Ms. Hammond,
Thank you for the CB's web site.
"The strength of the Dollar relative to the [Mexican] Peso neither benefits the Peso, nor hinders the Peso.... it will be completely the opposite......"
Attributed to Mexican [former] President Luis Echeverr¡a. 1970-1976
as part of a speech after the 1976 devaluation from $12.50MP/$1.00US, to $22.50/$1.00
(say what ?)
Do you want to know the future? Look at the past:
A little history: (1976)
lbjlib.utexas.edu
More: (1995)
pathfinder.com
The following study in "retrospect" (of the 1994 Mexican Peso devaluation), gives an account of what went wrong in the Mexican case. Then we can use a "fill in the blanks" method (with the appropriate adjustment as it may be necessary), and it could be applied to other nations. Pay particular attention to the final paragraph "A Painful Lesson", in terms of the new form of capital flows, which will force politicians to be more disciplined, or else...
lanic.utexas.edu
As for the relationship between the position of the US, including the markets, inflation and overall competitiveness, with that of the rest of the world and the current conditions, that seem to prevail, in general, we can say that the US is in a very privileged position.
If one recognizes that these devaluations, whether in Mexico, Asia or possibly even in Europe, could be only "temporary adjustments" if the appropriate measures are taken, then the "outlook" of things are not as bleak as sometimes, the media attempts to have us believe, perhaps the exception to the above may be Japan, since the banks, [with the help of the government] keeps hiding the reality of the situation.
An outline of "MERCOSUR":
lanic.utexas.edu
sice.oas.org (Various trade agreements)
It is good to live in the USA:
latimes.com:80/CNS_DAYS/980510/t000043940.html
I believe the US will continue to be a "safe heaven", that almost gives me the confidence to say, that interest rates will continue to be relatively low, the US dollar will continue to be the strongest currency, and that a liquidity driven upward trend US stock market will continue for the foreseeable future. (With possible mini-crashes in the process, otherwise dubbed as "buying opportunities").
Of course the above, has the following provisos:
1.- US politicians do not start spending more than what they take in.
2.- They do not become more inefficient than their foreign counterparts.
3.- Do not manufacture more senseless restrictive regulations.
4.- Thinking that the DOJ, is better suited to run software companies.
Otherwise, all bets are off.
Perhaps the only real threat not only to the US economy, but to the all the economies of the world, is the "Y2K" problem.... This issue I am only now beginning to study, therefore, I have no opinion at this time.
With all the above in mind, now read this:
A couple of articles by Henry Kissinger, one in a Swedish newspaper...
------------------------------------------
05/10 08:32 Kissinger says hard to see how EMU can
succeed
STOCKHOLM, May 10 (Reuters) - Former U.S. Secretary of State Henry
Kissinger said it was difficult to see how the European economic and monetary union (EMU) could succeed but added it was even more difficult to imagine that failure would be tolerated.
Kissinger, writing in the Swedish newspaper Dagens Nyheter on Sunday, said the project would be riddled by conflict between Germany and France.
"It's difficult to see how the European economic and monetary union could be a success. It's even more difficult to imagine that a failure would be allowed," he said.
"Navigating correctly through this developing situation will be a increasing challenge for U.S. foreign policy."
'Harmonising 11 countries' fiscal policies under a single monetary policy would be difficult during a period of strong economic growth. However, during a recession it would be even more complicated.
"If different parts of Europe find themselves in different parts of an economic cycle, it can be impossible to manage."
Socialist Europe especially could eventually be confronted with a dilemma, he said.
"Within the existing parliamentary system, European countries have not
succeeded in reducing the social welfare programmes which has ruined their ability to compete and aggravated unemployment."
EMU would eventually be driven to become a political union or towards
dissolution, Kissinger said.
"But the Europe which would result from a collapse of EMU will be
characterised by either extreme leftism or extreme rightism, or a combination of the two.
"It is in the interest of the United States to stop such a breakdown, but this does not at all mean that we should give unqualified support to any type of integration, regardless."
c 1997 Reality Online Inc., A REUTERS Company 1000 Madison Avenue,
Norristown, PA 19403, USA. All rights reserved.
----------------------------------------
.......Same article in the L.A. Times
----------------------------------------
Sunday, May 10, 1998
THE WORLD / EUROPE
Monetary Union May Spur Political Trouble
By HENRY A. KISSINGER
ÿ
ÿ
NEW YORK--The historic decision of 11 European heads of
state to create a European Monetary Union has received
relatively little attention in the United States, but it is
likely to require major decisions on our part before long.
ÿÿÿÿÿ
The EMU's failure would end the project to which Europe
has devoted the greater part of its political energies for nearly
a decade. If the union succeeds, it will alter financial flows and
change how international institutions operate. More important,
since the European currency can only succeed in the context of
political unification, the nature of that political unity will
determine the future of North Atlantic cooperation.
