Re: Krugman: Dollar as Ponzi scheme

[Rob Schaap <bantam@xxxxxxxxxxxxxxxx>]

G'day Pen-pals,

Have been watching ABC's 'Lateline' - bleak'n'dismal, so I watched hard.

Says Ken Courtis of Goldman Sachs (and it's all paraphrased as they're talking
me towards the bottle) ...

Thailand shook the world when it went belly-up, and Japan sports 42 times the
economy - in twice the trouble.  Koizumi is surprisingly (given his neoliberal
blathering) intent on another pump package, and the dread is of the interest
rates having to go up.  There is so much in bonds that interest rates are
gonna have to go up soon - the finance sector are carrying enough red ink
already, and shall need some reason to hold those bonds.  As interest rates go
up, the government, with debt at 150% of GDP, will feel a certain pinch.  If
the Yen falls, Asian currencies will plunge, too (maybe even China) - and
Oz'll be selling nobody anything.  The Ozzie, considered way underpriced
(indeed it's made its way up a cent since Doug's well-timed return home) might
yet have a long way to fall, and, strangely, the greenback perhaps a long way
to climb ... for a while ...

Says Peter Spencer of the Uni of London: excess capacity and lingering
inventories everywhere, job-cuts across all departments, profit warnings, and
indebted consumers ... yet it is on those consumers, and their appetite for
more debt and more shiny things, that it all seems to depend.  There are no
other locomotives, says he, on the horizon ...

Of course both expressed guarded optimism.  And, also of course, the American
expressed a little more than the Brit.  Even more ofcoursely, neither gave a
hint of a vestige of a clue of a skerrick of a shadow of a reason for said optimism.

And The Times adds to my mood (there is a thrill to slow horror to which I
fear I have become addicted) with the news that China is asserting herself in
bellicose style, which no doubt helps cohere a population with vastly varied
economic experience and interests right now.  If America lands people on
Taiwan, there's a big war.  If she doesn't, there's probably a medium-sized
war.  Japan, South Korea and Australia do precisely the thing that worked so
well in 1914, and air a gratuitously antagonising alliance.  Voila, the stage
is set for an economy-saving, albeit people-destroying, and perhaps
world-ending scenario ... see below, if you really want to.

Cheers,
Rob.


THE TIMES
THURSDAY AUGUST 02 2001
Beijing set to stage biggest war games
FROM LYNNE O'DONNELL IN HONG KONG

CHINA marked Army Day yesterday with a renewed warning to Taiwan that it will
attack it if the island declares independence. It also announced that combined
Chinese Forces will start the biggest-yet war games off the island.

                              The country?s largest and most advanced military
exercise was due to start soon after tens of thousands of troops had spent the
past three months in training on Dongshan island in the Taiwan Strait, a
pro-Beijing Hong Kong newspaper said.

                              The Wen Wei Po said that senior military leaders
would preside over the exercise, but gave no date other than saying they would
begin ?in the near future?.

                              Chi Haotian, the Minister of Defence, said that
China had not abandoned the ?principle of peaceful reunification? with the
island, which Beijing regards as a rebellious part of its sovereign territory.

                              ?But we will definitely not commit ourselves to
the abandonment of force and we will never permit any external force to
interfere in the affairs of Taiwan,? the minister was quoted in Chinese
newspapers as saying.

                              China would use force only if Taiwan declared
independence or was invaded by foreign forces, Mr Chi said.

                              Taipei and Beijing have been hostile to each
other since 1949 when the Nationalist Forces of Chiang Kai-shek fled to the
island, leaving the Communists to secure victory in the civil war.

                              Unifying the democratic island with mainland
China has become a goal of President Jiang Zemin and a touchstone of the
Chinese Communist Party?s claim on power.

                              America expressed its disappointment about
China?s hostile reaction to being excluded from a proposed regional security
forum.

                              The US and Australia floated the idea this week
of forming closer security links with Japan and South Korea.