Richard. You crack me up : - )..................
Economic crisis inches closer to home
By Martin Crutsinger
The Associated Press
WASHINGTON -- The economic crisis that has hit Asia and Russia -- and rattled the U.S. stock market -- is moving ever closer to American borders as major trading partner Canada and fast-growing Latin American markets start to suffer.
The International Monetary Fund on Thursday convened an unusual meeting of top finance officials from across the Western Hemisphere to try to accomplish the so-far impossible -- keeping the trouble from spreading.
A major goal is to try to calm jittery foreign investors who have begun dumping stocks and currencies from all markets in fear that what happened in Asia and now Russia will hit elsewhere, said Treasury Secretary Robert Rubin.
"There has been spillover from the turmoil elsewhere," Rubin told reporters during a break in the closed-door discussions. "The markets, as we are going through this period of great difficulty, are tending to sweep equally over all countries."
When the economic troubles began in July 1997 with the collapse of the Thai baht, Americans hardly noticed.
Even after the stock market suffered its biggest one-day point loss because of Asian jitters last October, the United States still seemed largely immune. The market came roaring back, helped by foreign investors who were looking for a safe haven.
But in recent weeks, the situation has grown more serious.
Canada, which buys 20 percent of American companies' exports, is slowing dramatically because of the hit suffered by its own commodity exports. And after Russia's botched devaluation of the ruble last month, investors have been fleeing emerging markets in Latin America, including Mexico, America's third-biggest trading partner.
Even before the turmoil, the U.S. trade deficit was hitting record highs because of the loss of Asian markets. Japan, America's second-biggest trading partner, is in its worst recession in 50 years.
But the problem will grow far more serious if the Asian contagion engulfs America's nearby neighbors. Taken together, Canada, Mexico and the rest of Latin America account for 40 percent of U.S. exports.
"Japan is in recession. Asia in general is in recession. If Latin America goes, it will be hard to keep us from getting sucked into the whirlpool," said David Wyss, economist at Standard & Poor's DRI.
American companies might be unable to sell as much overseas to countries in Latin America, for example, that suddenly find themselves poorer. That would hurt American companies' profits, in turn rattling a Wall Street already worried that profit expectations are too high.
In addition, thousands of layoff notices have already gone out to American workers in high-tech industries such as aerospace, which depend heavily on Asia for sales.
Officials gathered by the IMF are expected to issue a statement today highlighting many Latin American countries' recent accomplishments at getting their budget deficits and inflation under control -- in hopes that will steady investors' nerves.
Economists, however, say that's unlikely, with so many growing risks. Colombia on Wednesday became the latest victim of the global jitters, announcing a 5 percent devaluation of its currency, a move that increased worries in Mexico, Venezuela and Brazil.
In addition, one of the biggest threats now is that China will be forced to devalue its currency, setting off a new wave of turmoil in Asia.
Also, Japan is still mired in deep economic and banking troubles. Rubin and Federal Reserve Chairman Alan Greenspan were scheduled to meet in San Francisco on Friday with new Japanese Finance Minister Kiichi Miyazawa.
There were market rumors the talks might prompt a global agreement for the Federal Reserve and other major countries to lower interest rates to spur growth, but U.S. officials sought to lower expectations for any major breakthroughs.
They described the discussions merely as a chance for Rubin to continue pressing the U.S. case that Japan must do more to get its own house in order.
"We don't expect new initiatives to come out of this specific meeting," said one Treasury official, speaking on grounds of anonymity.
Web posted Thursday, September 3, 1998
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