- EIR on June 7 ("Asia Debates End of Deregulation")
and June 14 ("Moody's Attack Last Straw for Japan?") examined
the questions: Is Asia starting to reject the "Wall Street Model"
of deregulation? Is it Japan's economy which is about to blow up the global
financial system, as Moody's Investors' Service claims? Or isn't it rather
the dollar which is about to blow up, due to "junk bond economics"
not just at Enron, but across the whole U.S. corporate sector, trade deficit
and federal budget?
-
- The answers are yes, no, and yes. Once again Lyndon LaRouche
and EIR had the story first. Now, leaders in Asia have begun to speak in
public about the demise of the dollar, of the "Wall Street Bubble,"
and of the U.S.-British Model of "free-market" deregulation.
Bank of Japan Governor Masaru Hayami made a shocking public warning July
11 of a coming 1971-style U.S. dollar crisis, the kind which collapsed
the postwar Bretton Woods monetary system. "The possibility of a worldwide
move to dump the greenback is fairly high," he told a televised meeting
of the Japanese Diet. "A deterioration in U.S. fiscal conditions could
lead to a weaker dollar," which "could prompt investors outside
the U.S. to withdraw assets from the country."
-
- Such blunt statements by Japan's Central Bank, let alone
by the highly conservative 85-year-old BOJ Governor, are unheard of.
-
- The recent steep decline of the dollar, Hayami said,
"resembles the situation in 1960-1970, when the U.S. government was
suffering from twin deficits"--referring to the combined domestic
budget deficit and swelling U.S. foreign trade deficit which forced President
Nixon to pull the dollar off gold, and torpedo the Bretton Woods system,
in 1971. "The U.S. will probably fall into a twin-deficit status again
this year," Hayami said.
-
- On July 17, as the dollar slipped below 115 yen in Tokyo,
a 15% drop since January, Hayami repeated his view. Asked by reporters
if Japan should support the dollar, he called it pointless. "The dollar
is being sold. That's a fact. It can't be helped for a while," he
stated.
-
- "Dollar Heads South as U.S. Bubble Bursts"
was the way the Japan Times put it in their July 16 headline, comparing
the "bubble implosion in the U.S. information technology sector"
to the collapse of the giant Japanese real estate bubble in 1990. They
projected a decade or more of depression in the U.S., and no bottom for
the dollar, as the Federal Reserve prints dollars madly in response. -
Moody's Most Ridiculous - The failed Cabinet of Japanese Prime Minister
Junichiro Koizumi is denying this reality, and Hayami, sources say, is
among those Tokyo elites who want an open debate on the true extent of
the global crisis. "The yen is too high," Chief Cabinet Secretary
Yasuo Fukuda said July 17, urging the Fed and the European Central Bank
to make joint currency market interventions with Japan to support the dollar.
"The dollar is too low, since the U.S. economy remains strong,"
Finance Minister Masajuro Shiokawa said the same day.
-
- When a skeptical TV anchor asked, "What if the dollar
goes into free fall below Y100?," Shiokawa went into denial. "That
will never happen!" he fumed. "It's because all of you keep fanning
the flames that people get worried!"
-
- But the Hayami group thinks the dollar and the U.S. economy
are so far gone that intervention is "futile," a source said.
The Bank of Japan has not intervened since June 28.
-
- "Of all the Western analysts who said the American
`New Economy' could go on forever borrowing $1.5 billion a day from the
rest of the world, and that countries such as Japan which did not adopt
the `Wall Street Business Model' would collapse, the most ridiculous is
Moody's," a Tokyo official said July 17. "In January, the American
Enterprise Institute said the yen would collapse, triggering Japanese citizens
to run our banking system. Then on May 31, Moody's downgraded Japanese
Government Bonds almost to junk-bond status, below many Third World nations
such as Botswana, again predicting major capital flight out of Japan....
-
- "However, who looks ridiculous now?" he asked.
Japan's May foreign current-account surplus more than doubled from a year
earlier, and in fiscal 2002 (ending March 2003) "it could be the largest
on record," he said, nearing $150 billion, as U.S. trade zooms deeper
in deficit. So now "foreign investors all over the world are eager
to invest in Japanese Government Bonds" since the strong yen is raising
the value of Japanese holdings in dollar terms.
-
- In fact, Japanese Government Bonds are higher than ever
this year; now Japanese investors as well as foreign investors are shifting
funds from U.S. stocks and bonds, to JGBs.
-
- [The preceding article is excerpted from a much longer
piece by Kathy Wolfe to appear in the July 26 issue of Executive Intelligence
Review magazine. For a free copy of that issue, call, toll-free, 1-888-347-3258,
and say, "I saw it on Rense.com."]
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