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To: jim kelley who wrote (47832)	6/16/1998 2:31:00 PM
From: Chuzzlewit	Respond to of 176387

Jim, that's exactly what was going on. That's why I recommended to everyone on this thread to read the NY Times magazine section from the week before last (I believe). In a nutshell, here's how it worked (and this system was operative throughout Asia). 1. A business borrows money as a dollar denominated loan from a local bank; 2. The business lends that cash out in the local currency. The nominal interest rate is higher on this loan than the dollar denominated loan; 3. The business relies on the central bank to defend the local currency against the dollar. 4. If the local currency should fall the business does not generate sufficient cash to repay the dollar denominated loan. 5. The whole economy crashes. The point that the Times article made was that it was not until after the Asian financial collapse that westerners were able to look at the books of these Asian companies. What they discovered was that these businesses had never been profitable, and had used the core business as essentially a front for currency arbitrage. Now the point I've been trying to make is that these businesses can no longer dump because they have no source of currency arbitrage funds to generate cash flow. This means that these companies must begin to price in accordance with their costs. It may take awhile, but it will happen IMO. TTFN, CTC