Events related to the Crash

• Teizo Taya (on the Bank of Japan's policy board) has indicated that the Bank of Japan may not wait for full confirmation of a private-sector recovery to raise rates. However, he is leaving open the options of directly buying Japanese Government Bonds and setting an inflation target (both of which the Bank of Japan has defied political coercion on for the past few months).
• It is suspected that Teizo Taya is the Bank of Japan policy board member that is most in favor of easing.

• France's unemployment rate fell below 10% [to 9.8%] for the first time since late 1991. This continues a declining trend since June 1997, when the current Socialist coalition gained power with an unemployment rate of 12.6%.
• South Korea's Confederation of Trade Unions has started a strike, primarily to shorten the workweek from 44 hours to 40 hours without cutting pay. A secondary issue is their demand to nationalize Daewoo, rather than sell it.
• While South Korea is willing to do this if a negotiated agreement between government, business, and labor is conducted first, this has been rejected by the Confederation of Trade Unions.
• South Korea is very unlikely to nationalize Daewoo: this would be a very serious loss of face (reneging on already-negotiated agreements, after considering nationalizing Daewoo).
• South Korea's Confederation of Trade Unions is acting in a very Western (and unOriental) fashion: they are refusing to attempt a negotiated agreement.
• This highly unOriental behavior has already been penalized: the unions for Hyundai Motor Co. and Hyundai Heavy Industries have refused to join the protest, deducting 57,000 potential protesters each.
• Somewhere between 32,400 and 70,000 union members (out of up to 580,000) are joining the strike.

• Bank Indonesia denied that central bank governor Sjahril Sabirin planned to resign in response to the Bank Bali scandal.
• The Euro has fallen 26% against the yen since it was launched, as compared to a 5% fall for the U.S.$. This has rendered it amazingly unprofitable for Japan to export to the Euro Zone. Currency hedging is not reasonable, since the Euro Zone's interest rates are much higher than Japan's.

• Federal Reserve Bank of Philadelphia President Edward Boehne said that the Fed's interest rate hikes had started to slow the U.S. macroeconomy down, but that it was unclear if they were enough to prevent it from overheating.

• South Korea had its first current account deficit in 2.5 years. However, this is attributed to interest payments on foreign loans by local banks.

• Stanley Fischer, acting head of the IMF, advised Japan to consider an early supplemental budget. Miyazawa declined, reiterating that Jan-Mar. 2000 would rebound, but that April-June 2000 was less certain -- and that any supplemental budget could wait until the release of 1Q data in Sept. 2000.
• I suspect Miyazawa's right: Japan's government debt is expected to hit 130% of GDP in 2001. While it would take ¥4.0 trillion to bring Japan's economic support spending into line with last year's total -- the point is to reduce that part of the budget....

• MyCNN's news stream was disrupted early on May 27, 2000 Eastern Standard Time. I may have a news blind spot if this is not dealt with by May 30, 2000.

• A Zimbabwean macroeconomic commentary reports that the (so far) remarkably strong U.S. macroeconomy is damaging stock markets in the Americas, U.K., Europe, the Pacific Rim, and South Africa. The U.S. Fed's 0.5% rate increase is apparently hurting all of these markets.
• Standard & Poor's reported that while Taiwan's banking system was intrinsically strong, that Taiwan's citizens seemed very likely to panic over even minor difficulties.
• Japan's Finance Minister Kiichi Miyazawa has stated that the GDP downward revision has put the Japanese macroeconomy at a serious risk of overall deflation for fiscal Apr. 1999-Mar. 2000. Japan doesn't believe there is any evidence of political tampering with Japan's Q4 GDP figures [which the New York Times is refusing to back down on].
• This leads me to suspect cultural tampering with the GDP figures. The NY Times seems to be assuming that if there is tampering, there must be explicit intervention to explain it.

• It is suspected that Indonesia and the Philippines will be restricted to 1-2% growth by the lack of foreign capital to finance banking-system reforms.
• Thailand's unionized government workers appear to be in position to prevent the privatization of Thailand's power utilities. The immediate failure, if there is a failure to privatize on schedule, will be the electric utility.
• Thailand's telecommunications reform plans are very likely to occur in mid-2001 rather than November 2000, both because of the complexity of negotiations [33 parties] and the avid desire to avoid changing things before the elections (which must be held by November 2000?).
• Japan's Economic Planning Agency was forced to revise its Oct.-Dec. 1999 GDP decline from 1.4% to 1.6%, because of a verified "data fluke": financial institutions slashing their spending on new equipment by 37.7%, a serious revision to the initial estimates of a 3% reduction. Japan's EPA officials felt it was their duty to thoroughly verify the "data fluke" before using it. Unfortunately, this is seriously impairing Japan's PR regarding the integrity of Japanese macroeconomic statistics.

