Events related to the Crash

• The Bank of New York's CEO and chairman, Thomas Renyi, has taken an U.S.$800,000 pay cut in 1999 relative to 1998, as part of the consequences of the ROCML Scheme@BNY.

• Fiat insisted it was still in talks to buy (part of) Daewoo Motors.
• Japan's consumer spending finally started to climb (ending a six-month downturn), in the face of record unemployment of 4.9%.

• Alan Greenspan dismissed speculations that his interest rate increases were targeting the stock market price levels. Rather, he believes that aggregate demand is in danger of outracing aggregate supply. Relatively elevated stock prices does enhance this. Greenspan does not believe that altering margin levels would have any predictable effect on stock prices. Greenspan also indicated concerns about the practical accuracy of the U.S. Consumer Price Index.

• Pakistan's Finance Minister Shaukat Aziz has a very different idea of the timeable for resuming IMF negotiations than Musharraf: next week on Monday, i.e. April 3, 2000.

• About 700 union Daewoo workers clashed with police over the sale of Daewoo Motors to foreign creditors. The police apparently considered a march towards the party headquarters as non-peaceful....

• Thailand's Interior Minister Sanan Kachornprasart has resigned from all positions except Secretary-General of his political party -- because of three potentially incorrect declarations of assets in 1997 and 1998. This may be a technical problem due to unclear wording of the rules, however.
• Renault has declared that the talks with Samsung over the acquisition of Samsung Motors have collapsed, and currently does not have intentions to resume them. There was a severe divergence in starting prices: Renault's initial offer was U.S.$450 million, with U.S.$50 million in cash; Samsung's initial ask price was U.S.$622 million, with U.S.$300 million in cash. There are questions whether any other buyers for Samsung Motors are plausible.

• Svetlana Kudryavtsev (of the Bank of New York, and a notable figure in the ROCML Scheme@BNY) has pled guilty to accepting illegal payments of $500/month to monitor bank accounts, and to de facto lying to investigators (mostly due to language barriers and intimidation by the investigators). Six to twelve months of home detention appears likely.

• Musharraf says he is planning for IMF talks to resume in June 2000.
• Japan suspended imports of South Korean pork and beef after two South Korean cows were found infected with vesicular disease (which subsumes foot-and-mouth disease). South Korea does not export beef, but almost 100% of South Korean pork is exported to Japan.... Since 33% of South Korea's compound feed is for pigs, and 30% is for cattle, there could be some serious cascade effects.
• Indonesia replaced Eko Budianto with Irwan Siregar in IBRA. It remains to be seen whether this is a legitimate rotation (to prevent burning out Eko Budianto) or a pro-corruption measure. It is already known that Indonesia's bankruptcy law is a farce.

• Philip Baum, chairman of FMB Holdings, described Zimbabwe's fuel crisis as a direct result of pegging the exchange rate of Z$ at Z$38/U.S$1.

• Ecuador doesn't want to discuss further debt restructuring until the effects of dollarizing its economy is clearer. Ecuador wants to resume talks in the last week of April 2000.

• Zimbabwe has announced that a fuel supply deal has been signed with Independent Petroleum Group of Kuwait. Details in this report are remarkably scarce.
• Obuchi's Liberal Democratic Party has indicated that it is politically impossible to fund the increased government share of pensions (under the proposed pension reform plan) with a tax hike. Some Japanese seem to be wondering if it is politically impossible to fund this at all....

• The IMF has picked Horst Koehler as its new managing director.

• ¥100 trillion of postal savings, managed by Japan's Ministry of Finance, is coming due in the next two years. While the flood of money could help prevent supplemental budgets, it is feared the money could wreak havoc in the Japanese Government Bond market.
• The Obuchi government is trying to ram a highly unpopular pension reform bill through the Japanese legislature. Due to fears about demographic nightmares (2 workers for each retiree in 2020, 1.5 workers for each retiree in 2050), the reform bill aims to raise the retirement age from 60 to 65, while slashing benefits by 5% and increasing the government share of the bill from 1/3 to 1/2. The funding methods for the last are deliberately vague.
• This is on top of a public debt of 130% of GDP....

• Japan has approved a record U.S.$773 billion budget that is heavy on public spending, in an attempt to finally end the price collapse enveloping Japan. It is unclear whether this budget will end the depression -- or bankrupt Japan.... Obuchi etc. now are confident that no extra spending will be required Fall 2000.

