Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: gerard mangiardi who wrote (20785)	10/6/1998 3:24:00 AM
From: IQBAL LATIF	Respond to of 50167

Gerard, it is a world of have and have nots- I sit here in Pakistan looking at the local market capitalization the total is 8 billion $ down from 12 billion at it peak, this is a nation of 130 million people, so how much does it count in the global economy one can easily imagine from very small size of market capitalization, imagine my country has a slot on Yahoo.com international markets and like other insignificant ASEAN economies present a bleak forecast of future global Prospects. . However, I look beyond all this and find that Indonesia, Malaysia Korea as well as Taiwan all were great benefactors from global opening of economies these were nations where infrastructure development alone constituted a huge bill of trillion $ in next five years, I doubt this kind of expenditure would be able to continue.. I see that we need like Prof. Krugman puts it a period where integration may be slowed down, you are an economist and you know it perfectly well that to open Mexico or Malaysian Peso or Ringitt to open convertibility without convergence of macro economic fundamentals was invitation to trouble-- the Euro convergence criterion is the minimum goal post a nation should adhere too if capital account convertibility is to be allowed.. Malaysian Ringitt or for that matter Indonesian rupee will not be able to compete with OECD currencies unless inflation, budgetary deficits and total liabilities as percentage of GDP have some relevance to OECD countries currencies.. IMF in a total disregard of basic fundamentals forced these economies to open up, EU dealt this issue with little more intelligence they insisted on strict convergence criterion before convertibility, any currency which ever violated the snake like pound in 1992 was ejected by the markets, the devaluation of pound and ensuing economic prosperity of UK from 1992 onward is a good example of ditching of pegs.. IMF encouraged infrastructure development through short term hot funds, this is an old story you cannot have long term projects financed by short term speculative portfolio money, once the money leaves in droves as result of short squeeze we see double whammy currency and stock markets take the blood bath that we have seen ofcourse all this has ramifications on social structure of the countries in questions. The artificially pegged ASEAN currencies that depended totally on incoming hot money to maintain their exchange rates have now been knocked down, this has resulted in re-tracement of reforms but overall this is not a free fall like Mexico in 1995 and UK in 1992 these artificially held high exchange rates and constant supply of tinder through hedge funds hot monies after its initial wrecking will lead to leaner economies.. The total global economy is estimated at 45 trillion $ --- the division of GDP is so lopsided that you will be surprised-- OECD countries have a massive 67% share of the global GDP, now these are few countries only and the total population of this block is less than a billion, the unemployment in this region is running to near full employment levels with exceptions of France and Germany where cradle to grave social security benefits encourage unemployment.. Not to miss the point that EU was in semi state of recession in 1992-96 with UK only making real progress as result of hedge funds imposed competitiveness in its economy back in 92-- so if we are sure that at the moment we don't have this problem of slow down in OECD atleast.. one can argue that ASEA will hit OECD hard--= The issue here is that ASEA ex - Japan contributes only to 11% of global economy domestic consumption and huge exports ability is the bed rock of ASEAN economies we are not seeing the signs of major deterioration like 50% drop rather domestic demand is affected by 23% only-- Japanese economy is at the bottom and things look bleak but for me it is always at the turn around that things look the worst, they have been going through this whole cycle of recession but in my opinion have reached the bottom-- if you take out OECD ASEA we are left with global GDP of 22% divided between 4.5 billion people-- the demand as a result of size alone keep the imports of oil at last year levels, the import of wheat or other staple food at levels consistent with previous performance, the unemployment in these regions have stayed very high before this crisis and after this crisis, in my opinion the global economy is predominantly led by OECD demand ofcourse US being the most important country in this demand cycle, the market has been sold down to levels where a drop in corporate profits going forward has been prized, the entire gains of this year are washed out in France Germany and UK, for me unemployment in ASEA or third world would have negligible effect on global economy for simple reason we don't matter at the first place....true but painful---