Good afternoon to you all. In our report of September 13, we laid out
the specific details of the Russian debt problem. For your review, those
comments were as follows:
__________________________________________________________________
SEPTEMBER 13
<underline>The situation is not much better in Russia, where there is now
a real threat of massive default on loans</underline> ranging from the
IMF, to major banks and other lending institutions. To date, banks
around the world have had to write down about
$US 10 billion. In addition, another $US 20 billion in debt is under
payments moratorium and in danger of being lost. <underline>However, the
main concern comes from an additional $US 180 BILLION of government and
corporate debt which have not yet come due since the crisis
began.</underline> That situation will begin to hit the markets in
November, when Russia must begin payments of at least $US 2 billion per
annum. In 1999, that amount escalates to $US 17 billion in annual
payments. Quite simply, when taking into account Russia's Central Bank
Reserves and Government revenues, analysts are hard pressed to figure out
where the money will come from.
___________________________________________________________________
Word has just gone out over the news wires that Russia missed a $31.65
million payment that was due this week, bringing Russian arrears to the
USDA's Commodity Credit Corp. to more than $52 million.
We take this as strong evidence that Russia will not be able to meet the
debt obligations we mentioned on September 13.
How serious are the repercussions from Russian default?
Currently, commercial banks from Germany, the US, Japan, Britain and
others had outstanding claims at the end of 1997 totaling approximately
$US 60 billion. German banks are the greatest exposed with $30 Billion,
followed by the US and France at $7 billion each. <underline>However,
private lenders stand to lose as much as
$US 100 billion </underline>if Russia can not meet its debt, which would
be considered the single greatest loss ever by the international banking
community.
These are the facts. For those who need more convincing then our own
reporting, which should be all prudent investors, then we direct you to
the comments of President Clinton, who spoke earlier today. Clearly, the
comment are aimed at Congress, where a war has broken out over providing
more funding to the International Monetary Fund (IMF). We trust the
direct quotes are self-explanatory.
"We have a heavy responsibility to lead the world back away from this
financial precipice...Americans will suffer if the turmoil continues to
spread."
"We know we are going into an unprecedented time. This country has got
to lead and we've got to be aggressive".
"Half the world is in recession or experiencing very low economic growth.
We don't have to have a worldwide recession if those of us that enjoy
growth will take the initiative and move now, we can't afford to dally
around here".
In addressing Congress with respect to the IMF funding he stated. "This
is terribly, terribly important. We can lead back away from this
financial precipice but we need the resources to do it."
OUR COMMENTS
Short and simple. When the most powerful man on the planet uses the
words "unprecedented time", "we can't afford to dally around here" and
"terribly, terribly important", while discussing the state of global
economic affairs, we read it as a sense of urgency and desperation.
Given the possibility of massive Russian default, especially as they
concern commercial banks around the world, it is obvious to see why.
Have a great day.
Regards,
Agora
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