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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Mike M2 who wrote (81680)	6/16/2000 11:28:00 AM
From: Freedom Fighter	Read Replies (1) \| Respond to of 132070

Mike, I think there may be a touch of paranoia, extremism, and hate to Larouche, but I've read a few of his reports out of intellectual curiosity. I think he has the bubble diagnosed correctly. Wayne

To: Mike M2 who wrote (81680)	6/16/2000 4:12:00 PM
From: Ilaine	Respond to of 132070

I saw the story reported in the Financial Times, I did not realize it was not reported in the US - it seems like an important story. >>Bankers warn of global hard landing By Alan Beattie in Basle Published: June 5 2000 17:22GMT \| Last Updated: June 6 2000 11:38GMT The global economy faces the risk of a hard landing with US stock markets and the dollar dropping sharply in tandem, the Bank for International Settlements, the international organisation of central banks, warned on Monday. Recent volatility in currencies and equities, and the lack of liquidity in some financial markets, meant the market reaction to such a downturn posed a further risk, the BIS said in its annual report. Emphasising the uncertainties of the current global situation, the BIS said the imbalance between rapid growth in the US and slower growth elsewhere would have to be corrected, and that large movements in exchange rates were likely to follow. "The rate of expansion of domestic demand in the United States is unsustainable and potentially inflationary, and a similar if less extreme state of affairs prevails in some of the other English-speaking countries," the BIS said. In a pointed warning of the risks of complacency, the BIS compared the US to Japan in the late 1980s, with a combination of high productivity growth, low inflation and soaring asset markets, which ended in a collapse in asset markets and a prolonged recession. Present stock market valuations were unlikely to be sustainable in the long term, it said. "The Federal Reserve's rate cuts in late 1998, needed to stabilise fixed income markets, may have encouraged the stock market to rally at the same time," the BIS said. It warned that, if the inflationary threat in the US remained, the Federal Reserve should keep raising interest rates even if stock markets slumped - avoiding any suspicion that it was bailing out investors who had been caught out. "Were monetary policy to back off at the first signs of declining equity prices, the risks of moral hazard would be great," the BIS said. "Misguided investors should be allowed to pay the price, and quickly, so that capacity can be reduced and longer-term profitability rapidly restored." Andrew Crockett, the general manager of the BIS, said that although banks were better prepared for financial market turmoil than in earlier years, the recent high volatility in the equity and currency markets was likely to continue. "The market-making activities of some institutions and the liquidity of many markets are not as good as before," he said. "The ability to absorb changes in supply and demand in the markets is not there." The drying-up of government borrowing was also creating difficulties for bond investors, with liquidity problems fragmenting government bond markets, the BIS said. The BIS also criticised emerging market countries who had failed to push ahead with reform in their economies and banking systems, and which were loosening monetary policy by intervening to stop their currencies rising. "There is a risk of re-establishing the fixed exchange rate mentality which contributed to the Asian financial crisis," said William White, the BIS's economic adviser. The annual report said the Japanese government should maintain its fiscal stimulus to the economy. But it suggested switching the expenditure from public investment to the country's "underdeveloped" social safety net.<< news.ft.com