Two -- the resignation of the two MOF bureaucrats portends real banking reform. If so, the Japanese banking stocks will continue to rally -- namely - because Japan's depression is ending.

Three -- Hashimoto is only partially successful with outcome two -- too little, too late.

What I don't know is whether Japan's musclebound financial/economic system can really reform itself without total destruction first. Will the threat of financial ruin be enough to break the back of the bureaucratic machine that is bringing Japan to its knees? It all boils down to whether Hashimoto has enough political clout to pull the reforms off, and whether the reforms envisioned will be sufficient.

I wonder, do we have any Japanese on this site that can explain what is really happening? Otherwise we cross our fingers, and wait a few months. I for one am not optimistic, but I sincerely hope I am wrong, because the outcome could then be depression for all.

I see one problem coming up, and that is the WMD. Our defense forces realize that the international terrorist threat is much more serious than it used to be -- so there is a legitimate argument in favor of having a well-organized, strong defense force internal to the US. Of course, that organization should still be sworn to 'protect the citizens of the United States' , but I think you get my drift.

Several processes are thus converging, all in favor of a strong internal milirary force within the confines of the United States. As I see it, we as Americans need to make sure that these individuals will live up to the same standards that Old Soldier and his compatriots lived up to -- namely to protect the American Citizen as the first priority. I think if the oath of allegiance has been corrupted, it is not internal to the US military, but external to it -- paraphrasing when Old Soldier said. It is his opinion that nothing has changed within the US military, and I hope for our sakes that this is true.

I think I see what you are getting at -- this is like the delay between the heat you apply to an object and the amount the temperature rises. And -- at a phase change ( shift in credit ( un ) worthiness ) the relationship is nonlinear -- delayed due to the heat ( credit ) absorbed by the object being heated. I see what you are getting at - interesting! By the way, did you know that FDR inflated the US dollar during the great depression ( partially by that sudden dollar devaluation when he raised the dollar price of gold ) . But -- the banks were so gun shy, they did not loan!

How about credit as the driving force ( heat input ) and loan generation rate ( total dollar value ) as the subequent temperature? Same idea -- easier for me at least to understand.

Now to last part of your post -- when the relation between credit available and loan genration rate shifts suddenly -- we are at the critical opalescence phase -- the time of danger! Brilliant!

Is there a way to get that kind of data on various countryies and plot interest rate ( potential credit availability ) against actual loan generation rate, and look for a sudden change in their relationship?

So -- lets take the liquid/gas analogy -- liquid markets/financial activity is analogous to the water phase -- the gas phase is the boiling of the water ( or loss of water ) -- analogous to the loss of financial liquidity. After the water has 'boiled' away, there is no market, and it is all over! What I think is important about this is not necessarily the analogy, but whether there are warning signs that the financial liquidity is waning.

I will need to think about this -- and perhaps others with more financial expertise can help us understand.

Unfortunately, that is like holding the rest of the world hostage, and just the way a financial shockwave might spread!

Haven't heard from you in a while. With what looks like a bottom in gold, I was wondering if you have any Junior Base Metal companies that you have your eyes on. Any ideas will be well appreciated.

Thanks

Pete

Looks like we need a 'fear/panic' indictor, and a financial 'rot' indicator, as well as the other indicators that we are using. Unfortunately, I think most of our news about the financial 'rot' is very scanty -- much of it dug up by you!

By the way -- what do you think about your post yesterday about Japan only having 3 or 4 banks that foreign banks will loan to? Is this like our S&L crisis of a few years ago? Or -- it is much worse? 20 billion a day to keep 'dead' Japanes banks afloat is a pretty high cost -- any evidence that reforms are taking place? And -- now the new Finance whatever of Japan tells everyone that no more Japanese banks will go under? We've heard that before!

What I don't understand is that -- if the SEAsian countries are going through a liquidity crisis -- how can any goods be bought and sold? Is this the end of our expected SEAsian goods Tsunami? And why is the Cry0 going up -- inless it is linked to the SEAsian liquidity crisis?

Hope all is well with you -- did you see the Dines comment about crisis in the Canadian dollar?

