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

To: Cage Rattler who wrote (549)	9/3/1998 8:43:00 AM
From: Alias Shrugged	Read Replies (1) \| Respond to of 3536

Hello Ted. Since my formal economic/finance education is nil (and although some may see this as an advantage?!), I suspect my education starts now. I will babble in a naive generalized fashion, and you folks can show me the errors of my ways. <G> A country's currency reflects the wealth of a nation, both real and perceived. A great deal of wealth has been destroyed, and as the financial and economic impact of this reverberates throughout the system, additional wealth will be destroyed as overleveraged debtors cannot meet their obligations (either directly through Corporations failing and leaving their bondholders holding the bag, or indirectly as the drop in stock markets leave individuals unable to service their margin, mortgage or credit card debt. This debt will need to be liquidated. Japan, US, South America, Eastern Europe, S. Korea, etc. etc. are in the soup together - linked through global financial instruments. Debt can be liquidated by printing money, no? So, hard assets (gold, oil, real estate, etc.) will increase in terms of currency. I would guess that the dollar, mark, yen, etc. will stay within some band relative to each other - but that just signifies that everyone is being more or less impoverished equally. If almost everybody experiences inflation due to debt liquidation, current currency relationships may not change that much. I assume that some countries which are well insulated from the contagion thing (perhaps the swiss) will not see a drop in the wealth of their country and will not experience inflation in the same time frame as everyone else and will see their currency strengthen versus the other players. I am not sure of the economic impact on, for instance, the Swiss if their currency appreciates significantly vs. yen, USD, Mark - as I assume they do not have an export-oriented economy (although if the Swiss earn foreign currency via tourism, those revenues will decline). So, the Swiss may not see declines in their paper assets. OK - give me your best shot. As a humble guy, whose extensive knowledge pertains mostly to his own limitations, I look forward to your response. Mike