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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: X Y Zebra who wrote (371)	7/30/1998 3:52:00 PM
From: Henry Volquardsen	Read Replies (1) of 3536

I agree in allowing the markets to work their magic. I wasn't implying that the effect of hot money was either good or bad, it just is. BTW the solution for the hot money problem for the emerging markets is very simple and straight forward. You need to develop a large and stable middle class. This gives you a broader base of wealth with a large savings pool that can be used to finance growth internally, much the way a retail deposit base works for banks. The problem in many of the emerging markets is that the middle class is only beginning to develop so the wealth is concentrated to a far greater degree among the wealthy. These large concentrations of wealth tend to act more like hot money as it will move much more quickly. The problem of course is in developing a large stable middle class. Henry

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