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To: porcupine --''''> who wrote (397)	6/16/1998 8:02:00 PM
From: Freedom Fighter	Respond to of 1722

Global Depression Warning from World Bank By Peter Hartcher and Tony Boyd A global depression is in prospect unless Japan takes decisive action to arrest its yen crisis, senior international officials warned yesterday, amid turmoil in world financial markets and wild swings in the Japanese currency. The World Bank's vice-president for East Asia and the Pacific, Jean-Michel Severino, said that Asia had "entered a period of deep and long-lasting depression and one should not fool public opinion". He warned that it was critical to stabilise the yen to help stop the Asian economic crisis spreading to the rest of the world. He was backed by the Deputy Prime Minister of Thailand, Dr Supachai Panitchpakdi, who said that further big falls in the yen could lead to a "second Asia crisis" and a "first world depression". The mounting global pressure on the Japanese Government came as the yen went for an extraordinary rollercoaster ride, swinging through a range of more than 4 against the US dollar in a few hours on rumours of Bank of Japan intervention. The erratic yen also sparked a volatile day for the Australian dollar. It plunged to a fresh 12-year low of US57.10› - roared back to a high of US59› and then fell again, ending in local trading at US58.68›. Turmoil also hit the sharemarket, with more than $6.96 billion wiped off the value of Australian stocks as the market fell 1.6 per cent in a torrid day of trading. It followed a 207-point, or 2.3 per cent, slump on Wall Street on Monday - its second-biggest points drop this year and its fifth-biggest loss on record - sparked by fears that the Asian economic crisis will hit the earnings of US multinational companies. Pressure on Japan from its Asian neighbours intensified when Malaysia's Minister for Finance and Deputy Prime Minister, Anwar Ibrahim, called for speedy government action to solve its problems. "The weakness of the yen and Tokyo's slowness in putting its economy in order, particularly its foot dragging instead of strengthening its fragile banking system and opening its markets, are making the regional situation gloomy indeed," he said in a speech in Kuala Lumpur. Speaking in Melbourne, the chief executive of Hong Kong, Tung Chee-Hwa, and the deputy director of the International Monetary Fund's Asia-Pacific office, David Nellor, also nominated Japan as the central element of the unfolding crisis and called for urgent action from the Japanese Government. The World Bank's Mr Severino - who is responsible for $US6 billon in annual lending to the region - said the next four to five months were critical to stop the spread of the economic crisis from Asia. "The depression is being exported from one country to another and everyone is going down at the same time . . . it's also very clear that if this situation lasted, no country could be left out of the problem," he said. "I would find it absolutely critical that one find a way to stabilise the yen," he said. "This is a critical juncture for management of this crisis. In the coming four to five months, we can find a way out . . . or enter a period [where it will be] spreading around the world." He said that while stabilising the yen was necessary, it was not a sufficient condition to halt the spread of the crisis. Dr Supachai - a former central banker with a doctorate in economics - shared Mr Severino's concern. "If the yen would drop without limit or bottom, then a second Asia crisis will take place. "And that would mean a first-world economic depression." He said that "pressure could mount if Japan is left alone - the whole world should concentrate on Japan" to bring about decisive action. He was "deeply worried", he said. Asked what level the yen needed to reach to set in train a global depression, he declined to nominate a figure but said "it's already hurting us at 145" yen to the US dollar. The two men were speaking to reporters at the Australia Summit conference in Melbourne. The yen has lost about 80 per cent of its value against the US dollar since its peak in 1995. Market nervousness about central bank intervention saw the yen move through a 4 trading range in the space of a few hours yesterday morning, from a high of 146.75 to a low of 142.35, before it slumped back to a close at 144.85. It was believed to be the most volatile day's trading in the yen since April 1995, when the G-7 central banks began a concerted intervention to turn around the US dollar. The wild day on Tokyo currency and stockmarkets ended last night with the yen back near 145 at 144.85. The stockmarket was at its lowest level in six months and on the brink of breaking through a two-year low. Gloom about the Japanese economy deepened when Japan's central bank, the BoJ, raised doubts about the likely impact of the Government's 16.6 trillion yen ($US188 billion) fiscal stimulus package. The BoJ, which has been noted for its frank assessments of the economy, said the positive impacts of the package could be weakened "if the ongoing rapid deterioration in employment and income conditions further dampens the overall economic activities". It said that because of the present high inventory level and the relatively large output gap, "prices are likely to be weak for some time". Mr Severino said there was limited time to deal with the crisis. He said that the situation in Asia was more serious than the Latin American debt crisis of the 1980s. In that case, he said, "only some countries were going down and there was a major engine of growth in the region [the US]". In Asia, however, everyone was going down together and, with Japan's recession, there was no engine of growth. "Finding a way of bringing the whole region up together is a critical challenge," he said. Mr Severino, formerly economic and financial adviser to the French Cabinet, listed three prerequisites to a regional recovery: Stabilise the yen. Prevent a Chinese devaluation of its currency. Adopt more expansionary policies in the five most desperately crisis-racked economies of Asia.

To: porcupine --''''> who wrote (397)	6/16/1998 8:19:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 1722

>Someday, Goldman's going public may be looked back upon as the Mother >of all Bear Market signals. >But, just to be the devil's advocate, suppose Goldman feels it needs >more money to compete with giant financial multinationals. If so, it >would only be good business judgment to raise money when Mr. Market >is accommodating, rather than waiting until he isn't. >This wouldn't necessarily require that Goldman believe that the >Market is at a top. Instead, they may believe that the Market will >continue to rise, and that they better have a larger capital base for >competing in it. >I believe this is the underlying economic rationale for all of the >other great Wall Street partnerships having already gone public. I agree with just about everything you say here. A firm SHOULD use the capital markets to raise cash at beneficial times. It should also make strategic decisions and acquisitions with the proceeds. It should not however use its most influential employee to help drive up prices with somewhat disingenuous interpretations of the valuation data and then come public by selling its own stock to the public for perhaps twice or more what the traditional valuations and recent deals says it's worth! It is the fiduciary responsibility of the investment banks to make offerings at prices that well informed business people would deem fair. My view that Goldman's interpretation of the valuation data is highly suspect is not unique. Many newsletter writers have written on the subject.