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To: Frederick Smart who wrote (20851)	3/8/1998 7:54:00 PM
From: Paul Fiondella	Respond to of 42771

(Off Topic) Asia---Indonesia reply I'm sorry to say that I have watched "professor" Hanke, something of a currency speculator, and his involvement with Indonesia and Suharto's family with fascination, but I didn't know YOU were in the currency board camp!!! The purpose of the currency board is to allow the rupiah to trade high enough against the dollar for long enough for the foreign currency reserves to be used by Suharto's family and their cronies to sell their rupiah for dollars. They will then spirit the dollars out of the country. Remember that guy who ran the COngo and you'll get the picture. The premise of a currency board is the ability of it to buy every rupiah presented with a dollar at a fixed price. To do that you need to have enough dollars in reserve to buy back every rupiah in circulation. The currency has to be fully backed. There are so many things wrong with this approach in Indonesia its hard to know where to start to comment. So I won't. Its just a plain crazy idea. Since you appear to hold great stock in Clinton corruption as an influence on Indonesian policy, let me tell you that I believe that is the only reason why Suharto has gotten this far with stone walling reform of the financial system. There are plenty of international banks and lenders that want their money. They are supremely pissed at Suharto. When he was screwing the people they didn't mind but now he is about to screw them. Rubin's being prepared to dip into Treasury reserves to provide Indonesia liquidity when he wouldn't bother with say Zimbabwe means this dictator is playing Russian roulette with the international bankers big time. Clinton took some money from the Indonesians so there may even be an element of blackmail in it but the Indonesian money has been spread around Washington for over 30 years to anyone with influence. Its not just Clinton. What the IMF is afraid of in the currency board is that Indonesia will have no foreign currency left after a currency board collapses (think of it as getting rupiahs back for your dollar loans and making a run on the bank). The country will be a total basket case. One capable of bringing down the rest of Asia with its chaos. Otherwise they would back the idea in a minute. It can't work and its not Clinton. And I can't believe you believe in currency boards too!