One example would be the explosive growth in newscoverage regarding Monicagate about a week ago, when it looked like BC was history. Even his former senior staff members were talking that way. Now, most of this has died down, but the underlying forces that created this 'feeding frenzy' are still building up. The newsworthiness of the bombshell was not lost on the news media, and the previously monolithic 'Liberal press' information filter now has big holes in it. The White House will have a hard time preverting the next 'press feeding frenzy'.

The other items that would damage investor confidence are still mostly at the simmer stage as well. One of my most practical friends is nearly 100% invested in the equity markets, as are most of my colleagues -- to my amazement. My voice is nearly a voice in the wilderness. But when the voices of doubt get louder, and people note that the markets are not going up any more -- ( this will take months ) -- we will approach a near boil.

I think what makes my 'attennae' tingle is that this year there are many simmering pots about to move into synchrony. We at Kitco see everything months too early, and must watch for signs in the actual markets and news media, so that we do not become victims to our own runaway prophesy. I have done this many times with equity stocks, only to find that I chose the right stocks, understood correctly what was about to happen, but the buyers and sellers were on a completely different wavelength - I was often months too early. What we need to do with our 'simmer' indicator -- or whatever we call it, is try to sense the actual response in the markets or news media, not the individual news reports of events.

Please note comments by Rudiger Dornbusch, the MIT economist. His name always seems to come up when serious financial turmoil surfaces.

http://www.stern.nyu.edu/~nroubini/articles/1998AsiaOnUSWSJ198.htm

Why don't you enlighten me, and tell me what those bubbles look like? A general sense of foreboding on my part is not particularly useful as an investment indicator.

away...to the tanks w/ *loud* music

Éßonkersfergold

ted, VERY BIG game today....one I feel uneazzy about. Michael is in La, La..... ( ugh ) ........go ShaQ.... ( yea! ) .......Nick..... ( nuthin but net ) ......Kobe..... ( cross hand...SCORE! Little Michael ) .....yes!

I, like many Kitcoites am invested in gold stocks, oil stocks and defense, etc stocks -- but I have one eye on the lookout for anything that might give me a clue when it is time to 'duck'.

In physics there is something called critical opalescence when a phase change occurs. When you boil water, you see little bubbles and convective cells ( little regions of rising hot liquid ) just before the heated water becomes turbulent and boils vigorously. All you need to see this is put a metal pan on the stove, and boil some water.

I sure would like to know the visible signs -- if there are any ( besides increased volatility ) -- of a phase change in the markets. Regardless, I think we should be very alert for the next few years -- as the unexpected is coming our way!

http://biz.yahoo.com/finance/980130/japan_cred_1.html

Liquidity is drying up in SEAsia, so no goods Tsunami?

Also the commodity price index ( CRY0 ) is rising rapidly, faster than can be explained by the rising US dollar. Is this rise in the CRY0 due to a drop in trade from SEAsia?

Who is going to stop Saddam this time if he lobs a few missles into Isrial? As I recall during the Kuwait war we had little trouble defeating his army, but alot of trouble finding all the missles -- even well after total control of the air. This time we have no ground troops to speak of -- so all of it must be done from the air.

Precious Metals:

Silver remains the big problem. While many call this the poor man's gold, it is more like the poor man's opium that creats visions of unrealistic grandeur. The silver/gold ratio still appears poised to make new highs or at least test the 100:1 level.

....

However, if silver penetrates the $4.29 level, then caution should be employed. Silver might yet decline under $3.50 during early 1997 before any hope of a bull market emerges. Gold, on the other hand, has resonable support at the $368 area followed by $341. We do not expect to see new lows in gold under ANY CIRCUMSTANCES.

( Looks as if PEI struck a big fat zero on both their gold AND silver predictions ) .

Most certainly I shall ask them about the plutonium, I am sure they have some as I glowed in the dark for a week after the last tanker full.

Perhaps we could start a new craze where the criminals burst into the bank and only shoot the bankers. Not the tellers or the guards, let me make that perfectly clear, and of course not the customers. In addition, they take gold and silver out and give it to the customers, take their money and make a bonfire with it in the middle of the floor.

Running out of the bank yelling Go Gold and Silver!

All to the tune of Steve Miller's

Sure hope that China has enough sense to hold off on devaluation until the Japanese situation looks better. That would be enough to finish off Japan if that happened now, I think.

