WORLD BUSINESS

‘This Makes No Sense’

Japan has little tie to America's toxic securities, but its market melted down anyway, as fear ran wild.

By Christian Caryl | NEWSWEEK
Published Oct 11, 2008
From the magazine issue dated Oct 20, 2008

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  • Posted By: nawawimohamad @ 10/12/2008 12:30:17 AM

    The current financial debacle in the US is totalling about USD13 trillion which is roughly 0.0933 percent of its GNP. If compared with the world's GNP the amount would be negligible. But how can suvc an insignificant amount be creating a world wide crisis? It is all the fault of the media and speculators. The media has not been making a proper well balanced reporting and putting things in proper perspective. Instead it has created panic and together with the speculators have created the wprld economic crisis which could have been prevented. The media has been very irresponsible, it should contribute to the well being of the world and to try to calm the situation instead of sensationalizing every issue.

    The other factor is the government and corporate leaders because they have too much "freedom" in making financial decisions and only a few of them had been taken to task. Thsi does not provide enough deterent for them to be more prudent in making decisions.

    • Posted By: Holly Garfield @ 10/14/2008 2:37:48 AM

      To nawawimohamad: I am not sure where you are getting your figures, but the US annual GDP is curriently running about $13 trillion USD and the entire global GDP was about $59 trillion USD in 2006 according to the World Bank. Multi-trillion USD bailouts are hardly insignificant. US pension funds alone have lost $2 trillion since the start of the market dip.That's about $6700 for every person in the US, including children and adults without pensions. I have seen total US equity losses at $20 trillion at one point recently. Panic selling only turns unrealized losses into realized losses. One trillion = 1 million million or 1 thousand billion.

      The US has thrived above all other countries based on 'too much freedom'. In this case the deregulation of the past few US Presidents was a major contributor to the market drop, but with regulation the market wouldn't have risen high enough to have the fall. The US 'too much freedom' will alllow the US to bounce back. When I look at the overall US economy, since housing prices are now lowered, there isn't much weakness beyond the credit crunch. Unemployment is still relatively low and with a boost to employment people will be able to keep their houses and credit cards. Commodity prices are back down, so inflatioin is under control. House prices are so low that it shouldn't take too long to blow off the oversupply once credit starts working again.

      As far as savings rates go, remember that economies grow when people spend money, not save it. The low US savings rate is what makes the US such a strong economy. We put our money to work for us. The long term annual growth of the US stock market is 10% per year, compounded. Compare that to savings rates, and figure in compounding, and you will see why the US is so far ahead of countries with high savings rates.

  • Posted By: socrateos @ 10/12/2008 8:16:03 PM

    Oops! I meant "Toyota makes money by making cars while GM makes money acting like a bank" -- not "GE".

  • Posted By: socrateos @ 10/12/2008 8:11:09 PM

    Fortunately for Japan, US is no longer the largest importer of Japanese goods - China is. Japan's dependence of US market has been shrinking fast last several years now, and this trend will continue most like in an accelerated manner.

    Also fortunately for Japan, its economy does not rely heavily on money market as in US. Toyota makes money by making cars while GE makes money acting like a bank. Japanese economy does not rely on investors as much as US's. The stock market is far less significant in Japanese than in US.

    And most fortunately for Japan, the high saving rate of its people (15 % in good years and 5% even in bad years, compared to less than 2% in US) has accumulate incredible amount of many trillions of dollars in house holds, which can help the country weather through most severe economic down turns.

    Ever wonder why Japan is still No 2 even after so called "Japan's lost decade"?












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