ÿÿÿÿÿ
The formation of the EMU will be dominated by two sets of
conflicts: between France and Germany over whether the union
should open Europe to the global economy or insulate it;
between Britain (and Germany) and France over whether the
unified Europe should stress Atlantic cooperation or challenge
U.S. leadership.
ÿÿÿÿÿ
A paradox dominates either prospect. It is difficult to see
how the European Monetary Union can succeed. It is even more
difficult to imagine that it will be permitted to fail. How to
navigate between these perplexities increasingly will challenge
U.S. foreign policy.
ÿÿÿÿÿ
On Jan. 1, 1999, the currencies of the 11 members of the
EMU will be related to each other by fixed, immutable ratios.
On Jan. 1, 2002, these currencies will be replaced by the euro.
Starting next January, the monetary policy of the member
states will be determined by the European Central Bank, which
will deprive the European governments of much of their
flexibility on fiscal policy. As their economies grow at different
rates, most European countries will have to make adjustments
in areas where they have been most resistant to change--labor
conditions, work hours and social contributions.
ÿÿÿÿÿ
All this will drive the EMU toward either political union or
disintegration. But the Europe resulting from the collapse of
the monetary union would be either extremely left wing or
extremely right wing, or a combination of both. The prevention
of such a debacle is in the U.S. interest.
ÿÿÿÿÿ
In the short term, the EMU will probably succeed because its
governments have no alternative. Therefore, political union
increasingly will move to the forefront of their agenda. The
ends such a political union will serve become of great
consequence. Will Europe be a unitary federal state dominated
by a new bureaucracy, or confederal so that existing states can
influence its political decisions? European statesmen have
avoided addressing this issue to avoid a controversy with the
United States. But the issue is fundamental.
ÿÿÿÿÿ
A Europe whose principal motive for political unification is
to sustain its economic integration will have two political
temptations: to withdraw from political responsibilities into the
status of a super-Switzerland or as a mini-United Nations,
delivering moral homilies and concentrating on economic
competition. Or it could use its new strength to challenge U.S.
preeminence by demonstrating the limits of U.S. competence.
Both approaches run counter to the Atlantic partnership of the
past five decades.
ÿÿÿÿÿ
Whether the emerging Europe results in a reinvigorated
Atlantic relationship or in its gradual disintegration will depend
on whether the British or French approach to Atlantic relations
prevails, and on whether the United States can give a strong
lead. Britain clothes its disagreements in the mantle of
consultation; France presents consultations as if they were
confrontations, making it seem as if French diplomacy has
extracted from us what we might be quite prepared to offer.
British leaders have conducted Atlantic relations as a common
enterprise from which both sides can benefit; French leaders
have too often turned Atlantic relations into a zero-sum game
in which one side of the Atlantic or the other is bound to have
the upper hand.
ÿÿÿÿÿ
In an alliance such as the North Atlantic Treaty
Organization, French tactics can be melded into a wider
consensus. In a two-power Atlantic world, they could lead to
mounting estrangement. This is why a confederal outcome to
European integration preserving some role for the traditional
states, at least in the political field, is more compatible with
Atlantic cooperation than a rush toward a centralized federal
system.
ÿÿÿÿÿ
The United States has every reason to welcome Europe's
emerging identity, but it also has every reason to seek to
maintain the possibility of enhanced cooperation in the
post-Cold War period.
ÿÿÿÿÿ
This has the following implications for U.S. policy:
ÿÿÿÿÿ
* The U.S. tendency to advocate European integration
simply because a more powerful partner is more likely to share
U.S. burdens is unhistorical. It is equally possible for Europe to
unify to avoid sharing U.S. burdens. With respect to the
emerging Europe, the common purposes cannot be taken for
granted and must be fostered deliberately by statesmanship.
ÿÿÿÿÿ
* Since the end of the Cold War, U.S. policy, oscillating
between indifference and imperiousness, has treated Europe as
an auxiliary for material assistance or as a photo opportunity
rather than as a genuine global partner. The administration has
been reluctant to define even what it understands by Europe,
often implying that it includes the entire area up to the Afghan
and Chinese borders. This is why it has avoided the most
important argument for NATO expansion--that it is a means to
unify the Europe of the Cold War with the Europe that was its
victim--and to relate both parts of Europe to the United States.
ÿÿÿÿÿ
* U.S. policy should give a new dimension to the political
aspects of the Atlantic relationship. The idea of a North
Atlantic Free Trade Area should be pushed as a symbol of that
vision.
ÿÿÿÿÿ
* Most important is a definition of purpose. It has become
axiomatic to assert that there is no longer one overriding
threat. But it would be ironic if the democracies preaching the
spread of their political institutions around the world did not
find it possible to articulate common purposes for a world of
change.
- - -
Former Secretary of State Henry A. Kissinger Frequently
Writes for The Times
Copyright Los Angeles Times
ÿ
latimes.com:80/CNS_DAYS/980510/t000043853.html
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One could say it is either free markets, or bust!
Z.
"If confusion is the first step to knowledge, I must be a genius."
~ Larry Leissner ~
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