Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Chas. who wrote (41009)	10/10/2008 4:56:45 PM
From: elmatador	Respond to of 220276

Cynical observers might have been forgiven for imagining a sense of righteous vindication among IMF officials over the past few days. On Thursday, Dominique Strauss-Kahn, its managing director, pointedly noted that the IMF had rightly been pessimistic months ago about the financial crisis and the global economy, and rightly prescient in its advice to governments that they would need to recapitalise cash-strapped banks. “Maybe you remember six months ago some people were writing papers on the so-called decoupling theory – the idea was that emerging countries will be immune from the financial crisis,” Mr Strauss-Kahn said. “We did not believe [that] here, and since the beginning we were explaining that no part of the world was immune.” IMF to help out emerging market states By Alan Beattie in Washington Published: October 10 2008 19:55 \| Last updated: October 10 2008 19:55 For an organisation dedicated to maintaining the stability of global finance, the International Monetary Fund has had remarkably little to do as that system has reached the brink of crisis. With the financial turmoil centred in the rich countries, which can usually generate enough resources to bail themselves out of problems, its role has been confined to providing advice which governments have been free to ignore. That might change, as the crisis has spread among the fund’s traditional emerging market clients and its dire warnings about the fragility of global finance and the economy have come true. Cynical observers might have been forgiven for imagining a sense of righteous vindication among IMF officials over the past few days. On Thursday, Dominique Strauss-Kahn, its managing director, pointedly noted that the IMF had rightly been pessimistic months ago about the financial crisis and the global economy, and rightly prescient in its advice to governments that they would need to recapitalise cash-strapped banks. “Maybe you remember six months ago some people were writing papers on the so-called decoupling theory – the idea was that emerging countries will be immune from the financial crisis,” Mr Strauss-Kahn said. “We did not believe [that] here, and since the beginning we were explaining that no part of the world was immune.” No country likes going to the IMF for help, since it is widely seen as an admission of policy failure. Indeed, one of the more remarkable events of the week was that the first instinct of Iceland, which is suffering a crisis in classic emerging market style despite being one of the richest countries on earth per capita GDP, was to take Kremlin gold rather than IMF loans as the first step to resolving its crisis. But if the flight away from risky assets continues, some emerging market countries may have little choice. The fund’s lack of rescue lending over the past few years, and that even serial delinquents like Argentina have paid off their IMF loans, means that it has about $200bn in easily retrievable assets, and can call on its member countries for more if it needs to. Mr Strauss-Kahn announced this week that he was readying emergency procedures that allow the fund to lend rapidly to countries in crisis, arrangements used during the 1997-8 Asian financial crisis. But economists say the first wave of likely borrowers will not be from Asia. Morris Goldstein, senior fellow at the Institute for International Economics in Washington, says that in the front line of vulnerability are countries in central and eastern European countries such as the Baltics and Romania. “They have the classic problems that have caused countries to need IMF lending in the past – big current account deficits, maturity mismatches and volatility in the banking system,” he says. The dominance of western European banks could be a particular problem, as those institutions reduce their risk wherever possible and pull cash back towards their home markets. In a research note published this week, economists at Goldman Sachs noted that markets had recently singled out for punishment currencies and credit-related assets from those countries which were particularly vulnerable to sudden shifts in financing from external creditors. Chief among them were Romania, Ukraine, Hungary and Poland, with Brazil and Turkey also somewhat at risk. Safer bets were east Asian economies like Singapore, China and Malaysia. More falls in food and fuel prices will also endanger economies that have recently done well from commodity sales like Argentina. Buenos Aires this week said it might delay repaying the so-called “Paris Club” of official creditor governments because of the crisis. Although economists say that many emerging markets in general are much better placed than during previous episodes of financial stress, having built up foreign exchange reserves and prevented their banks overextending themselves, the extraordinary seizing-up of global credit markets means that few can be confident about the future. And if the global financial system continues to struggle, the IMF’s potential pool of customers could widen out to include rich countries which borrow in their own currencies. Desmond Lachman, a former IMF official now at the American Enterprise Institute, a conservative think-tank, says that even Australia and New Zealand, with big current account deficits, might need emergency lending