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Strategies & Market Trends : John Pitera's Market Laboratory
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To: macavity who wrote (5322)12/20/2001 11:14:14 PM
From: John Pitera  Read Replies (3) of 33421
 
Hi Macavity, I agree with you that the Argentine government was in denial in not being more proactive. The Leadership did not want to make the changes needed since they knew they would be thrown out by popular sentiment.

The 130 billion of USD debt does seem high, but consider the overall trajectory of capital market development in the past 150 years. In the 1960's John D Rockefeller had a refining business in Cleveland along with Henry Flagler. His firm had no access to capital from the stock market. There was no way to raise capital in the equity market. The banks were even unwilling to loan his nascent refining business money. They only had money for Governments and Railroads.

Back then you could have the most innovative farsighted idea but were shut off from funding a vision even if it would revolutize the world and improve living standards on a global basis.

Now fast forward to the late 1990's. We had a period of vast overbuilding of several sectors of the economy. The telcom, Internet and several other tech sectors were some of the most egregious example of this building and speculative frenzy. And Billions upon Billions of dollars went into nonproductive or non-utilized capital investments.

This happens on a different curve with countries. Bankers want to encourage risk, capital infrastructure improvements and commerce that increase productivity. So long as it does not risk the standards of prudence and stewardship of capital that always seem to be shifting.

Market competition to lend money by the world's many different lenders exacerbates the tendency to loan too much to shaky borrowers at the top of the economic cycle. But I don't think that this is an overall vilifying indictment of the overall organic process, as my friend Henry has described it.

I'd argue that there are cycles of movement between excessive credit tightness brought on by economic
Contractions, followed by expansions that at their zenith, are replete with imprudent lending and
Investments occurring.

Since the overall trend since those 1960's days when Rockefeller had such limited access to the capital
Market has been constructive in my opinion; I'm inclined to give the entire system a "wider Berth".

Berth being a very neat term I saw William F Buckley use very effectively in talking about the growth of
Democracy in the USA in the last 400 years.
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