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OECD: Global boom in private equity buy-outs due to distortions in global financial system

May 21, 2007
By Ken Worsley


In a release today, the OECD showed there is no depths to how low they will go in an attempt to influence what goes on in Japan and China. Or, you might say that in a report released today, the OECD showed a firm grasp of why we’re about to be hit with an impending disaster in global financial markets.

From the report:

Low yields result from excess global saving and liquidity. They risk pushing leverage and equity prices in parts of the corporate sector to excessive levels…Two major prices in the world economy worth noting in this respect are the near zero interest rates in Japan and the fixed exchange rate for the reminbi…It is a basic proposition that if one fixes the price of money in parts of the world economy, one will not be able to control its supply.

All perhaps true, yet no mention of the lack of Consumer Price Index growth in Japan. Does the OECD expect to wake up tomorrow and have interest rates above 2 percent in Japan when prices aren’t rising? We know full well (and have been critical) of attempts by politicians in Japan to hold down the interest rates until it is politically expedient to raise them. So does the OECD, even acknowledging why its own report will go unheeded:

The policy focus from a global perspective should be on raising interest and exchange rates that are too low at present. But domestic considerations in the countries concerned may delay this process.

May delay? I hope they’re not holding their breath…All sticks and no carrots is a rotten diet to try to pass out. Then, the OECD truly lets their insecurity complex hang out with this line: “It is important here not to shoot the messenger, as some pundits are wont to do.”

It’s not even necessary, if the messenger shoots both his own feet.

Filed Under Exchange Rates, Finance 

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Comments

4 Responses to “OECD: Global boom in private equity buy-outs due to distortions in global financial system”

  1. John S on May 21st, 2007 9:21 pm

    I guess it’s pretty eacy to agree and disagree with this one. But, they have to publish this: It’s the ‘I told you so’ piece that someone’s going to need to have lying around in a couple of years.

  2. Marc on May 22nd, 2007 5:03 am

    Easy is right. On the one hand, global capital is leveraged beyond the hilt and we’re looking at a house of cards. But, admonitions against Japan and China are bound to make them defensive and unwilling to be ‘pressured’ into doing what foreigners want them to do, be they right or wrong. The post on Hiroko Ota showed about the only dissenting voice in Japan now. We have high-ups in the Cabinet sucking up to, and loving being the go-to boys of global capital, but afraid of the backlash. Look at Bull-Dog…their CEO said he was ashamed that a buyout offer was made. He knows it shouldn’t happen, that it’s not good for the firm. But he knows he could walk away rich as fuck. Tell me who’s wrong.

  3. John S on May 23rd, 2007 1:03 pm

    We have high-ups in the Cabinet sucking up to, and loving being the go-to boys of global capital

    What proof of that do you have? It sounds like you’re describing the painfully insecure boys in Toranomon, so anxious to validate their existence that they’ll lend to anyone, even if that destroys them in the end. Not sure it has anything to do with the government.

  4. OECD-IMF Report: Japan should not raise interest rates just yet : Japan Economy News & Blog on December 2nd, 2007 10:12 pm

    […] May 21, the OECD released a report stating: Low yields result from excess global saving and liquidity. They risk pushing leverage and […]

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