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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: Robert Douglas who wrote (544)	9/2/1998 11:33:00 AM
From: Paul Berliner	Read Replies (1) of 3536

If Malpass thinks a strong dollar is at 'the heart' of the global currency problem then he's either extremely naive or a poor economist. The heart of the global currency problem is the falling commodity prices, which has sliced several countries' cash flows in half. Witness Russia, Chile, S. Africa and Venezuela. How could Russian service their debt and pay salaries when they receive half the price per/Bbl. of oil than they did a year ago? This has caused economic problems in these countries and thus the currencies became overvalued. Their major trade partners are then negatively affected, and the dominos fall. At the root of it all, who's ultimately responsible for the falling commodity prices and everything in it's wake? Japan. Hard asset respomsibilities: Oil & metals. Soft asset repsonsiblities: Grains & livestock. And as we all know, the root of Japan's problems is the huge # of non-performing loans held by their banks. And that problem, ignored and teased for years was the original spark that ignited the fire. A strong dollar is an effect of the above mentioned events, not the cause.

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