NICs in crisis ------------- What brought it on: no capital controls (China is weathering the storm after all); the fixed or pegged exchange rate system; reckless lending of excess capital, a la Chesnais; crony capitalism; faulty bank regulation; the lack of vigilance inspired by the bailout of Mexico; the volatility inspired by speculators; Japan's commitment to the export of its high growth, high investment model to the NICS after its own version has been teetering ever since the Plaza dollar devaluation (Robt Brenner) and even in a slow growth world?
Russia ------- In less than a decade Russia is already running up enough debt to approach Maastrict criteria (30% of GDP) while interest payments verge on 20% of GDP. Debt and interest/GDP ratios are increasing exponentially. The IMF will continue to push for the complete centralization of revenue as a precondition for further emergency funds--about the only thing the Duma has not ceded. That is, the IMF will have effected a greater centralization of totalitarian power than even Stalin while Western Europe luxuriates in baths of Russian capital flight.
China ----- In order to save face, China has not yet devalued, but this should be expected next year. High growth may be achievable by ordering state enterprises to produce greater inventories, and for warehouses, but value is being destroyed in the process as the often shoddy output will find no market and China will eventually face a tremendous banking crisis brought on by the unprofitability of its state enterprises. The rationalization of them will throw tens of millions into the streets and with the dynamic private enterprises keeping three sets of books there is no way the Chinese state will have the taxing power to carry out this one trillion dollar fiscal expansion. In order to revive growth China will then devalue, but since devaluation has not yet simulated the tigers as it did Mexico in 1994, one should expect that the most vicious forms of beggar thy neighbor competition have yet to materialize. An American recession will bring about unimaginable horrors. The crisis cycle is about to reassert itself and thus the possibility of proletarian revolution.
Japan ----- The bailout will do nothing. The Japanese banks de facto circumvented the 1988 Basel Accord by counting its bubble equity as part of the 8% capitalization requirements banks must meet in terms of the risk weighted assets they own. The Japanese banks overlent and could do so comeptitively because they were often lending on the basis of only half the capital of rival banks. Of course the bubble burst and the Japanese banking system finds itself in a liquidty sink hole. The bailout will only help the top 20 or so banks meet the capitalization requirements they should already be meeting given the risk weighted assets they own; the bailout will not provide the basis for fresh lending. The banks will be in no position to take the risks to revive accumulation. The markets were correct to reverse their judgement after reading the plan, and the Nikkei will continue its downward march. In a slow growth environment layoffs are certain; the President of Toshiba who has been repulsed by the Wall Street Model of rentiers and their superrich managers and who has prided himself on serving "stakeholders" instead of shareholders talks openly about the need for more labor flexibility and some social welfare to cushion the inevitable massive layoffs. From now on out, Japan will fit Doug's Wall Street Model--slow growth, high unemployment, bloated rentiers and wealthy whorish managers. The universalization of Anglo American barbarism, a world of Charles Murrays, Ken Starrs, and Robert Bartleys.