Probart IBM is first rocket shot across the bow.
More on the way.
I think Peter Cook's article is very prescient:
I think that as the US and European Economies slow down under higher interest rates
the World Economies will stop and default and the Fed will be unable to lower
interest rates because of inflation here.
The banks and everybody will be suddenly caught in a Magnum Vise from which they
cannot escape.
Gold is likely to reach $350/oz before fears of run away inflation abate,
TA
globeandmail.com
With central banks raising rates and financial markets getting upset,
the world is likely, on past evidence, to be moving toward a debt crisis of some
kind......................
.........If we have learned anything in the past five years, it is
THAT FINANCIAL CRISES, WHEN THEY HIT, DO NOT STAY HOME.........
From Mexico's debt troubles came the Latin America Tequila
effect,........Thailand's devaluation....a rolling Asian
recession, .....Russia's bond default the...
.............the U.S. Federal Reserve Board solved that
deflationary threat with an unscheduled
U.S. interest rate cut that surprised and delighted the markets; that was on Oct. 13, 1998.......
......As of now, there are four countries that face debt defaults: Ecuador, Romania, Pakistan and Ukraine.....
..........Realistically, therefore, the world is not going to devise new architecture or create
new international financial institutions. Or, rather, not yet. Nor does the world want to put
at risk the huge sums of money flowing to the Third World -- which might happen if too many rules
and regulations were interposed. So the principal setters of standards
and protagonists of new ideas, the G7, the IMF and World Bank, proceed at a snail's pace
When the next crisis hits, it is a safe bet they will still be wrestling to make
modest changes.
AND NO ONE WILL HAVE BEEN FOREWARNED.
TA
==================================================================
To: goldsnow who wrote (43376)
From: Alex
Wednesday, Oct 20 1999 7:50AM ET
Reply # of 43435
The next inevitable debt crisis
PETER COOK
Wednesday, October 20, 1999
Oxford, England -- With central banks raising rates and financial markets getting upset, the world is likely, on past evidence, to be moving toward a debt crisis of some
kind.
If we have learned anything in the past five years, it is that financial crises, when they hit, do not stay home. From Mexico's debt troubles came the Latin America Tequila
effect, from Thailand's devaluation a rolling Asian recession, from Russia's bond default the threat of turmoil, and deflation, on a grand scale. It is only one year since the
U.S. Federal Reserve Board solved that deflationary threat with an unscheduled U.S. interest rate cut that surprised and delighted the markets; that was on Oct. 13, 1998.
So, presumably, the memory of what might have gone wrong is fresh, and the desire to do something to avoid the next crisis strong?
Phrase that last statement as a question, and the answer is: "Not really." The idea of overhauling the world's financial architecture floats in and out of the spotlight like the
crises themselves. Students of financial architecture theory will recall that reform of the then 50-year-old International Monetary Fund and World Bank dominated the
agenda of the Halifax G7 summit of 1995, chaired by Prime Minister Jean Chr‚tien. Four crisis-filled years later, new reports are being prepared and new oversight
committees are drawing up agendas. We have a new G20 that will bring big developing countries into the process chaired by Canada's Finance Minister, Paul Martin, and a
new Financial Stability Forum headed by the former chief of Germany's Bundesbank, Hans Tietmeyer.
But much of what they will propose is for the distant future. To date, there have been few architectural changes. And the risk is that, as we get further from the last crisis,
political support will fade.
It is human nature, of course, to think that either a crisis will not occur or that we have learned enough to cope with it better. But that is not the case, according to a
blue-chip group of policy advisers and financial practitioners attending a Ditchley Foundation meeting near Oxford last weekend. Their view was, first, that crises are
endemic and, second, that the next one will probably bear no resemblance to the last.
As of now, there are four countries that face debt defaults: Ecuador, Romania, Pakistan and Ukraine. None of these is rated "systemic," meaning that there is unlikely to be
a danger of its troubles infecting others, as happened in Asia in 1997-98.
In dealing with them, new rules are being applied. For example, banks and even bondholders are being forced to become much more involved in workouts and putting in
new money, while the IMF itself offers less. In addition, there are new sources of money for "worthy" countries -- those that are well managed but still find themselves
caught up in crises -- to draw on.
In a sense, this approach is helping to level the playing field. If the IMF steps back from its multibillion-dollar rescues of the past, there is greater incentive for borrowing
countries to be careful and lenders and investors to pause before they rush in. The IMF can also leave other creditors twisting in the wind if it lends into arrears -- that is,
advances more money to a country in crisis -- because it must be repaid first. These ideas, plus others such as collective action clauses that allow for an orderly restructuring
of a country's bond debt, are seen as shifting the burden from the IMF to the private sector.
But participants at the Ditchley seminar (who expressed their views on condition they not be named) and other well-known economists and practitioners, such as Paul
Volcker, Paul Krugman, Fred Bergstein and George Soros, who attached their names to a recent Institute of International Economics report on "Safeguarding Prosperity in
a Global Financial System," question whether such modest moves are enough.
The G7 has balked at collective action clauses on its own bonds, so no good example is being set there. The IMF is limited in what it can do to name and shame countries
that fail to produce reliable financial statistics or adequately supervise their financial sectors. There is no agreement on whether it is good for developing countries to tax
short-term capital flows. And many see huge problems in the adoption of codes of conduct and proper ethical and legal practices in parts of the world where corruption and
cronyism are rife.
Realistically, therefore, the world is not going to devise new architecture or create new international financial institutions. Or, rather, not yet. Nor does the world want to put
at risk the huge sums of money flowing to the Third World -- which might happen if too many rules and regulations were interposed. So the principal setters of standards
and protagonists of new ideas, the G7, the IMF and World Bank, proceed at a snail's pace. When the next crisis hits, it is a safe bet they will still be wrestling to make
modest changes. And no one will have been forewarned.
Peter Cook can be reached by E-mail at pcook@globeandmail.ca
globeandmail.com;
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