Wild times we live in -- agreed?

Just a matter of time, I think -- agreed?

South America up to this point has been in pretty good shape -- economy wise, but Argentina's CE is apparently broke, Brazil has returning inflation problems -- do they still have 40% interest rates? Mexico is quietly devaluing the Peso.

One third of the world's economy is in SEAsia, and only China and Taiwan are in pretty good shape. My relatives in Hong Kong are saying that real estate is plummeting. South Korea is a basket case, and now I learn that there are only 3 or 4 banks in Japan that non-Japanese banks will loan to. There is talk about an Indian devaluation, and denials of Chinese devaluation are becoming more frequent.

And -- a confrontation in the Middle East appears imminent. The Israelis are buying gas masks again.

So -- outside the Americas, are things really all that great, even if they were last year?

Not a censorship, just asking for a higher dose of courtesy.

Any comments about the Japanese situation? I don't like what I read at all.

With regard to the National debt -- When the baby boomers start to retire en masse around 2010-2015, the old shell game with funding the US government with excess Social Security funds will collapse. I wonder how many baby boomers expect ever to see their social security money again. Think what would happen to Microsoft, GM or IBM if they did this to their retirees!

By the way -- raising the national debt is a great way to increase the money supply -- it's 'non inflationary' because some other elected official will be in office when the inflationary effects become evident. Don't have to ask Congress for the money if you have access to the national debt spigot. Great way to support the IMF.

We worry about the US along these lines -- but Germany and France are in worse shape right now with their entitlements, according to the Economist, and other sources. But -- they can only go by the official figures, which may not be accurate.

I enjoyed your jokes --

Entertaining as always. Saw an interesting news byte about two skydivers who were narrowly missed by a commercial airplane. I was then wondering what the pilot was thinking about being narrowly missed by the skydivers. Much bigger than a goose, and how do you fly the plane with a white parachute over the nose of the plane! Do you ask one of the stewardesses to lean out the window with a knife? And -- just how long can you fly on automatic pilot?

Should all sky divers carry transponders so that the tower can identify them, and what do they do if they are told to hold their landing pattern?

Interesting questions. I think I would rather be buzzed by a UFO.

AG has told us that the SEAsia Tsunami will wash on our shores during the end of our first quarter, and the deflationary effect may be beneficial. So- no rising ( short term ) interest rates. I gather he also said that labor pressures do still raise the possibility of inflation to return. I would interpret this as the optimal situation for gold -- an inflationary situation where the FED does not dare increase rates.

I find it amusing that the 'black sheep' of the Bennett family is William Bennett's brother, Robert Bennett, one of BC's laywer team. Too bad William Bennett has no influence over his prother.

I didn't know that the President of the United States could legally pay for so many private lawyers using public funds. How many congressman are doing that?

My impression of the Monicagate situation: The tide has shifted back in favor of BC, and away from Starr -- at least on the surface. My guess is that Starr will come up with something eventually if his investigation has not been compromised in some way -- but it is very hard to piece together a case that will stand up when BC is enjoying such general support from the 'people'.

BC will remain in power until the economy tanks or a military fiasco of some kind shifts the tide again. If that happens, BC will be a liability to the mysterious group that pushed him into the limelight. I for one would not want to be in that situation. The members of that hidden group are probably already gathering a list of replacement candidates. Reminds me of what the Mafia does. They have a public figurehead that is 'clean' that they manipulate. If the figurehead gets dirty they throw it away and get another clean one. Lots of fun and perks for a while, but with sudden departure likely.

Ziva: Most of us are well read, and are familiar with what you are posting. Why don't you just post us web sites, and stop hogging the airways? Also, if you continue misquoting us -- any arguments you present will not be examined at all.

You should be aware by now that this cyberworld is Bart Kitner's creation, and in his reality we play by his rules, or not at all. He is a fair person -- but he can disconnect any of us if he thinks we are disrupting this site.

Does anyone know if Warren Buffett still is a big shareholder in Solomon Smith Barney?

http://www.yahoo.com/headlines/980130/business/stories/commodities_5.html

http://www.yahoo.com/headlines/980130/business/stories/economy_6.html