Subject:	China Will Devalue Currnecy: Torpedoes Japan
Date:	1999/07/19
Author:	Paul Milne <fedinfo@halifax.com>
	Posting History

Business: The Economy   China hints at devaluation   China's industries are vulnerable to foreign imports   The Chinese Government appears to be seriously weighing the possibility of devaluing its currency, the renminbi, for the first time. China has stuck by its policy of maintaining a fixed link to the dollar during the two years of the Asian crisis, fearful that any move to devalue would touch off a further collapse of Asian currencies.   ==============   China, dependent for survival on exports, is going to devalue their currency. They have no choice, They are getting HAMMERED.   "..its trade surplus has fallen by 64% so far this year as a result of the strong currency. " "The high exchange rate has hurt exporters by some $8.7bn ..."   "For instance, a Daewoo factory in Yantai that makes excavators is unable to export any of its diggers this year as they have become uncompetitive with those made in Korea. "     They have staunchly maintained that they would not. This is the single most important indication that they WILL. Never believe it until it is officially denied. All the currencies around them have been blasted and now have a remarkable competitive advantage against China who will die without maintaining its high level of exports.   China will devalue. Then, it will be the Asian flu all over agian, but worse by an order of magnitude. This time Japan will go too. You heard it here first. When China devalues, they torpedo Japan.   It is just like China saying "Open torpedo bay doors. Bearing...due east. Fire one! Fire Two! Fire three!"   Japan must export to survive. The Chinese devaluation destroys their competitive advantage sinking an already tanking economy.   The beginning of the major global economic impact comes when Japan goes.   Won't be long now   This is the economic context of Y2K.  Enjoy.   Paul Milne http://news.bbc.co.uk/hi/english/business/the_economy/newsid_398000/398245.s tm

-- a (a@a.a), July 20, 1999

Answers

Which, if/when it occurs, will further increase OUR trade deficit by making those Chinese goods even cheaper in comparison to American made goods..........

164 days and counting....

-- Jon Williamson (jwilliamson003@sprintmail.com), July 20, 1999.

Yes, and all hell was supposed to break loose when Japan's economy went in the toilet. Nothing happened. Same with Brazil...yada yada yada.

-- Anti-chainsaw (tree@hugger.com), July 20, 1999.

Anti...

If you followed the Brazil et. al. crash, you would have seen many top money people scrambling to put things right again. Which they did, temporarily

Sigh...

-- mar (derigueur2@aol.com), July 20, 1999.

I follow it ALL. yada yada yada Nothing happened!

-- Anti-chainsaw (tree@hugger.com), July 20, 1999.

Anti,

Listen: hear the crescendo rising.

-- a (a@a.a), July 20, 1999.

Ignoring the economic implications, the timing seems related to the US position over Taiwan. If I understand correctly, China is not too concerned about other Pacific-rim nations, but would love to threaten the US due to the US position on Taiwan.

I can't blame them one bit about being angry with the US, but am surprised that they don't care more about their neighbors.

-- Anonymous99 (Anonymous99@Anonymous99.xxx), July 20, 1999.

Not to worry...Central Banks will sell more gold to prop them up till Dec. 31 st. Can't stop that 12,000 DOW!

-- Gia (laureltree7@hotmail.com), July 20, 1999.

>>I follow it ALL. yada yada yada Nothing happened! <<

Nothing? Right. And a fine yada yada to you, too.

You really mean that nothing has disturbed your own comfortable place in the universe, yet.

When a major earthquake happens under the sea bed, it creates a tidal wave. That wave can travel for several thousand miles and only be visible on the surface as a ripple a few inches high. As it approaches land, and the sea bed rises up to sea level, the wave emerges from below the surface and may suddenly rise from a few inches high to more than 100 feet above the surface.

Before the Japanese economy went into the toilet, four Japanese banks were on the list of the ten largest companies in the world. Japanese banks hold more US Treasury debt than anyone else. Those same banks are waterlogged with over $1 Trillion in bad debts. If they ever have to liquidate their US Treasury holdings to raise cash to meet their obligations, you'll stop thinking that "nothing happened".

The global economy is in horrible shape.

I don't always agree with Paul Milne, but he is right to finger the possible Chinese devaluation as a very serious trigger event for world markets. Korea has been emerging from its crisis only by taking market away from China. China is hurting. If China devalues, Korea tanks again as will most of East Asia.

If East Asia tanks again, Japanese banks take the biggest hit. The IMF loans are mostly servicing Japanese bank loans, to keep them from defaulting. The whole debt edifice is held together with spit and earwax right now. It could split wide open pretty easily. Once east asian loan defaults overwhelm the system, they will spread here in a matter of days and the US stock market is chopped off at the knees.

The chances are, the whole edifice comes down faster than the Fed can patch it up. Sorry. I wish it weren't that vulnerable, and I sure as hell don't see myself as a winner in this scenario. I'll be a hurtin' puppy if this happens. We all will be.

-- Brian McLaughlin (brianm@ims.com), July 20, 1999.

Brian,

All I've been reading on this forum for the past two years is how everything is going down the toilet. Japan, Brazil, Jan. ,1999, April 1, 1999, July 1, 1999, solar flares, psychic predictions, Kennedy crash cosspiricy theories...yada yada yada. Many of you have been predicting doom and gloom for two years. NOTHING HAS HAPPENED!! Next big deal is the GPS rollover.... Betcha NOTHING HAPPENS!!

