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Strategies & Market Trends : Waiting for the big Kahuna
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To: Haim R. Branisteanu who wrote (7403)10/26/1997 3:15:00 PM
From: John Hunt  Read Replies (1) of 94695
 
Haim or Anyone,

I have been trying to think through some of the dangers for the world economy from the Asian crisis:

Bank Problems with Bad Loans

The banks will place restrictions on existing lines of credit and sharply curtail any new lines of credit. Manufacturers will respond by canceling/postponing spending on capital equipment purchases from the US, Europe and Japan. Manufacturers will also reduce orders for resources to the bare minimum necessary to meet production (no stockpiling for future demand). This will affect resource based economies such as Canada.

Currency Devaluation

Since most purchases are in US$, the countries will cut back/delay public projects such as new power plants, dams, telecommunication infrastructure, defence orders, etc. ( Can some of these countries really pay Boeing for all those planes that they have ordered? ).

Falling Security Markets

Loss of wealth by the citizens of these countries will force them to cut back on consumer goods purchases from the industrial countries.

I think the above shows this situation is farther reaching than just lost US exports to the region and the deflationary effects that have already been widely discussed.

Please comment on this and add things that I have missed or let my know where my thinking is going wrong.

Thanks,

John
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