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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: Frodo Baxter who wrote (5742)	8/21/1998 12:40:00 PM
From: Sam	Read Replies (1) \| Respond to of 9980

LK, "have you seen the yield curve today? That's a market signal for the Fed to ease." Yes, but the Fed is still full of hearty inflation fighters! I can't say I understand why, except that the last battle is always freshest in mind, and none of us (except tech investors, of course) have much experience with deflation. But to my undoubtedly naive mind, at least, 5% deflation is worse--much worse--than 5%--or even 10%--inflation. Harder to stop, and the cure is inflationary anyway.

To: Frodo Baxter who wrote (5742)	8/21/1998 1:35:00 PM
From: Paul Berliner	Read Replies (3) \| Respond to of 9980

LK, regarding the so-called success of the HK and ARG currency boards and the 12% interest hedge funds have to pay on short $HK positions... Again, in Hanke's article, he praises these 2 boards as beautiful and unbreakable due to their seemingly foolproof setups. But as specs attack the $HK, the currency board is forced to buy $HK to defend it and as you, it sends interest rates higher. So what's the harm? These skyrocketing rates pummel their economies into submission by dealing death blows to corporations. Most corps. have their outstanding debt or lines of credit at floating HIBOR and similar rates. How would you like it if you had to increase your interest expense by 25%, 50% or even more each fiscal period due to the currency boards actions? This is why HK is 'officialy' announcing their 1st recession in decades. The property sector, HK's economic engine, has been suffering even more than corporations because of the negative effects the rate rises have on their particular market. Ditto in Argentina. As you learn in any economics class, shrink the money supply and rates rise. The currency board system will always have this tremendous caveat. And as for Hanke, he is globally ridiculed for advocating a board in Indonesia when he was Soeharto's advisor just a few months back. He wanted to fix the rupee at about 5,000 to the $US, which would indirectly lead to Indo's central bank's waterloo. You don't hear much from Hanke anymore-the world's foremost currency board booster, because we all know they don't work and he has kept quiet- for now. P.S. Steve... I can't contend with a Philippines resident, but they've had a 4 year bear market and a painful recession.... I can't be the only one who has read articles on their ongoing debacle....anyone out there?