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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (4172)	8/8/2002 11:26:09 AM
From: stockman_scott	Read Replies (1) \| Respond to of 89467

A Latin crisis to rival Asia? Martin Crutsinger The Associated Press Thursday, August 8, 2002 Fears of a 1998 replay WASHINGTON The conventional wisdom has been that South America in 2002 is not the same as Asia in 1997 and 1998, when financial crises spread from country to country, toppling 40 percent of the global economy into recession. But in view of the recent turmoil in Uruguay and Brazil following Argentina's record debt default last year, some economists are worried that the conventional wisdom may be wrong. "Let's face it: The dominoes are falling again," said David Wyss, chief economist at Standard Poor's Corp. in New York. "Before, we thought Latin America would not be a replay of Asia, and now we are hoping it is only Asia in 1997-98 and not something worse." Financial markets in several South American countries have been in turmoil in recent weeks, with interest rates soaring and currency levels plunging. The situation is beginning to resemble the Asian crisis, in which troubles in Thailand in 1997 quickly spread throughout the region and then to Russia. The Russian bond default and botched devaluation of the ruble in 1998 sent shock waves through Wall Street, triggering steep declines in stock prices and the near collapse of a large American hedge fund. It was not until the Federal Reserve Board engineered a series of rapid interest rate cuts that calm was restored. The scary thing, some economists say, is that this time around the situation could be more dire. The Asian crisis occurred when the U.S. economy was soaring. After the Fed cut rates and market stability returned, American consumers went on spending, helping serve as a growth engine for the rest of the world. But now the United States is struggling to emerge from a recession and the worst bear market on Wall Street since the mid-1970s. Not only is the United States unlikely to serve as an engine of growth the way it did in 1998, but South American countries are facing much bigger problems than those encountered by their Asian counterparts. "The economic fundamentals are not as good in South America as they were in Asia," said Sung Won Sohn, chief economist at Wells Fargo. "Asian countries have high national savings rates, while Latin America countries are much more dependent on foreign borrowing." Argentina has already been forced into the biggest government default in history, halting payments on the bulk of $141 billion in foreign debt last December. Now investors are worried about the possibility of a default in Brazil, with its even bigger foreign debt burden of $264 billion. Concerns about a possible Brazilian debt default, along with comments by the U.S. Treasury secretary, Paul O'Neill, about the threat of aid money being diverted to Swiss bank accounts, sent the Brazilian currency plummeting last week. The Bush administration, increasingly concerned about deepening problems in Latin America, has moderated its opposition to bailouts from the International Monetary Fund and directing U.S. assistance to countries in trouble. IMF teams are currently negotiating conditions for new loans with Brazil and Argentina, which is mired in the worst financial crisis in its history. Analysts have said both countries will receive new IMF loan packages soon, given the change of heart by the Bush team and the IMF's desire not to be blamed for further destabilizing financial markets. "There is still a possibility the financial contagion could spread further if markets are not calmed," Sohn at Wells Fargo said. "With the United States still struggling to emerge from a recession, that could affect us at a very vulnerable time."

To: Jim Willie CB who wrote (4172)	8/8/2002 11:42:08 AM
From: stockman_scott	Respond to of 89467

The Memory Hole By Paul Krugman Columnist New York Times Tuesday, 6 August, 2002 Winston Smith, the protagonist of George Orwell's "Nineteen Eighty-Four," was a rewrite man. His job was to destroy documents that could undermine the government's pretense of infallibility, and replace them with altered versions. Lately, Winston Smith has gone to Washington. I'm sure that lots of history is being falsified as you read this -- there are several three-letter agencies I don't trust at all -- but two cases involving the federal budget caught my eye. First is the "Chicago line." Shortly after Sept. 11, George W. Bush told his budget director that the only valid reasons to break his pledge not to run budget deficits would be if the country experienced recession, war or national emergency. "Lucky me," he said. "I hit the trifecta." When I first reported this remark, angry readers accused me of inventing it. Mr. Bush, they said, is a decent man who would never imply that the nation's woes had taken him off the hook, let alone make a joke out of it. Soon afterward, the trifecta story became part of Mr. Bush's standard stump speech. It always gets a roar of appreciative laughter from Republican audiences. So what's the Chicago line? In his speeches, Mr. Bush claims to have laid out the criteria for running a deficit when visiting Chicago during the 2000 campaign. But there's no evidence that he said anything of the sort during the campaign, in Chicago or anywhere else; certainly none of the reporters who were with him can remember it. (The New Republic, which has tracked the claim, titled one of its pieces "Stop him before he lies again.") In fact, during the campaign his budget promises were unqualified, for good reason. If he had conceded that future surpluses were not guaranteed, voters might have wondered whether it was wise to lock in a 10-year tax cut. About that 10-year tax cut: It basically takes place in two phases. Phase I, which has mainly happened already, is a smallish tax cut for the middle class. Phase II, which won't be completed until 2010, is a considerably larger cut that goes mostly to the richest 1 percent of taxpayers. That two-phase structure offers substantial opportunities for misdirection. If someone suggests reconsidering future tax cuts, the administration can accuse him of wanting to raise taxes in a recession -- implying, falsely, that he wants to reverse Phase I rather than simply call off Phase II. On the other hand, if someone says that tax cuts have worsened the budget picture, the administration can say that tax cuts explain only 15 percent of the move into deficit. This sounds definitive, but in fact it refers only to the impact of Phase I on this year's budget; by the administration's own estimates, 40 percent of the $4 trillion deterioration in the 10-year outlook is due to tax cuts. There is, however, an art to this sort of deception: you have to imply the falsehood without actually saying it outright. Last month the Office of Management and Budget got sloppy: it issued a press release stating flatly that tax cuts were responsible for only 15 percent of the 10-year deterioration. The Center on Budget and Policy Priorities noticed, and I reported it here. Now for the fun part. The O.M.B. reacted angrily, and published a letter in The Times attacking me. It attributed the misstatement to "error," and declared that it had been "retracted." Was it? It depends on what you mean by the word "retract." As far as anyone knows, O.M.B. didn't issue a revised statement, conceding that it had misinformed reporters, and giving the right numbers. It simply threw the embarrassing document down the memory hole. As Brendan Nyhan pointed out in Salon, if you go to the O.M.B.'s Web site now, you find a press release dated July 12 that is not the release actually handed out on that date. There is no indication that anything has been changed, but the bullet point on sources of the deficit is gone. Every government tries to make excuses for its past errors, but I don't think any previous U.S. administration has been this brazen about rewriting history to make itself look good. For this kind of thing to happen you have to have politicians who have no qualms about playing Big Brother; officials whose partisan loyalty trumps their professional scruples; and a press corps that, with some honorable exceptions, lets the people in power get away with it. Lucky us: we hit the trifecta. truthout.com

