Events related to the Crash
September 29, 2000 [MyCNN]
- Denmark has voted against joining the Euro zone. This is a definite case of people voting with
their brains (applied to the historical record of the Euro) rather than with loyalty to employers and unions. There
are three things obviously useful to revive the Euro: correction of structural problems in France (employment policy) and Germany
(tax structure), and the political stabilization of Yugoslavia. The first two were problems created by France and
Germany joining the Euro zone; they were relying on trade barriers imposed by currency differences to maintain
their economic growth.
- Thailand's macroeconomic statistics continue to indicate an export-led recovery. Year-on-year exports were
up 24.9% from Sept. 1999 to Sept. 2000, and year-on-year imports were up 41.2% from Sept. 1999 to Sept. 2000. Much
of the latter is attributed to crude oil prices.
September 28, 2000 [CNNfn]
- DaimlerChrysler and Hyundai have agreed, according to DaimlerChrysler's CEO, that Daewoo Motors
"is not for us." Also, it appears that one motivation for Ford backing out of buying a controlling stake
in Daewoo Motors is that such a purchase would have been a change of plans. General Motors indicated that
its decision on whether to bid again would be made fairly soon, and had not been made yet because
General Motors was still gathering information. Fiat appears to be acting similarly.
September 27, 2000 [MyCNN]
- South Korea is considering whether it is feasible to pay off all of its IMF loans by the end
of December 2000.
September 27, 2000 [CNNfn]
- The U.S. Bureau of Labor Statistics found a systematic error in their calculation of the CPI for
the past year -- just in time to do improved calculations of Social Security checks for the next year.
The error was an understatement, ranging from 0.1% to 0.3% on an annualized basis.
September 26, 2000 [MyCNN]
- Japan has successfully applied political pressure to Dai-Ichi Kangyo Bank Ltd (DKB), Mitsubishi Trust & Banking Corp, Shinsei Bank and Nippon Credit Bank
-- creditors of construction firm Hazama Corp. -- to forgive ¥100 billion of debt in order to prevent another bankruptcy
like Sogo Co. Ltd.'s. This is not expected to make Hazama Corp. viable. Construction firm Kumagai Gumi is already
attempting to request a similar effort on ¥450 billion of debt.
- Japan's Financial Supervisory Agency proved able to document that the Tokyo branch of WestLB Securities Pacific Ltd
padded insurers' solvency ratios. WestLB's trading in almost all OTC interest-rate derivatives (exception: fixed income securities)
will be suspended from Oct. 2, 2000 to Oct. 29, 2000. WestLB's loan intermediation is to be frozen from Oct. 2 to Oct. 6, 2000; they
cannot apply for new credit derivative transactions until Nov. 25, 2000.
September 25, 2000 [MyCNN]
- World Bank President James Wolfensohn noted that South Korea's rapid economic recovery has
masked South Korea's need to reduce "the three C's" -- corruption, collusion and cronyism -- in order
to prevent a repeat of the collapse in June 1997.
September 22, 2000 [MyCNN]
- Rumors have started circulating about Korea Exchange Bank "seeking some sort of financial aid from Commerzbank".
This, combined with announcements of intent to raise 40 trillion won in public funds to complete
reforms of banks and businesses by the end of December 2000, is adding further stress to South Korea's
subordinated bonds. [The major stress is said to be the collapse of Ford's bid to buy Daewoo Motors.]
September 22, 2000 [CNNfn]
- Joint intervention by the U.S. Fed, the ECB, and the Bank of Japan boosted the Euro to slightly
over U.S.$0.88/Euro. The timing was publicly unexpected -- there had been confident analyst assertions
that there would be no intervention before the G7 meeting on Sept. 23, 2000.
September 21, 2000 [MyCNN]
- China's Hainan International Trust and Investment Corp is on schedule to be late (if not outright default)
on its Samurai bonds yet again. The typical advance distribution of coupons for a Sunday distribution has yet to
take place. In July 2000, it went into de-facto default on July 10, but eventually paid on July 27. It is
thought that the central government bailed out Hainan International Trust and Investment Corp that time.
- Japan's impending supplementary budget is estimated to be ¥3.5 trillion to ¥4 trillion.
September 20, 2000 [CNNfn]
- Germany's below-expectations IFO survey has deflated any expectations of successful intervention to support
the Euro.
- The combination of higher interest rates and gasoline prices is raising concerns about the possibility of
a burst of home mortage defaults in the U.S. A significant percentage of these mortages have as little as 5% down,
raising the risk that a sudden failure of home values to appreciate could leave some owners owing more on their mortage
than the home is worth.
- Koehler's suggestion that the time to intervene in favor of the Euro had come was not taken kindly by the ECB.
September 20, 2000 [MyCNN]
- Japan is preparing a U.S.$37.4 billion spending package (minimum committed seems to be U.S.$32.7 billion)
in an effort to keep its macroeconomy from shrinking. The last two years' supplementary budgets combined was
U.S.$67.3 billion. [Why doesn't this news report use yen for these figures???]. Japan's public debt, as of
March 2000, was 123% of GDP.
- Uganda is planning to increase electricity exports to Kenya, starting in 2004. The new target would be 165MW,
in contrast to the current target of 80MW (and the actual amount of 30MW to 50MW).
September 19, 2000 [CNNfn]
- The Euro hit another record low against the U.S.$. Both the IMF, and Japan, think the question of
intervention is when, not if.
