"Wherefore We must interrupt a silence which it would be criminal to prolong, that We may point out...as they really are, men who are badly disguised." Pope St. Pius X, September 8, 1907, Pascendi Dominici Gregis


Saturday, March 19, 2011

Singapore Media Versus American Media

It became an issue of discussion surprisingly quickly after Japan's recent earthquake whether the Japanese government, corporations, citizens or some combination thereof would need to repatriate large amounts of overseas savings (Japan is the third largest holder of US treasuries after the Fed and China) in order to pay for all of the damage.  Most American journalists have tended to downplay this possibility, with the notable, if expected, exception of "Lord" Browne of Euro Pacific Capital. In that second clip, Ron Insana argues that the Japanese can't afford to lose one of their biggest export markets, insinuating that any such repatriation would lead to a higher Yen and thus an increase in the cost of Japanese exports to Americans.

Perhaps, but the lack of affordability inhibition has not prevented Japan from running up the largest cumulative deficit in the world, near 200% of GDP. Is it comforting that the only nations with higher deficits as a percentage of GDP are Lebanon and hyperinflationary Zimbabwe? I think most informed viewers take it for granted that the current situation benefits those who arranged it, i.e., Japanese exporters and their allies in government. The questions is, when does it become so stretched to the limit that the game of endless debt-creation (on both the part of the Japanese and the Americans) must finally come to an end. If an earthquake-tsunami-meltdown doesn't do it, the worst crisis for Japan since WWII, then what will? I don't think anyone argues, given Japanese demographics, that the trend is sustainable so the only remaining issue is when? And why not now?

Accustomed to the apparent irrationalities in the market (e.g., an increase in the price of US Treasuries during a disaster that ultimately may set off a run thereon), there appears to be no immediate reason why one should think this time would finally lead to a run on US Treasuries. But that is always true, until it actually is different. So it is not even remotely surprising that most folks in the US financial media who are to an extent dependent on the perpetual motion machine that is the current world dollar-dominated fiat currency system would try to make this eventuality seem as distant as possible. But, they could always be right.

Well, now some evidence that their quick push to rule out a run on treasuries is indeed a positively selfish or unconsciously cultural phenomena. This from Seah Chiang Nee of The Star in Singapore:

Even discounting a nuclear nightmare, Japan -- which is the world's third biggest economy and one of Singapore's top trading partners -- faces years of economic struggle. It will have to divert hundreds of billions of dollars to rebuilding shattered infrastructure by using its reserves, selling bonds or by reducing overseas spending.
"Knowing their nationalistic fervour, it will not be a surprise if Japanese corporations worldwide start soon to divert funds back home," said a stock researcher.
The Japanese will likely buy or invest less in Singapore and the number of tourists will likely drop. Japan ranks as one of the five economic pillars that sustain Singa-pore's prosperity, next to the United States, Europe, China and South-East Asia.

Singapore, over the last thirty years, has worked very hard to build a world class economy, and they have succeeded. Their prowess is due not to a natural endowment of resources or a partnership with a larger power, but their foresight, technical ability, discipline and economic freedom. It is highly suggestive then that the Singaporeans, whose economic might depends less on a sleight of hand con game and more on hard work and the free flow of information are taking seriously, for their own county, the possibility of massive Japanese repatriation.

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