APFN - $700 B a lie, it's at least $5 TRILLION
http://disc.yourwebapps.com/discussion.cgi?disc=149495;article=120917;title=APFN
$700 B a lie, it's at least $5 TRILLION
http://www.bloomberg.com/apps/data?pid=avimage&iid=izuuC.SAXQ1Q
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a8DIq9yO0vzY
$5 Trillion Cash Pool Needed to Stop Rout, Ohmae Says (Update1)
By Bei Hu
Enlarge Image/Details
Sept.
23 (Bloomberg) -- Treasury Secretary Henry Paulson's $700 billion plan
to buy devalued assets from financial companies is ``a joke'' because
it doesn't go far enough to calm markets, said Kenichi Ohmae, president
of Business Breakthrough Inc.
Ohmae, nicknamed ``Mr. Strategy''
during his 23 years as a McKinsey & Co. partner, called for a $5
trillion ``international facility'' to be made available to financial
institutions. The system could be modeled on one used by Sweden during
its banking crisis in the early 1990s, he said.
``This is a
liquidity crisis,'' Ohmae said at an investor forum hosted by CLSA
Asia-Pacific Markets, the regional broking arm of Credit Agricole SA,
in Hong Kong yesterday. ``The liquidity has to be so big that people
won't get panicky.''
Paulson's proposal to remove hard-to-sell
assets clogging the financial system marks the broadest intervention
since at least the Great Depression. Asian stocks fell today, following
U.S. shares lower as investors questioned whether the effort is enough
to prevent a recession.
The plan came after the collapse of
158-year-old Lehman Brothers Holdings Inc. and the government takeover
of insurer American International Group Inc. caused financial markets
to seize up last week. The calamity was the culmination of a year
during which the U.S. housing market slump left banks and securities
firms with more than $520 billion of asset writedowns and credit losses.
Yesterday,
Paulson and lawmakers narrowed their differences on the plan and agreed
that the U.S. should get equity in participating companies.
Hard to Coordinate
Ohmae,
65, is the author of management books including ``The Mind of The
Strategist,'' ``The Borderless World'' and ``The End of the Nation
State.'' Business Breakthrough, founded in 1998, provides online
management training.
One way of funding the $5 trillion facility
would be through contributions from foreign exchange reserves in China,
Japan, Taiwan, the Gulf states, the European Union and Russia, Ohmae
said.
An international relief effort on that scale might be
difficult to coordinate, said Robert Howe, founder of Hong Kong- based
hedge fund manager Geomatrix (HK) Ltd., which oversees $32 million. ``I
doubt the practicality of getting international cooperation on
something like this,'' he said.
Ohmae compared the current
financial crisis with Japan's 15- year economic decline that began in
1989. Both started with a property bubble, which wiped out companies'
equity when it burst, and like in Japan, the current one could lead to
escalating bankruptcies as banks worried about their own survival rein
in lending, he said.
`Viagra' Economy
The
financial-market upheaval may lead to slower growth in China and the
reversal of the commodity boom as ship orders are canceled and steel
supply dumped, said Ohmae. What Ohmae called Japan's ``Viagra'' economy
and Australia's ``dig and deliver'' boom may also fizzle as China
weakens, he said.
Against the backdrop of a potential global
market panic, Paulson's plan is insufficient, said Ohmae. Paulson is a
former chief executive of Goldman Sachs Group Inc., the world's biggest
securities firm.
``He wants to fix problems one by one as if he
were still the chief executive officer of Goldman Sachs,'' he said.
``He has to take his CEO hat completely off and come up with a systemic
solution as opposed to a one-by-one solution.''
To contact the reporter on this story: Bei Hu in Hong Kong at
[EMAIL PROTECTED]
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