PMS wrote:
>>BTW, I've been reading a book called The Great
Game by John Steele Gordon. I found this
reference to James Baker, former Reagan Sec of
Treasury, Bully of Electorates and Scooper-upper
of deflated Asian and defense assets and I'd like
to know what he wanted, who he was threatening,
etc. Know where I can read about this in more
detail?
" The market peaked on August 25, 1987, at 2722.42. Then, as troubling news items compounded(the continuing rise in bond yields, a threat by Treasury Secretary James Baker to let the dollar fall against other currencies, a large trade deficit, an Iranian missile hit on a US flag tanker in the Persian Gulf, and more) the market began to slide. By October 16, when it fell 109 points, the biggest one-day drop in its history, it had fallen 17.5 percent 2246.74" <<
At the time, the three biggest identified "strategic" threats for the US were: Soviet Union and Warsaw Pact, Iran, and Japan. The currency movement was designed to engineer a complete reversal of Japan's fortunes. Either the complete over-valuation of the Japanese yen would wipe out the trade deficit with Japan (basically making Japanese cars too expensive to sell in the US) or it would cause so much economic turmoil and forced restructuring in Japan that US interests would buy up what they wanted in Japan. Neither exactly came true--or rather took a lot longer to happen. Rubin, under Clinton, jumped on the idea, taking the dollar to a remarkable 80 yen to the dollar (at the time some even argued they would take it to 1 yen to 1 dollar if that is what it took, and the Japanese thought they were serious).
Still, what Baker wanted did happen to quite an extent. The Japanese relented on GATT issues, toeing the US line almost totally--though the idea of 'financial services' then morphed into 'networked services' later (to include the US's supposed advantages in exporting services in finance and banking, insurance, EDUCATION, especially tertiary but probably things like standardized tests, too, and then internet stuff, which really got a lot of emphasis under Clinton and Rubin and then Clinton and Summers).
The continuously overvalued yen has led to a Japan in extended recession, in constant turmoil (and a consequent loss of faith in their economic system) and restructuring, and increasingly vulnerable to foreign takeovers. I mean Ford didn't add industrial capacity to Japan, it just took over Mazda. Renault ditto, taking over Nissan (though this might well turn out to be mutual). GM is deep into Isuzu, Suzuki and Fuji Heavy/Subaru. And Daimler Chrysler ultimately might have got the best deal in Mitsubishi Motors (better than Mazda, a more flexible manufacturer than Nissan, I forsee Mitsubishi engines going into just about everything Chrysler all over the world).
I think it's a done deal about banking as well. First of all, the insurance industry is now significantly foreign owned. It's only a matter of time before banks and private equity from the US own some big Japanese banks.
One rumor is that it's already been agreed: US interests will get 20-30% of the banking system. Look for Baker-Carlucci-Bush's own Carlyle Group to get in on it somehow.
The other rumor, though, is that many in the government are fed up with trying to fix the banking system when the problem is the bad economy (largely caused by the strong yen). Some are saying, protect accounts and let the big banks go under when they go. If a bank, foreign or domestic, wants to takeover a failing giant, let them cover all the losses, not the taxpayers (Japan has or at least had one of the most developed banking systems in the world, and even if the giant credit and city banks disappeared, there are plenty of other financial institutions to fill the gaps).
Knowing what I know about the whole US-Japan set up, I'm betting the former--the big takeover of banking.
C. Jannuzi
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