To: Gary Korn who wrote (27788 ) 12/12/1997 8:38:00 PM From: Glenn D. Rudolph Respond to
SOUTHEAST ASIA: WHAT COMES AFTER A BAILOUT? PART 2
Futures World News - December 12, 1997 08:57
FINANCIAL ECONOMY STOCK CURRENCY V%FWN P%FWN
-- Doubts are growing regarding Japan's plan to shore up its financial system. Too little, perhaps too late.
-- Some analysts and traders are openly wondering if the United States will catch the Asian contagion quicker and in a more negative way than previously anticipated. Some firms are citing concern about Asian economic growth in pulling back previous expansion plans, or investment buyouts. And even one of the shining starts of U.S. exports, agricultural shipments, are beginning to catch the Asian contagion. On Thursday, USDA analysts cited Asian-related impacts in lowering various estimates concerning soybean, soymeal and meat imports and exports.
-- Meanwhile, concerns keep surfacing about China. Some analysts note their $250 billion debt, with hundreds of bloated and bankrupt or near bankrupt state- owned companies. Others counter that in part by noting China's products are still competitively priced in the world marketplace (after all, China actually started the Asian round of currency devaluations in 1994; soon after, their trade balance, especially with the U.S., shot up by billions of dollars.) Besides, the optimists say, China is still the next Asian miracle, and investment flows are continuing to pour into the country.
-- The following salient comment comes from Roger C. Altman, now an investment banker, but who previously served in the U.S. Treasury under President Jimmy Carter, and as deputy secretary of the U.S. Treasury in the first Clinton Administration:
"The emergence of this huge, quasi-governmental force (the International Monetary Fund/IMF) carries profound implications for the world. Global markets can topple despots in ways local citizens cannot. They also have no tolerance for regimes that stifle enterprise and growth for the sake of political preservation. For example, China is still relatively closed. But its growth and income aspirations can be achieved only if it fully enters the global economy. To do this, it needs a convertible currency and lower barriers to capital flows. This will inevitably mean a more democratic and decentralized state, because financial markets will force it. But this can also be destabilizing. The sheer momentum of markets often causes them to overshoot.
"Right now, their disaffection for developing nations extends beyond Asia to Brazil, now in the midst of a long-term recovery. The risk, therefore, is that a downward cycle spins out of control and threatens the world financial system. There was a hint of this in the chain-reaction global stock market declines we saw three weeks ago."
Altman says this is why it is important the IMF has the necessary financial resources, "however large, to prevent full-fledged collapses. Otherwise, the entire global financial system could be at risk." End
