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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: Jags who wrote (470)	8/25/1998 11:07:00 AM
From: Chip McVickar	Read Replies (2) of 3536

Jagadish and Thread, One of the most important theories behind devaluation is the quick solution to impending debt problems either obtained from international capital markets or from internal mis-management. But it is an easy way out. Offering only shory-term monetary relief from fiscal responsibility. The long-term problems remain well intrenched. Japan is a pecular example of devaluation principles. They are essentially a highly profitable society by any definition. Their banking system has been highly profitable and may very well still be solvent although hampered by recessionary forces and stuborn burocratic mismanagement, probably brought on by the inherent cultural influences in Japan. Also by their management of the economy through government policies. The Yen has in fact been devalued by Free Market forces based on the perception of the countries problems. Floated currencies work when countries "agree to agree" and they do not work when governments refuse to acquiesce and adapt to each others economics pressures. On the news wires this morning and last week is the Long-Term Credit Bank of Japan who is seeking protection and a bailout using public money to re-organise the bank for a merger. Obuchi has been defending this approach to regain public confidence and help to open-up loan structures. It has been met with a lot of obstruction and stone-walling. Almost "denial" that any crisis faces the Japanese. Obuchi hopes to stablize the overall financial system...not bail out bad loans. [so he says] His opposition refuses to use public moneyfor this.... They may never wake up....never "lose face" and in denial,ride it all the way down. The intense struggle taking place within international financial systems was unexpected, up untill 2 July 1997 when the Thai Baht colapsed everyone was "agreeing to agree".....Possibly and for complex reasons, the internal structures of these agreements....may literally be crumbling under their watchful gaze. Greenspan and the IMF and G7 and the World Banking system are administering their very best medicines to allow these debt problems to sift through the mesh in an orderly manner and not unbalance this entire experiment with "floated currencies" and free market forces. The debt structures have been created without regard for fundamental fiscal responsibility, this has occurred throughout the world. Accountability has arrived faster then anyone anticipated. We may have just reached a natural point of collapse. I like the concept of free markets and believe they are the most natural human expression of trade,.....but what is inplace today may need to evolve further to account for some type of regulation and some stronger statement of stability. Whatever that might be...it will have to balance wealth more evenly over populations and change the attitude that debt leverage can build a happy nest-egg for everyone. Greenspan and company may yet pull this off and regain some control of international debt structures, but the old principles of control have not been working as planned. Chip

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