• U.S. Representative Sonny Callahan, R-Ala., chairman of the House Appropriations subcommittee on Foreign Operations, has suspended U.S.$20 million in aid to Ecuador in retaliation for Ecuador's denial of due process of law for a U.S. citizen.
• There are fears that Chatu Mongol will actually quit as the Bank of Thailand's governor.

• The Bank of Thailand's governor, Chatu Mongol Sonakul, has threatened to quit if Thailand's government reneges on a letter of intent with the IMF dating from August 1997 -- by altering the Bank of Thailand Act to remove the Bank of Thailand's independence from the Finance ministry. [Namely, altering the act so that the governor is appointed by the Finance ministry.]
• Thailand's Central Bankruptcy Court has ruled Thai Petrochemical Industry Plc [TPI] insolvent. This was viewed as an acid test of the effectiveness of Thai bankruptcy laws, since TPI only owed over 40% of the total non-performing loans in the Thai banking system...
• Salomon Smith Barney is diverging from the consensus estimate regarding the nonperforming loan rate in Thailand. Namely, Salomon Smith Barney is expecting loss rates on Thai nonperforming loans to be somewhere between 20% and 35%, rather than around 50%. The question seems to be the comprehensiveness and reliability of the local audits: Salomon Smith Barney is apparently far more optimistic than consensus.
• The IMF is sending a delegation to Angola to see if the Angolan government is now ready for IMF assistance.
• Angola's diamond and oil reserves make mere loans meaningless.... The IMF thinks it must convince the Angolan government by moral persuasion.
• On the other hand, Angola's external debt is estimated at U.S.$12.5 billion. Servicing it from 1997 to 1999 cost U.S.$1.6 billion, i.e. 26.4% of GDP i.e. 87.2% (!?!) of total state revenue.

• Kenya and Zimbabwe have announced a fairly serious deregulation of air travel between Kenya and Zimbabwe. All frequency and capacity restrictions are to be eliminated immediately.
• Ahem. Has the A1 aviation fuel deficiency at the Harare international airport been dealt with? [Cf. Mar. 12, 2000 under Zimbabwe]
• The EU has managed to align itself behind Horst Koehler. The United States and Japan have agreed to back Horst Koehler under these conditions, which puts Koehler's support as at least 61% [35% EU+20% U.S. +6% Japan].
• The Bank of Japan has openly changed its policy, and is looking into a very nonbinding inflation target. This is in the face of very explicit political demands for directly buying Japan Government Bonds, and other quantitative easing measures.
• The Bank of Japan considers trying to create inflation highly disastrous....

• Thailand's financial sector had a non-performing loans rate of 38.68% at end-Jan. 2000, vs. 38.91% at end-Dec. 1999. This drop was smaller than commonly expected. All comparisons below are end-Dec. 1999 to end-Jan. 2000.
• Commercial banks increased from 30.59% to 30.67% non-performing loans.
• Nationalized banks decreased from 62.87% to 62.18% non-performing loans.
• The amount of non-performing loans being renegotiated increased from 1.121 trillion baht to 1.138 trillion baht.
• Japan's growth target for the current fiscal year is still 0.6%. Apparently, Japan's government thinks that a 2.0% rebound for end-Dec. 1999 to end-Mar. 2000 is realistic.

• Japan's GDP fell 1.4% from end-Sept.1999 to end-Dec. 1999. This is significantly worse than the prediction of 1.0% decline. end-June 1999 to end-Sept. 1999 GDP declined by 1.0%. In spite of this, Japan's government is insisting that the Japanese economy is recovering.
• Japan's government position is dictated by the necessity to avoid losing face. Of course, the recent surge in oil prices could be confounding the statistics.

• Bolivia's President Hugo Banzer has announced an emergency economic plan aimed at minimizing economic damage caused by Bolivia's suppression of cocaine culturing and distribution. The Quechua and Aymara Indian tribes are said to be particularly affected by this.

• France's inflation rate from Feb. 1999 to Feb. 2000 came in at 0.1%, below the predictions of 0.2%. The energy sector's inflation rate of 12.9% was almost entirely cancelled by the rest of France's macroeconomy. Neglecting volatile sectors, France's macroeconomy is in deflation....

