Events related to the Crash

• Columbia has authorized an alteration in its floating band currency exchange regime. This will permit a de facto 9% devaluation [in contrast to the Western private consensus estimate of 15-20%]. Considering that Columbia should have Brazil as a major trade partner, and that Brazil has had a severe devaluation itself recently, this should not be too serious.

• Japan's Financial Supervisory Agency is expected to shut down Credit Suisse's operations in Japan as early as July for obstructing a probe into whether it helped Japanese companies hide losses.
• It seems that employees of Credit Suisse have been verified as having late-night paper-shredding parties, and 40 boxes of documents were shipped to their London office in an attempt to prevent them from falling into the FSA's hands.
• Some of these employees have either been suspended, or have had their salaries cut, for the above actions already.

• Japan's world trade surplus for May plunged by 31.5% compared to a year ago. The actual surplus was ¥834.34 billion, compared to the average forecast of ¥947.8 billion by Tokyo-based economists [i.e., an average forecast drop of about 22%]
• Did I miss the report for April, or is it simply not there? It should have been somewhen between May 16, 1999 and today.

• Japan's quarter-on-quarter GDP growth was leaked as being at 1.9%. There is no support in the low-level statistics for this number.
• 1Q 1987 had a similar unexpected surge of slightly over 2% -- which was totally cancelled by 2Q 1997.
• We should be seeing the main impact of the economic stimulus package 1Q 1999, so this should be considered. Perhaps a budget deficit of 10% of GDP, applied mostly to 1Q 1999, should have this kind of effect.
• China has cut a number of key interest rates. In particular, the 1-year yuan rate is now at 2.25%, rather than 3.78%. This is the 7th cut since May 1996. However, the latest annualized deflation rate is 2.2%.
• S&P reports that Indonesia's bank cleanup [to 8% capital adequacy ratio, rather than the 4% announced by Indonesia] will cost U.S.$87 million, or 82% of Indonesia's current GDP. Recovery is currently estimated to take 10 years [at least one earlier estimate had claimed 2 years....] While Indonesia is conducting a restoration to just 4% [with estimate U.S.$70 million], this is judged by S&P to not be viable in Indonesia's operating environment.
• That is, S&P believes Indonesia wants to spend U.S.$70 million and leave its banking system ready to collapse again.

• U.S. Federal Reserve Governor Laurence Meyer said the U.S. banking industry is showing signs of strain. In particular, bad loans are on the rise for the first time since the 1990-1991 recession in the U.S. Most of the delinquencies are in commercial and industrial loans, but agriculture has been affected by severe reductions in demand from Russia and Asian countries.
• That is, U.S. agriculture is specifically being taken down by the Crash.
• 82% of the assets of the 50 largest (U.S.?) bank-holding companies are now in 20 (U.S.?) banks. These banks are now under increased supervision, because of their intrinsic regulatory complexity [they are heavily involved in derivatives and securitizing debt]. Also, current credit-risk models for U.S. banks, under U.S. Fed scrutiny, have proven highly inadequate.

• Russia has defaulted on an $855 million interest payment on Soviet era London Club debt. Unlike the GKO restructuring (which was governed by Soviet law, thus without legal retaliation possible), this debt is governed by U.K. law. It is unclear whether a requested rollover for the June 2 payment (and the Dec. 2 1998 payment, which has already been rolled over once) will be granted. It is also unclear whether legal action will, or will not, be taken against Russia.
• The Euro has fallen through the chartist resistance level mentioned on May 27 [$1.0345/1 Euro].