tag:blogger.com,1999:blog-4815867514277794362.post682378035863322967..comments2024-03-08T06:18:28.125+11:00Comments on Bronte Capital: Muddling through – why the American banking system will not turn Japanese – Part IIJohn Hemptonhttp://www.blogger.com/profile/03766274392122783128noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-4815867514277794362.post-35594634485703912952009-05-12T00:39:00.000+10:002009-05-12T00:39:00.000+10:00Gaius
You can be disabused of that notion quickl...Gaius <br /><br />You can be disabused of that notion quickly. Japan was running a big current account surplus in 1990. The banks STILL had excess deposits then.<br /><br />Remember - for the most parts - banks intermediate current account deficits.<br /><br />There was none in Japan - and the bank SURPLUSES were real then too.<br /><br />JJohn Hemptonhttps://www.blogger.com/profile/03766274392122783128noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-64448594666455551022009-05-12T00:36:00.000+10:002009-05-12T00:36:00.000+10:00But American banks are not awash in funding – and ...<I>But American banks are not awash in funding – and given the profligacy (especially historic) of the American consumer – not to mention tax cut funded Iraq wars and the like – the US financial system is almost always going to be an importer of spondulicks. That might change in twenty five years – but it is not changing now.</I>i think this is really the big question, isn't it? were not japanese banks in more or less exactly this position in 1991-2, but with corporate rather than consumer credits sucking up all available lending capacity? <br /><br />western banks are collecting fat spreads right now, but the true long-term test for the system won't be in loan supply -- it's in loan demand. if banks can't make sufficient new loans to replace the fat ones rolling off their books, earning power will diminish over time even as asset prices continue to deteriorate.<br /><br />as i understand it, japan ended up with massive excess funds in banks because (beginning in 1996) the private sector started to repay loans (ie, aggregate loan demand went negative), to the tune during the early 2000s of 5% GDP. but in 1989, the japanese nonfinancial corporate sector was increasing its bank debt at a rate of in excess 12% of GDP (and issuing debt on the order of 5% GDP in capital markets to boot). that massive 17%-of-GDP swing in private credit took ten years to effect. aggregate private sector loan repayment seemed to have ended in 2005, but has probably resumed in this crisis.<br /><br />to prevent a crash in monetary aggregates, the government borrowed out these excess deposits, which at 77 bank shows up as a massive investment portfolio in JGBs. <br /><br />for what it's worth, i think a more appropriate comparison would be to the 77 bank of 1991. i have a sneaking suspicion that 77 bank was then also a mirror image of the current 77 bank, but i'd love to be disabused of that notion.gaius mariushttps://www.blogger.com/profile/10618655639631695070noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-45869368348052069232009-05-11T14:42:00.000+10:002009-05-11T14:42:00.000+10:00One interesting comparision to prove your point is...One interesting comparision to prove your point is to look at the 3 month Canadian interbank bankers acceptance rate vs the 3 month USD interbank Libor rate which are the marginal funding rates for CAD and USD based lending respectively. Both should be the same because the Fed and Bank of Canada both have target rates of 0.25% but the CAD bankers acceptance rate is around 0.40% while the 3 month USD Libor is just under 1.00%. The difference can also be seen in less stark terms by looking at the Tokyo interbank offering rate vs Libor.<br /><br />-TimTimhttps://www.blogger.com/profile/03894651289037073128noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-32305666094975562792009-05-10T19:49:00.000+10:002009-05-10T19:49:00.000+10:00John, have you seen this for 77 Banks web site (in...John, have you seen this for 77 Banks web site (in english):<br />http://www.77bank.co.jp/english/profile.htm<br /><br />-SteveAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-29406744347597968812009-05-09T14:12:00.000+10:002009-05-09T14:12:00.000+10:00I would comment that the FLOWS of savings are much...I would comment that the FLOWS of savings are much lower. That is the PARADOX OF THRIFT.<br /><br />In the Paradox (a classic from your Keynsian first year course) everyone collectively tries to save more, the economy tanks and hey - nobody collectively saves more.<br /><br />Welcome to the modern world.<br /><br />--<br /><br />The excess STOCK (as opposed to flow) of savings is in Asia. The stimulus is a good idea - but it would be a far better idea in China.<br /><br />JJohn Hemptonhttps://www.blogger.com/profile/03766274392122783128noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-22292287147850212102009-05-09T12:26:00.000+10:002009-05-09T12:26:00.000+10:00John,
Can you comment on the drastic decrease in ...John,<br /><br />Can you comment on the drastic decrease in revenues in these various surplus countries? For example, Japanese savings today is virtually zero percent. Oils are dramatically lower, and only surplus are China and Saudi Arabia. In general revenues in all countries are going to go down significantly. Would this mean that there will be much less to lend everywhere, and interest rates are likely to go higher, and risk of xxflation, in-, or de-, or stag- is very real?Anonymousnoreply@blogger.com