• There seems to be some divergence between Germany and the rest of the EU over whether unanimous support for Horst Koehler is reasonable. Germany is ignoring an internal split in the UK [Prime Minister Tony Blair for, Chancellor of the Exchequer Gordon Brown against], and seems to be reading too much into Italy's waffling [Italy's Giuliano Amato has also been named as a possible EU candidate]. Eisuke Sakakibara alias "Mr. Yen" is still a contender, even though he isn't aware of having any chance of getting the post.

• The Phillipines' stock market was frozen on Mar. 8, 2000 due to the sudden resignation of the stock market investigators, and a delay of government bond sales by 24 hours to Mar. 10, 2000. The investigators are confident that their probe into allegations of share price fixing (in 1999) by gaming firm BW Resource Corp. was "whitewashed".
• The U.S. Treasury bought back U.S.$1 billion of its outstanding debt. Average weighted maturity of the buyback was 16 years, and coupon interest rates ranged from 8.75% to 11.25%. Total buybacks this year are expected to be around U.S.$30 billion -- out of U.S.$3.3 trillion....

• The IMF has coordinated a U.S.$2 billion aid package for Ecuador, spread out over 3 years. The primary purposes are to stabilize balance of payments, and lending for investments. The entire package is conditional on Ecuador's dollarization program [almost certain].

• The U.S. has declared that any EU candidate worth supporting must have consensus within the EU. Until that situation changes, no EU candidate will be acceptable.... However, the U.S. is insistent that someone from the EU head the IMF.
• Alan Greenspan, in a speech to the Independent Community Bankers of America (some sort of banking organization), said that many U.S. banks are endangering the U.S. economy by assuming that the current economic conditions as ordinary and expected (rather than the reality, which is extraordinary and exceptional).

• There are some questions as to whether Germany can rally EU support for Horst Koehler. The political opposition has described Schroeder as committing diplomatic hari-kiri with Ciao Koch-Weser. His methods for rallying EU support seem to have backfired, and Italy has concerns about whether Koehler meets the U.S. respectability requirements.

• Ciao Koch-Weser has removed himself as a candidate for heading the IMF. Horst Koehler has been asked to be Germany's new candidate; his initial response is non-committal, and requires a broad support for IMF members to accept.

• The EU is having to do media damage control. Contrary to the actual EU stance, the German weekly Welt am Sonntag has been circulating news reports (via interview with Koch-Weser) that Ciao Koch-Weser has been withdrawn as a candidate.

• It is unclear whether unexpected growth in Japan's Jan. 2000 housing starts is starting a recovery trend -- or is merely a technical artifact of an interest rate rise Nov. 1, 1999.
• Germany's Christian Democratic Party has declared Germany's nomination of Koch-Weser a diplomatic disaster.
• 'Schroeder's efforts to push through a candidate without broad support had sparked "a deep breach of trust between the United States and the European Union and incomprehension and bitterness in Third World countries," Christian Democrat parliamentary leader Friedrich Merz said.'

• It appears that the EU will support Koch-Weser as its candidate, in spite of U.S. opposition. While it may make good rhetoric to say that the U.S. is throwing its weight around, etc. -- there are more serious concerns. Namely, the U.S. wants a European candidate that the Third World can tolerate. If the EU actually has ideological blinders regarding this point, the IMF political infighting could go on for months.

• Chase Manhattan Bank thinks that Thailand's projections for its economic recovery are practically impossible without government intervention. Apparently, structural reforms are useful in sustaining the recovery into 2001; these structural reforms apparently have not been significant yet.
• Nonperforming loans at end-Dec. 1999 were at 2.07 trillion baht i.e. 38.5%, vs. end-Jan. 1999 of 2.68 trillion baht i.e. 46.2%. This indicates that total loans were at ~5.37 trillion baht at end-Dec. 1999, and at ~5.80 trillion baht at end-Jan. 1999.
• This also indicates performing loans increased to ~3.30 trillion baht at end-Dec. 1999, compared to ~3.12 trillion baht at end-Jan. 1999.

• Japan's Financial Supervisory Agency [FSA] has reason to suspect that five affiliates of DeutscheBank have used complex financial trades (possibly involving derivatives) to hide clients' financial losses. Orders to improve the use and verifiability of internal controls are expected.