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To: Joseph G. who wrote (2453)	6/21/1998 9:53:00 PM
From: yard_man	Read Replies (1) \| Respond to of 86076

You are right that my gains so far have been trading gains. Some countries may not honor basic committments. Not just defaulting on loan agreements. If and when such a country does this when it is dependent on exports it would be committing economic suicide. I think the probability is low unless there is significant civil unrest, i.e. civil war or some kind. In real terms perhaps some of these countries will not come back in 10 to 20 years, but when you look at not only how far the markets have collapsed and the currency exchanges rates which have also cratered, I find it highly unlikely that there is going to be another implosion in equity prices of the same magnitude at this point from the standpoint of the dollar. Individual US stocks have a nozero prob. of becoming worthless (I have a buddy who bought Morris Knudsen a few years back), the risk with a collection of stocks is much less, even in another country. Have you been investing long enough to have bought one of the US bear markets?

To: Joseph G. who wrote (2453)	6/21/1998 10:25:00 PM
From: Cynic 2005	Read Replies (3) \| Respond to of 86076

Joe, when you get such words of wisdom from a 90 years young man, take it. I for one can certainly distinguish between venerable wisdom and senile ramblings. #reply-4952271 ----------------- A situation had developed both in Japan and in the US which will be ended only by a Schumpeter-type cleansing. [Economist Joseph Schumpeter described the aftermath of booms as 'creative destruction'.] In the case of the US, we are seeing stock market speculation, some real estate speculation and a terrific boom in mergers and acquisitions not benefiting efficiency but benefiting those bringing it off - plus there's an explosion of subsidiary financial operations, including in particular junk bonds. When the market fell on Monday, it was blamed on South Asia; any future problem will be so blamed. But no one should doubt that there are grave flaws in the Wall Street financial structure. . . The Observer: How do you think Greenspan has been handling things? Galbraith: Greenspan has been doing admirably what the Federal Reserve has always done - which is nothing. He was very clever the other day when he said deflationary influences would come from South Asia, restraining American speculation: toning down American speculation, rather than emphasising the speculation itself. The Observer: Would you generally approve of the way he has conducted monetary policy at the Fed? Galbraith: Absolutely not. There should have been far more warning about the speculative splurge on Wall Street and the extent of citizen participation. That was the mistake that the Federal Reserve made in the Twenties, and the mistake that it has made again now. And the reason for it is simple: you cannot warn against a speculative splurge without taking responsibility for what happens thereafter; no head of the Federal Reserve wants to be held responsible for a dip in the stock market. Once or twice he has got close to saying that, and he certainly knows it. But nothing appeals so much to a central banker as personal caution. One thing is wonderfully clear - when trouble comes on Wall Street, the blame will all be passed to Indonesia, Malaysia and maybe Japan. Wall Street insanity - let me use a slightly milder expression, Wall Street 'speculative error' - now has a perfect cover. . . . Galbraith: We could move much more aggressively than we are doing to clean up the situation, to make sure that we have common honesty in the operation of all these mutual funds, for example. One always worries that there may be some relationship between what a mutual fund is doing with its investors' money and what the participants in the fund are doing with their personal funds. There have been some cases of that in the newspapers recently. In the US we now have far more mutual funds than there is intelligence, perhaps integrity, to handle them. They are the bridge between the innocent and the eventual loss. This is a time when we should tighten, and be very certain about, the quality of our bank regulation. There should be strong warnings against investment in high-interest bonds. Nothing calls for more concern than the revival of the junk bond; while the problem of regulation is a bit difficult, we should look with some concern on this whole mergers and acquisitions binge. But having said all that, I would emphasise again that the sequence of speculative boom and its result is part of the market system (one cannot now use the word capitalism) and has been for hundreds of years. The market system has its considerable accomplishments, but one should never ignore its downside. The Observer: Do you think we are going to come back to a point when some kind of Bretton Woods system is needed, and some control of capital? Galbraith: One of our stronger points is that in consequence of the existing Bretton Woods system - if properly financed - we have a structure for easing what the financial community loves to call a correction. We should always bear in mind that, as is happening now in East Asia, the peculiar genius of the IMF is to bail out those most responsible, and extend the greatest hardship to the workers, who are not responsible, who are innocent participants. The Observer: Do you believe, and have you ever believed, there is any truth in the 'new paradigm' idea? Galbraith: When you see reference to a new paradigm, you should always, under all circumstances, take cover. Because ever since the great tulip mania in 1637 [when 'investors' bid up the price of bulbs to astronomical levels, even devising a system of call options on tulips they didn't actually own], speculation has always been covered by a new paradigm. There was never a paradigm so new and so wonderful as the one that covered John Law and the South Sea Bubble - until the day of disaster. . . The Observer: Do you feel optimistic about the next 10 or 50 years? Galbraith: The answer is very simple. On 15 October this year I will celebrate my 90th birthday. At that age the matter of optimism and pessimism as a purely personal matter becomes slightly irrelevant. ---------- Emphasis added! To me he looks like a genius, the mind of whom needs to be preserved for ever.