September 19, 2000 [MyCNN]
- The recent surge in crude oil prices may force Brazil to maintain high interest rates, which could
inhibit its currently stellar recovery from the Crash.
September 18, 2000 [CNNfn]
- Daewoo's government-led creditors said that a new buyer would be chosen in October 2000 -- if according to plan, by October 20, 2000.
Uhm Rak-yong, governor of the state-run Korean Development Bank, expects General Motors/Fiat and DaimlerChrysler/Hyundai Motor to make revised
bids by September 28, 2000. GM wanted to consult with Fiat before making any announcements.
September 15, 2000 [MyCNN]
- Japan's pension and retirement systems are facing a challenge from Japan's globally unprecedented
percentage of people at least 65 years old. GDP is expected to be reduced by 2.2% from reduction in
workforce by 2005, and 6.7% by 2020 by the same means. This indicates that part of Japan's persistent recession
is structural, from a reduction in effective workforce.
- Ford cancelled its plans to make a final bid for Daewoo Motors, killing a deal that was on schedule to
close by the end of September 2000. This appears to be due to Daewoo Motors' bizarre accounting practices; Ford reduced its
takeover price from U.S.$6.9 billion to somewhere under U.S.$5 billion as a result of converting Daewoo Motors' accounting
to U.S. standards. South Korea intends to hold another auction. DaimlerChrysler indicated that it thought Daewoo was too risky to bid for again,
but Hyundai was equivocal on its plans (in consultations with DaimlerChrysler). I have no information about whether General
Motors and Fiat intend to bid again; Ford was clueless about whether it would bid again.
September 15, 2000 [CNNfn]
- The U.S. Labor Department's Consumer Price Index fell by 0.1% for August 2000 from July 2000,
contrary to a forecast of a 0.2% rise. Excluding food and energy prices, the forecast was correct.
September 14, 2000 [MyCNN]
- The World Bank cut off funding of Kenyan water projects that do not involve the private sector,
due to verification of government mismanagement. The dams and pipes were constructed in a mechanically sound way,
but the level of service and degree of loss is greater than when the World Bank started funding. Kenya has much
more physical water supply capacity than is actually being used.
- The Bank of Japan, as expected from Hayami's commentary that raising rates was "unthinkable", maintained
its overnight rate at 0.25%.
- Japan's corporate bankruptcy rate rose for the tenth straight month year-on-year, climbing 21.5% to 1,704 for August 2000 (the second-highest figure for
this year). The amount of bankrupted debt rose 47.4% year-on-year to ¥1.38 trillion for August 2000. This was a decline of 67.7% from July 2000,
however.
September 11, 2000 [MyCNN]
- Japan's GDP growth for April-June 2000, compared to Jan.-March 2000, was 1.0%, compared to
the consensus range of 0.2% to 1.1%. This was contrary to the personal consumption trends.
September 11, 2000 [CNNfn]
- The Euro set another record low against the U.S. dollar. In the absence of ECB intervention backed by the U.S. Fed,
the decline is expected to continue for another 1-3 months. Conventional reporting seems oblivious to the developments
in Yugoslavia (political instability there weakens the Euro very reliably, probably because Milosevic has easy invasion routes
to Greece and Italy). In particular, Milosevic has effectively declared that he does not plan to respect the results of the
upcoming elections.
September 9, 2000 [MyCNN]
- Japan's Finance Minister Kiichi Miyazawa speculated that a slight deflationary tendency might be cancelling out
the inflationary effects of the recent surge in oil prices. He also said that it might be possible to slightly reduce Japan's issuance of
Japanese government bonds.
September 7, 2000 [CNNfn]
- The Euro hit another record low of 1 Euro/U.S.$86.87, before stabilizing at the same time that rumors of ECB intervention. It is implausible
that the ECB can get U.S. support to back a successful intervention.
- Moody's Investors Service downgraded Japanese Government bonds to Aa2 from Aa1. A substantial factor in this downgrade
was Japan's total level of government debt, running at 130% of GDP [higher than Italy]. Anothe substantial factor was Japan's rapidly-growing elderly
population, which exposes the government to pensions in a similar fashion to its exposure to banks.
September 7, 2000 [MyCNN]
- Japanese companies increased capital spending by 2.2% in April-June 2000, compared to April-June 1999. This was less than
half of the lowest consensus estimate, 5.5%; the range of consensus estimates was 5.5% to 14.0%.
September 6, 2000 [CNNfn]
- The Euro hit a record low of 1 Euro/U.S.$0.8792. This appears to be aggravated by EU buyouts
of U.S. companies, which require selling Euros for U.S.$ to finance. Also, the U.S. economy is still growing
too fast for the Fed's tolerances, in contrast to the much slower growth rate of the EU.
September 6, 2000 [MyCNN]
- Japan's index of leading economic indicators was at 57.1 for July 2000, up from 55.0 for June 2000.
September 5, 2000 [CNNfn]
- The Euro hit record lows against Japan's yen, and almost did so against the U.S.$. Euro weakness
also revived the yen against the U.S.$, in spite of a potentially imminent government debt downgrade by
Moody's.
September 3, 2000 [MyCNN]
- Indonesia's (new) chief economics minister Rizal Ramli announced intentions to negotiate with the IMF to
intensify macroeconomic reforms.
No-frame index