GS--It gets worse>>Confidence 'Torn Asunder' in Asia
February 27, 1998
MIAMI BEACH, Fla. - U.S. Federal Reserve Chairman Alan
Greenspan offered a bleak assessment Friday of the financial
turmoil gripping Asia and urged the international community to
prepare for the next major financial crisis.
"In an environment of weak financial systems, lax supervisory
regimes and vague guarantees about depositor or creditor
protections, bank runs have occurred in several countries and
reached crisis proportions in Indonesia,'' Greenspan told a Federal
Reserve Bank of Atlanta conference in Miami Beach.
"Uncertainty and retrenchment have escalated. The state of
confidence so necessary to the functioning of any economy has
been torn asunder,'' he said. "Some exchange rates have fallen to
levels that are understandable only in the context of a veritable
collapse of confidence in the functioning of an economy.''
Greenspan said that collapsing currencies in Asia were rooted in a
"visceral, engulfing fear,'' rather than a rational reaction to sharp
declines in the state of economies.
The Fed chief said the global financial system needed reform after
the problems in Asia and the Mexico peso crisis of 1995 and he
warned that another major crisis could strike after the turmoil in
Asia subsided.
"We are beginning slowly but surely to begin to understand how this
new high-tech international financial system is functioning,''
Greenspan said.
"And hopefully before we run into crisis number three - and there
will be a crisis number three - we'll have sufficient preventative
measures in place to either fend it off, or if it occurs, to assuage its
severity,'' Greenspan told the conference.
((Do you suppose an "assuage" is Kosher???????????????????))
While stressing the seriousness of the problems facing Asia,
Greenspan held out hope of recovery if its hardest-hit nations
reformed their ways and the international community continued to
offer support.
"Eventually, the Asian economies now suffering from the current
crisis will recover,'' Greenspan said. "If the proper policies are
pursued and there is support from the international community, the
process of recovery can begin soon and the structural reforms
necessary for more durable growth will be under way.''
Without specifically mentioning the IMF, Greenspan said
institutions working to contain Asia's financial crisis should be
supported.
The Clinton administration has asked Congress to approve about
$18 billion in additional funds for the IMF to replenish resources
drained by 1997's multibillion-dollar bailouts for Indonesia, South
Korea and Thailand.
Many U.S. lawmakers oppose IMF funding.
Asia's economic crisis has so disturbed the Clinton administration
that it is sending its second envoy to the region in as many months. |
