul Hassan Sulaiman is expected to retire at the end of
April 2000. Possible candidates initially named were:
- Former Second Finance Minister Mustapa Mohamed
- Malayan Banking Bhd (Maybank) managing director Amirsham Aziz
- Bank Negara adviser Nor Mohamed Yakcop
- Bank Negara deputy governor Zeti Akhtar Aziz
- However, Mustapa Mohamed and Amirsham Aziz have initially declined. Mustapa
Mohamed apparently does not want to sabotage his political career, and Amirsham
Aziz does not want to change banks.
April 18, 2000 [MyCNN]
- Most Thai banks are expected to announce large 1Q 2000 losses -- because of loan loss
provisions. Only Thai Farmers Bank and Siam Commercial Bank had completed loan loss
provisions before 2000. It is unclear whether Bank of Asia (75% owned by ABN AMRO) is
planning to force a 1Q 2000 profit by deferring loan loss provisions. The only banks expected
to have operating profits are the three mentioned above, and the Bank of Bangkok; of these,
Siam Commercial Bank and the Bank of Bangkok have had operating profits since 3Q 1999.
- The Malaysian Institute of Economic Research continues to hold to its forecast of 6% GDP
growth for Malaysia, and expects the currency peg to remain in place despite a slight increase
in inflation. The Malaysian Institute of Economic Research does think the currency peg has
subtle negative consequences (unlike PM Marathir), which are currently being overwhelmed
by the positive side effects.
- The IMF thinks that South Korea has implemented most of the banking structural reforms it
needs to. The IMF would like South Korea to make progress in 'denationalizing' banks.
April 14, 2000 [CNNfn]
- Japan's corporate bankruptcies increased for the fifth straight month, and are expected to
continue to increase. However, the total corporate bankruptcies for fiscal 1999-2000, 16,887,
are 3.5% less than the total corporate bankruptcies for 1998-1999. The total corporate
bankruptcies rate for 1997-1998 was the highest ever, at 17,439.
April 14, 2000 [MyCNN]
- International investors still have doubts that Indonesia can implement economic reforms fast
enough to prevent its macroeconomic disintegration. There are some practical concerns about
whether the Indonesian government can maintain control and simultaneously meet IMF
conditions. In particular, removing fuel subsidies is very likely to provoke coordinated mass
disruptions; this has prevented their removal once already.
- Japan's Economic Planning Agency reiterated its belief that Japan's macroeconomy was
recovering, but did not have material evidence to back this claim.
April 13, 2000 [CNNfn]
- Alan Greenspan told the U.S. Senate Banking Committee that the resiliency of the U.S. stock
market has not been seriously tested, in spite of recent volatility in the stock markets.
- Lawrence Summers is concerned about the gross imbalances in the global economy: namely,
the U.S. expansion rate is far above normal, while the EU and Japan are barely (if at all)
expanding. He is confident that Japan and Europe need to boost domestic demand, and
reorganize their economies to produce more output.
April 13, 2000 [MyCNN]
- Bolivia's Congress voted along party lines to approve Bolivia's state of emergency -- making it
reasonable to extend it through October 2000, if necessary.
April 12, 2000 [CNNfn]
- The Bank of Japan believes that conditions are falling into place for the end of its
zero-interest-rate policy. Any such change is thought to be a few months away, at least.
- Federal Reserve Governor Lawrence Meyer is concerned that the U.S. economy may overheat
even further, due to a risk of labor and product markets tightening further (stacked on the
balance of demand and sustainable supply).
April 10, 2000 [MyCNN]
- Bolivia has shut down the protests against its water utility upgrades. The police mutiny
problem was neutralized by a 50% pay raise.
- The U.K. has started to arrange political pressure on the Mugabe regime in Zimbabwe to shut
down Zimbabwe's land-reallocation maneuver. Given the circumstances that provoked the
maneuver, I seriously doubt this will have much of an impact.
- Thailand's Finance Minister Tarrin Nimmanmaehinda felt it was necessary to declare that
local newspaper reports suggesting he was going to sack central bank governor Chatu Mongol
Sanakul were false.
- c.f. March 16, 2000: Chatu Mongol considers sacking himself an effective threat....
- Both Pakistan's military government and Pakistan's Ministry of Finance were correct about the
timing of Pakistan's talks with the IMF:
- As the Ministry of Finance said, the talks were held this week.
- As the military government said, Pakistan was not ready to hold meaningful talks until
June 2000, and nothing resulted from them.
April 8, 2000 [MyCNN]
- Bolivia has declared a state of emergency to control nationwide protests against improvements
to the water utilities. Roads were blocked for five days prior to this, and a mutiny of police
forces in La Paz had to be prevented.
- There may be nationalism here: the water utility improvement project is heavily
implemented by foreign investors....
- The currently proposed water utility rate increase is 20%. The water utility bill, for
some households, is already running at 15% of household income. A high percentage
of households already believe they cannot afford to connect to the water utility.
- The road blocks are causing food shortages in La Paz and Cochabamba. Cochabamba
is where the first upgrades to the water utility are planned.
April 5, 2000 [MyCNN]
- Japan's coincident indicators index (a measure of current activity) has hit its theoretical
maximum of 100 for Feb. 2000. It is presumed that this will shortly drag personal
consumption upwards. The Feb. 2000 leading indicators index was estimated at 71.4,
substantially above the breakeven of 50 -- and below Jan. 2000's 88.9.
April 4, 2000 [CNNfn]
- Renault and Samsung appear ready to resume talks for Renault's acquisition of Samsung
Motors on April 21, 2000.
- The IMF, in response to the remarkable accounting difficulties at the Russian Central Bank,
has decided to require international-standards audits of central banks taking IMF loans.
April 4, 2000 [MyCNN]
- Prime Minister Obuchi apparently had advance warning that a stroke was about to hit him,
and appointed Aoki as acting Prime Minister. Unfortunately, the stroke has proved
remarkably severe (putting Obuchi on life support in a coma). Obuchi's prognosis has not
been officially declared yet...but the use of life support indicates that the stroke affected the
brain stem.
- If Obuchi avoids brain death, and the nerves controlling his diaphragm are still
functionally connected, speculative medical treatment would include a pacemaker (to
replace the probably-wiped-out vagus nerve stimulation to his heart). In this case, an
arrangement like that for polio survivors would be possible [iron lung when sleeping,
conscious control of breathing otherwise].
- Japan's Cabinet did a total resignation to permit the nomination of a Prime Minister.
His first move was to reinstate the Cabinet unchanged.
- Indonesia's banks apparently do not have incentives to merge without government
interference. They also have extreme accounting incentives not to loan money. While overall
nonperforming loans have been reduced from 80% to 32.8%, this has been done by writing off
loans, rather than restructuring (Indonesia's bankruptcy laws are remarkably impotent).
April 3, 2000 [CNNfn]
- Moody's Investors' Service is reviewing Thailand for a possible upgrade.
- The Bank of Japan intervened in the yen market at ¥103.30/U.S.$1 [shortly after the tankan
economic survey indicated improving macroeconomic conditions].
April 3, 2000 [MyCNN]
- It appears that the 'vesicular disease' in South Korea is indeed foot-and-mouth disease. The
highly-predictable import ban of pork (and other meat) from South Korea into Japan has
immediately reduced South Korea's forecast pork exports from $400 million to nothing.
Japan's local companies have already (or are) canceling South Korean import contracts and
trying to find alternate suppliers.
No-frame index