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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Chip McVickar who wrote (427)	8/20/1998 1:03:00 AM
From: kormac	Read Replies (2) \| Respond to of 3536

Chip, I know little about the international monetary system, but I am learning much about it here. I did read Charles P. Kindleberger's Manias, Panics and Crashes and he believes that floating currencies lead to instability. I can't find the page now, but Lester Thurow in his book on Future of Capitalism also refers to Kindleberger's thoughts on this. I know well in how low regard Paul Krugman holds Thurow. I was listening to Krugman on Cspan and he mentioned what I have for long believed, the presidents do not deserve much credit for how economies function. Some of them are lucky to have served at the right time and some are not. Seppo

To: Chip McVickar who wrote (427)	8/20/1998 8:42:00 AM
From: Lee	Read Replies (1) \| Respond to of 3536

Chip, Thanks for your thoughtful response. It provides for me a new set of glasses to view the unfolding events. Your comment... "Also behind this are the governing systems of socialism, capitalism, democracy, communism and shall we say "free market systems" that seem to work independently of any national government. All seek to supply the answer to what is a stable economy.....much less a stable international system of monetary policies." ...is quite telling. At the end of this crisis we still will not know the answer, and there will be plenty of strong opinions. The hallmark of economics is that it is not a science. Economic theories can not be tested in laboratories. One can not hold all other things constant and change one variable to see the effect. (The quants will cringe) economics is the product of the collective actions of people so the rules of math and logic sometimes are overruled in the short-term creating the foundation for chaos. Mr. Kam wrote that the US productively produces the only goods that matter, nukes, planes, and ships (to paraphrase). Another hypothesis as to what should back a currency? Cheers, Lee

To: Chip McVickar who wrote (427)	8/20/1998 10:23:00 AM
From: Robert Douglas	Read Replies (1) \| Respond to of 3536

Chip, Let me just add a word or two of my own on this debate between fixed (and its' variations) and floating currencies. Each, has its' plusses and minuses but I believe the critical factor is not whether a country has a fixed or floating currency, but rather the underlying economic policies of that country and whether they are sound or not. Let me illustrate. Suppose country X tries to keep a fixed currency rate but underneath it is running inflationary monetary and fiscal policies that over time debase the currency. All they are doing is supporting the currency at an unnatural level. Eventually the gap between the level of the currency and its' true value grows large enough that speculators intervene and bring the two together. This is what we have seen in many Asian countries and Mexico that kept their currencies artificially high for years. The problem was not with the currency system, but with the awful economic policies that preceded the currency collapse. Another problem with "fixed" rates is what to fix it to. Fixing it to the US dollar is fine unless the US starts to run bad economic policies or the dollar gets out of line because of market forces. Argentina is having a hard time since their currency is appreciating along with the dollar, making them less competitive. Fixing it to gold is not a panacea either as the US has discovered. Blaming the currency is a lot like blaming the repo man when he knocks on your door. It isn't his fault but rather your bad spending habits that brought him to your home. -Robert