-- Anti-chainsaw (Tree@hugger.com), July 20, 1999.

Hey dumbass - do you know what "Y2K" stands for?

-- (@ .), July 20, 1999.

(lucent and tech )stock dropped 191 points today.....

-- Moore Dinty moore (not@thistime.com), July 20, 1999.

It ain't over till it's over.

-- yogi (yb@hall_of_fame.com), July 20, 1999.

I don't know whether China is going to devalue the yuan (renminbi) or not, but I do know that strongly encouraging China not to undertake such a potentially disastrous devaluation has been the linchpin of our economic strategy in SE Asia in the past two years.

-- Don Florence (dflorence@zianet.com), July 20, 1999.

>> All I've been reading on this forum for the past two years is how everything is going down the toilet. Japan, Brazil, Jan 1 ,1999, April 1, 1999, July 1, 1999, solar flares, psychic predictions, Kennedy crash cosspiricy theories...yada yada yada. Many of you have been predicting doom and gloom for two years. NOTHING HAS HAPPENED!! <<

This is quite a mish-mash of a list. But just putting a bunch of heterogeneous items side-by-side on a list doesn't make them equal. If you are a careful thinker, you should be able to discover which of these "threats" are credible and which are not.

The solar flares, psychic predictions and Kennedy crash conspiracy stuff are just noise.

The "big dates" prior to 1/1/2000 each had marginal credibility as harbingers of things to come. The fact that FY2000 started on July 1 without discernable disruptions was a relief to me. The other two dates were far more borderline.

The major economic disruptions in Japan and Brazil are very credible threats to our economic stability. These aren't historically unique events, like Y2K, and as such they are far less contaminated by the need to rely on guesswork. When the second biggest economy in the world racks up more than $1 Trillion in bad debt, your only excuse for dismissing it as a trivial event would be ignorance of the highest order. Brazil is important because our big banks have loaned it tens of billions of dollars, and if they default it means a lot of money evaporates. When a lot of money evaporates, the effects reach a long way.

>> Next big deal is the GPS rollover.... Betcha NOTHING HAPPENS!!<<

No bet. GPS rollover is small potatos. Most of the Y2K "precursor" events are grasping at straws. Their failure to bring panic and chaos to the world is heartwarming, but essentially not important.

OTOH, Y2K itself has already consumed many hundreds of billions of dollars in remediation expenses. In my book, any problem that takes that kind of capital to solve is *a big problem* right there.

Your thoughts, Anti-chainsaw?

-- Brian McLaughlin (brianm@ims.com), July 20, 1999.

One of these days, very, very soon, the pollys will understand that its not just the few failures over a few key dates that is the problem. Its the cumulative effect, over the next 6-12 months, as the rate of these systemic failures intensifies and becomes more and more enmeshed in the digital infrastructure, overwhelming those few individuals at the consoles and keyboards who are battling the blaze. Especially while other "weird and wonderful" things are occuring. If there is anything that can be predicted with 100% accuracy about the y2k problem, it is this:

It won't happen in a vacuum.

-- a (a@a.a), July 20, 1999.

Australia felt the effects of the Asian Flu, our dollar is now around 65 US cents when a few years ago it was around 80 US cents.

Yes it didn't affect us that much, but it still did and there are several companies that I know of that are still feeling those effects and are just managing to survive.

On another tangent, there was a power failure at my workplace for 3 hours last night. Our UPS's last for an hour so our systems shut down after this time and 2 of them had to be manually rebooted to get them to work again. One of those 2 had errors and needed extra help to get started.

It was not a Y2K related power failure but the power failure did shut down our business which is operational 24 hours a day.

Total Downtime: 9 Hours

Just would like to point out that when we have system failures here we try for an immediate workaround so we can keep functioning, then we investigate the cause of the problem and then we try to fix it. Now workarounds in my experience causes extra load on your other systems, this extra load itself can cause performance degradation and also then have a higher chance of failing themselves.

Regards, Simon Richards

-- Simon Richards (simon@wair.com.au), July 20, 1999.

G'day Simon. There's been lots of talk in the media about how well Australia weathered the Asian Flu, but they mostly ignore the phenomenal Current Account Deficit we are running. (And they're ignoring impending y2k problems, of course.) Much like America, our economy is booming, but only because of credit fueled consumer spending.

-- number six (Iam_not_a_number@hotmail.com), July 21, 1999.

If there is an Asian Flu II this will be the most likely time to see the Japanese banks tank and start the global banking chain reaction. This was called for a long time ago and it's still ticking. For all the time that the Japanese banks have gotten in this mini-recovery, they still haven't made progress at defusing their greate problem.

Their banking industry has done all they can to stay afloat for Asian Flu I. But they've only been bailing when they should have been patching their leaky boat. They don't have any wiggle room left to use up, so their only option to stay open in to begin liquidating their assets, primarily US Treasury Notes.

Then we'll find out that the US banks are chained to the Japanese banks and when they start going under some people will hear an eerie laugh echoing across the cold, financial sea that they're soon to go under.

"BWAHA HA HA HA HA..."

WW

-- Wildweasel (vtmldm@epix.net), July 21, 1999.