• Kenya has announced severe electric power rationing: homes will lose 12 hours during the day, businesses will lose 12 hours during the night, Monday through Saturday. A number of snap estimates predict a reduction in Kenya's GDP growth by at least 1%, with possible immediate recession.
• Kenya is planning to ration water [apparently for the same reasons as rationing electricity: the long rains have failed to appear] starting in June 2000. The failure of the rains has been attributed to deforestation by local environmentalists. However, statistically the environmentalists are a fringe minority.
• Japan's trade surplus has started rising year-on-year again, overall. Japan's trade surplus with Asia is growing about twice as fast as its trade surplus with the U.S., but is still only half as large. This is attributed to Japan recovering in its manufacturing sector before its personal consumption has recovered.
• Japan's retail sales fell year-on-year by 3.4% from April 1999 to April 2000.
• Japan's Financial Supervisory Agency slammed trading bans on the Tokyo branch of Deustche Securities [May 29 to June 9, 2000], for bonds and swaps. It seems that there were multiple failures to get licensing, as well as the use of complex trades to hide client losses. Japan's FSA also put a trading ban on bond investment trusts for Kankaku Securities from June 1 to June 7, 2000 -- without immediately clear explanation.

• Moscow and other major Russian cities, at least, are starting to obviously recover from the 1998 ruble crash. Supermarkets have started to arrive, and both markets and street vendors have had to improve their image to compete.
• I upgraded Russia's condition to yellow from red.

• London-based HSBC has agreed to buy a 75% stake in Thai Bangkok Metropolitan Bank for 36.6 billion Thai baht. This is the third sale by Thailand's Financial Institutions Development Fund, which was set up to clean up 1 trillion baht in nonperforming loans.
• Singapore's United Overseas Bank has already bought Radanasin Bank.
• U.K.-based Standard Chartered has already bought Nakornthon Bank.
• Japan's unemployment rate was cited at 5.2%. Extreme pessimists suspect the physical rate is close to 10%.

• South African analysts expect the Zimbabwe-induced weakness in South African markets to diminish after Zimbabwe's elections, currently scheduled for June 24-25, 2000.
• Zimbabwe's World Bank aid has been shut down as a side effect of being 60 days behind in payments. Zimbabwe will not be in default until payments are six months late.
• Thailand's nonperforming loans declined from 38.1% in Feb. 2000 to 37.2% in Mar. 2000. This was in spite of 32.1 billion baht in new bad loans in Mar. 2000.

• While the European Currency Board continues to refuse to intervene in favor of the Euro, it has taken a lesson from Japan and started covertly manipulating the Euro by manipulating the timing of commercial orders. Also, the Bank of Japan is becoming even more vehemently against Euro strength relative to the yen than U.S.$ strength relative to the yen, and may intervene around ¥96/Euro.

• The failure of the long rains has sabotaged Kenya's electric grid (which is almost entirely based on hydroelectricity). Unless there is a serious reversal, Kenya may be forced to ramp power rationing up to twelve-hour blackouts from six-hour blackouts in Nairobi and surrounding areas. Kenya's current estimated power shortfall is 120 MW.

• Japan's Economic Planning Agency reported that Japan's macroeconomy was still in a severe condition, due to extremely weak consumer spending and employment conditions. However, capital spending has clearly recovered. The next few months may well test the trickle-down hypothesis....

• General Motors (a possible buyer of Daewoo Motors) has been forced to explicitly state that GM plans to increase employment at Daewoo Motors if they take it over [contrary to many rumors circulating among the unions].
• South Korea is reopening most of its cattle markets, being fairly confident that they have controlled an outbreak of hoof-and-mouth disease.
• Zimbabwe is in danger of becoming 60 days overdue on loan payments to the World Bank, which would cut off further loan disbursements. I'm not certain this is currently a meaningful threat to the Mugabe regime....
• The World Bank is fairly confident that Kenya can qualify for economic assistance as a result of this round of talks, if not directly from this round of talks. The biggest question is whether it is possible to adjust Kenya's budget to handle the World Bank loan payments.
• This is definitely a real consideration; cf. April 20, 2000.

• Federal Reserve's vice chairman, Roger Ferguson, believes that the U.S. macroeconomic data is difficult to properly interpret. While he is confident that the U.S. macroeconomy is overheating, he isn't certain how fast....
• Why does much of SE Asia set macroeconomic growth targets that are considered unsustainable for the U.S., or even more extreme??