To: Jim Willie CB who wrote (4172)	8/8/2002 12:02:32 PM
From: Sully-	Read Replies (1) \| Respond to of 89467

Fixed-rate mortgages set another record low Rates spur record wave of mortgage applications By Steve Kerch, CBS.MarketWatch.com Last Update: 11:57 AM ET Aug. 8, 2002 WASHINGTON (CBS.MW) -- The benchmark 30-year, fixed-rate mortgage hit a record low again this week, eclipsing the previous record set just two weeks ago, Freddie Mac said Thursday. The 30-year mortgage averaged 6.31 percent for the week ending Aug. 9, falling from 6.43 percent. The secondary mortgage agency said that rate was the lowest seen in the 32 years it has tracked mortgage rates. The 15-year, fixed-rate loan also hit a record low, touching 5.69 percent compared to last week's 5.84 percent. Freddie Mac (FRE: news, chart, profile) started tracking the 15-year loan in August 1991. And one-year Treasury-indexed adjustable-rate mortgages averaged 4.37 percent, dropping from 4.45 percent. All three loan types required the payment of an average 0.6 points. A point is one percent of the loan amount. Downward revisions of the nation's gross domestic product for 2001 and for the first quarter of 2002 "suggest that the economy faces weak growth," said Frank Nothaft, Freddie Mac's chief economist. "This led to anticipation that the Fed will reduce overnight interest rates by the end of the year, if not sooner. That expectation, in turn, has created a boon for potential and existing homeowners in the form of lower mortgage rates," he said. Meanwhile, an index measuring mortgage loan applications for purchases and refinancings hit a record high for the week ended Aug. 2, as interest rates slipped and homeowners lined up to lock in record-low rates. The Mortgage Bankers Association of America said its applications index increased 6.2 percent to 1066.9, on a seasonally adjusted basis, from 1004.3 the previous week. The index broke its previous record reading of 1055.5 set the week ended Nov. 9, 2001. "Last week's reports that economic growth was weaker than expected had a negative impact on stock prices. This led many investors to pull out of stocks and invest more in bonds," said Phil Colling, an MBA economist. "This 'flight to quality' phenomenon led to lower interest rates, especially in the latter half of the week." By Friday, the 10-year Treasury note yielded 4.29 percent -- the lowest since September 1965. Fixed mortgage rates also declined "and consumers are now rushing to take advantage of low rates to refinance existing mortgages," he said. "It is possible that with interest rates at record lows, some consumers who refinanced at rates above 7 percent for a 30-year fixed rate mortgage are now refinancing again. The home purchase market is also benefiting from today's low interest rates," Colling said. The MBA's seasonally adjusted purchase index increased to 374 from 360.5 the previous week. The record high for the index of 408 was set the week ended July 5. The seasonally adjusted refinance index increased to 5097.3 from 4748.8 the previous week. The record high for this index of 5534.5 was set the week ended Nov. 9, 2001. Refinancing activity represented 68.4 percent of total applications, increasing from 67.6 percent the previous week. The share of adjustable-rate mortgage activity decreased to 17.8 percent from 18.8 percent the previous week. The average contract interest rate for 30-year fixed-rate mortgages was 6.17 percent, decreasing from 6.32 percent the previous week, with points increasing to 1.47 from 1.44 the previous week (including the origination fee) for 80 percent loan-to-value loans. The 30-year fixed rate established a new record low last week, breaking the record of 6.26 percent seen in the week ended July 19. Steve Kerch is the real estate editor of CBS.MarketWatch.com in Chicago. marketwatch.com

To: Jim Willie CB who wrote (4172)	8/8/2002 12:18:24 PM
From: mt_mike	Read Replies (2) \| Respond to of 89467

Jim, you are 100% correct about the strong dollar. Rubin and AG orchestrated the great transfer of wealth to CEOs and investment banks. I am getting really sick of Democrats going on TV blaming this recession on Bush. Especially that bitch Hillary. How come no one has the sense to point out the destruction caused by the strong dollar and easy money policy of the 90s. On the other hand, the Republicans need to stop the irrsponsible spending and cut the size of the government by half and then implement some more tax cuts. It would also be nice if some economists got a clue and could explain to the public why this is not the 1992 recession and why we need time to work off the excesses of the 90s rather than reckless interest rate custs and government programs to pump up the economy. I am beginning to think that instead of a big flush we are heading towards stagflation and a slow grind down in the stock market. I think there is just too much money in stocks via retirement plans to ever cause a big crash. Who knows, I could be wrong.