Events related to the Crash

• Thai Prime Minister Thaksin Shinawatra, in a speech to open a United Nations Economic and Social Commission for Asia and Pacific (ESCAP) conference, attributed part of the macroeconomic problems [The Crash] in Southeast Asia to strict adoption of Bank of International Settlement standards for capital adequacy, transparency, and good governance.
  • Capital adequacy is a two-edged thing -- certainly the large cash flows required of the national governments is a theoretical problem. I have not seen news reports of serious difficulties from this.
  • The latter two (standards for transparency and good governance) have been the cause of most of the reported empirical difficulties in Indonesia and Kenya. To phrase their empirical position (as of this date) sarcastically: "I'd rather have my corruption than IMF/World Bank assistance!" A legitimate choice, since such assistance has not been totally effective against The Crash.

• Germany's IFO index fell to 93.9 for March 2001, compared to 94.9 for Feb. 2001 and 97.5 for Jan. 2001. Gernot Nerb, head of surveys at IFO, reported that the expectations component was still declining, and expected the index to decline further in coming months. However, the European Central Bank is more concerned about excessive inflation (2.6%, currently) than the IFO index readings.

• Japan's Ministry of Finance reported that for fiscal year 2000/2001, Japan's customs-cleared trade surplus fell 20.6% (from fiscal year 1999/2000) to ¥9.609 trillion. The March 2001 customs-cleared trade surplus fell 17.2% (from March 2000) to ¥915 billion. It seems that a trend where imports grow faster than exports is continuing; significant improvement in the next few months is not expected.

• First Union Corp. said Thursday it has agreed to buy Wachovia Corp. for about $13 billion in stock. This is expected to create the nation's fourth-largest bank. The ratio is about two First Union shares for each Wachovia share. The initial reaction was a 4% decline in First Union shares vs. a 2% gain in Wachovia. Monday's trading resulted in almost no shift in Wachovia shares, while First Union shares fell an additional $2 or so...so the stock market doesn't like it (initially).
  • Nor should it -- cf. Salomon Smith Barney's commentary on Jan. 15, 2001. Both First Union and Wachovia are heavily exposed to large loans at risk of default.

• In negotiations between Turkey and the following labor groups: Confederation of Revolutionary Workers Unions (DISK), Hak-Is and Turk-Is, Turkey proposed a mostly-inflation-matched wage scheme -- with a pay freeze the first six months, when inflation is expected to peak. DISK and Hak-Is have both indicated this is unacceptable; Turk-Is has not divulged its response to the media, but did confirm this proposal.
• TUSIAD (industrialist group) board member Muharrem Kayhan has indicated that TUSIAD may be able to support an economy recovery plan for Turkey -- but that TUSIAD cannot support the current government, which is incapable of implementing a recovery plan (rather than creating economic crises).

• About 2,000 of South Korea's 20,000 (or so) cement truck drivers have joined an indefinite strike, according to the Korean Federation of Construction Industry Trade Unions. This is expected to affect (but not paralyze) 2,100 projects and cut off 70% of the cement supply "to the metropolitan area" (which one?). This is not expected to affect the 2002 World Cup Stadium (for American soccer/international football), which is planned to be jointly hosted by South Korea and Japan.
• Richard Koo, chief economist at Nomura Research Institute, expressed concerns that the United States may be heading for a mass deflation which neither monetary policy nor tax cuts can effectively deal with. He also estimated that Japan would need to keep running a large deficit for two to three more years (i.e., through 2003 or 2004).
  • This course of action has been noted as having a high plausibility of turning Japanese Government Bonds into junk bonds, by multiple sources over the past two years. The first reference was by an MIT economist back in 1998, with a junk bond due date of 2002. Since this course of action has already induced ratings downgrades by both Moodys Investors Service and Fitch IBCA, simple extrapolations indicate that they estimate the same fate in a slightly longer time frame.

• South Korea's Commerce, Industry and Energy minister Chang Jae-shik said that "We expect GM to officially announce its plan to take over Daewoo Motor early next month" -- contrary to GM's avowed lack of internal deadlines, and insistence on refusing to discuss details due to confidentiality requirements.

• Jin Murai, senior vice minister in charge of revitalisation of the financial sector, told a parliamentary committee that Japan's banks were expected to accelerate their disposal of bad loans to ¥3.5 trillion for the fiscal year ending March 31, 2001 (out of ¥32.9 trillion).