• One faction of South Africa's government apparently believes the best way to diplomatically handle Zimbabwe is to publicly praise Mugabe, while privately informing him he must change his ways or else.... I'm not sure why double-mindedness should be any more effective with man than with God [cf. James 1:5-8].
• Brazil would like to alter the IMF debt calculation levels to factor in the maturity of the loans. This actually is a sensible idea: the Thai, Indonesian, and South Korean currency collapses were all caused by excessive amounts of debt due in the next six months (55% seemed to be the critical number; the Philippines was at 54%, and wavered but did not melt down).
• Japanese Prime Minister Yoshiro Mori apparently plans to dissolve Japan's Lower House on June 2, 2000, and convene elections on June 25, 2000. This is a political validation measure: Mori was instated after Prime Minister Obuchi suffered a stroke that probably damaged the breathing center in his brain stem.

• A conference of EU finance ministers failed to mention EU intervention to support the Euro -- directly falsifying rumors of such intervention that had been supporting the Euro. This pushed the Euro to U.S.$0.8975/Euro, ¥97.50/Euro, and also caused falls in various Euro zone stock markets.

• ABN AMRO chief bond dealer Tim Marsland (of South Africa) said that until Laurent Kabila (head of the Congo regime in the Congo/Zaire civil war) and Robert Mugabe of Zimbabwe are removed from power, that foreign investors will stay out of (southern) Africa.

• Hyundai and DaimlerChrysler are directly contradicting each other over whether DaimlerChrysler has agreed (or even was in talks about) to jointly develop a small car with Hyundai.
• This is more confusing than it looks...since recently another German company, Veba, in its efforts to avoid confirming the existence of secret talks, explicitly denied they existed. This is totally legal in Germany -- but violates SEC rules. Too bad Veba is listed on the U.S. exchanges....
• Japan, China, South Korea and ASEAN [Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam] have started to set up a currency-swap agreement to defuse scenarios similar to what took down Thailand, Indonesia, and South Korea in 1997.
• But is the net effect to aggravate?? WWI is widely attributed to a complex network of treaty alliances, such that the assassination of a minor Austrian emperor amplifies into a large war....

• Thailand's Finance Minister Tarrin Nimmanhaeminda said that the worst-case estimate for public debt growth had it at 60% of GDP rather than the current 40% of GDP. To control this, bad debts in the banking industry must be resolved more efficiently, and Thailand's macroeconomic recovery must begin sooner. About 15% of the current debt was incurred during the 1997 bank cleanup.

• The Euro hit a record low of U.S.$0.8845/Euro before rebounding above $0.89/Euro on rumors of central bank intervention.
• Alan Greenspan avoided committing the Fed to any sort of rate bias. However, he is very concerned about U.S. banks becoming complacent about risks simply because they are hedged with derivatives, etc. Alan Greenspan also expects, in the event of bank failures, that all obligations that are not federally insured will be seriously hit (for instance, shareholders should not expect any protection whatsoever).
• McDonough (a senior member on the U.S. Fed committee) has noted that the longer U.S. productivity gains continue, the less likely they are to be a cyclical phenomenon. It is also clear that the U.S. macroeconomy growth rate is sufficiently faster than either the EU's or Japan's that the relative rates are posing problems.

• Mr. Yen (Eisuke Sakakibara) commented that he did not expect the U.S. stock market bubble to burst within the next two years; however, the U.S. Fed must raise interest rates if it hopes for a soft landing. He also suggested that in discussions for a proposed Asian Monetary Fund, that U.S.$200 million in currency swap was way too small, and that it should be at least U.S.$20 billion [this is a factor of 100?].
• Indonesia's IMF deal is all but signed; it does need approval from Washington. However, there are several areas where the general populace is overpowering the Indonesian government: fuel subsidies (removal is indefinitely postponed due to violent resistance), a value-added-tax (imposition is indefinitely postponed), and protections for local sugar growers. [The last might be interpreted as a national security issue].
• Kenyan Finance Minister Chris Okemo is hoping to have an IMF deal in place by early August 2000.

• The Euro has fallen through $0.90/Euro, and recovered from $0.8895/Euro. This is blamed on U.S. macroeconomic growth being substantially higher than the Euro zone's macroeconomic growth. There have also been several EU mergers recently that required U.S.$ rather than Euros.

• The Daewoo main plant strike has ended. The union leaders are willing to tolerate foreign ownership of Daewoo Motors if issues (including layoffs) are addressed.

• There are concerns that Zimbabwe's impending macroeconomic meltdown could envelop South Africa. South Africa's rand hit a record low of 6.87 rand/U.S.$.