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Politics : Dutch Central Bank Sale Announcement Imminent? -- Ignore unavailable to you. Want to Upgrade?

To: Alan Whirlwind who wrote (12766)	12/23/2001 3:41:46 PM
From: sea_urchin	Read Replies (1) \| Respond to of 82289

Alan, I don't think the problem is so simple. It's more like a house of cards. If Argentina fails, and it is likely to, then no-one will want to buy "emerging market" debt. That's why the IMF is effectively "over a barrel". It simply has to give the money to roll-over the Argentine debt (ie buy Treasuries) even though it doesn't want to. Argentina, in fact, has passed the point of being able to borrow money, as we understand borrowing to be ie with the possibility of being able to repay the loan with interest. Today, anyone who buys Argentine debt (ie lends to Argentina) is simply contributing to a bottomless "charity". As far as world markets go this quote sums it up pretty well: "Argentine debt accounts for between a quarter and a fifth of tradable emerging market debt — its debt is widely held by investors all over the world. In the extreme case that Argentina was unable to meet its obligations, the effect could eclipse even the financial panic produced by Russia's debt default two years ago." wsws.org As a rider, it's because of panic over Argentina (and other factors) that there's been such a big run on the SA rand in recent weeks with the currency falling to half of its value in just over a year. Fortunately for SA it doesn't have anything like the Argentine debt exposure. The trouble in SA is lack of confidence in the government and political problems affecting neighbour, Zimbabwe. And, the run on the currency took place because it could ie because the value of the rand is not fixed. Unlike SA, Argentina doesn't have a floating currency. The value of the peso is pegged to the USD. This idea is really from cloud-cuckoo-land, or maybe 18th century France, because those who have money feel very rich living on imports which are financed by credit. The country suffers massive deflation and exports nothing. The poor are out of work while the wealthy can speculate all day buying stocks on Wall Street, that is when they are not playing polo. Even now, the new government will not devalue the currency. One doesn't have to be a genius to see why the country is tottering on revolution. And, why the world is holding its breath.