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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: danderso who wrote (133)	12/25/1997 2:44:00 PM
From: Rational	Read Replies (2) \| Respond to of 9980

Dave: Thanks for the clarification. The "general" US public is so busy in their day-to-day lives that until some trouble hits home, they are unwilling or unable to comprehend a problem. As an example, at the Fed dining tables, we used to be in agreement that the borrow-spend policy of eighties that gave a "boom" to the US economy would inevitably go bust -- it did in early nineties. Common folks in the US were very happy because of the tremendous growth in the economy and did not notice the rising deficit. But, the Fed was very desperate because of its failure to motivate the US Congress and Administration to reduce deficit that was making Fed's monetary policy quite ineffective in propping up the US economy. Later Greenspan was so delighted that, when Clinton moved to present a budget aimed at cutting the deficit, he agreed to sit next to Hilary Clinton (as a show of strength for the new budget coming from a conservative) in the Congress during Bill Clinton's delivery of the budget speech. The credit for the current state of the US economy goes to the new administration and the team of veteran policy makers like Robert Rubin, Larry Summers, Joe Stiglitz and, of course, Greenspan. This team engineered a rescue of Mexico and are doing so for Korea and the rest of SE Asia, not for humanitarian reasons (when the WB steps in with doles), but to contain a looming crisis that is expected to engulf the rest of the world. It is a serious problem that is beyond the means of common people to comprehend because it has not affected them yet. That the problem is serious can be easily grasped, however, from an obviously bear market for the tech stocks that are heavily connected to Asia. After having said that, I believe the efforts of the US/Japan/IMF/ADB will surely solve the crisis to a great extent and the common people may not feel the impact they would have felt without the high level efforts. This is why I feel great about the smart and alert US policy makers to rectify a problem before it looms large and becomes unsolvable. I have a personal experience to say so. When the US banking crisis was severe (late eighties), I was studying the issue in a research project as a finance professor at NYU Business School. I wrote a paper for closing banks optimally and for pricing federal deposit insurance fairly; presented the paper at the American Finance Association meetings and published in the Journal of Finance. These are most presitigious outlets for a finance professor and so I was happy. But, I was more excited and surprised to receive a call from the US Congress to help draft bank regulatory policy in Summer of 1989. I was not prepared to make a move to the government and so I consulted them without knowing that the findings of this research were being legislated into the FDIC Improvement Act of 1991. This research was then discussed at the Board of Governors of the Federal Reserve System meetings and I received an invitation to visit and present the stuff. I visited the Board and stayed there for more than planned. I was not and am still not a US citizen; I did not have to even apply for a job (I filled the formal application after joining). Fed has about 250 economists hired mostly from the top five universities and some of these have latter received Nobel prizes. [I did not even go through this hiring process.] Compare this to a very fragile Asian Central Bank that is at the beck and call of the political head of the state and no research support for CB policies. US Fed will not implement a policy change without sufficient research and debate and is open to receive relevant opinions from everyone including non-citizens! Sankar