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

To: Joseph Beltran who wrote (7061)	10/11/1998 6:20:00 PM
From: Stitch	Read Replies (1) \| Respond to of 9980

Joseph, <<I am beginning to wonder -after over one year since the inception of this "crisis"- whether korea, thailand, indonesia and others would have been better off just defaulting on their loans. >> My understanding is that there has been little in the way of sovereign debt to default on in the way you suggest. The thing that makes Asia distinctive from the Mexico bail out is that in Asia it is a case of bad corporate debt. Huge debt, piled up over time, poured into primarily non productive projects. This is the so called hubris oft referred to. If debt has accumulated since then it has been by governments intent on keeping these companys afloat as they are the source of political power and largesse to the politicians. The available course for governments to default, IMO, is to install monetary policies similar to what Malaysia has done. If that isn't a default what is? The problem is how to wean the country off this defensive posture when you want to rejoin the world. Not to mention the punishment meted out in the form of rerated sovereign debt, diminished foreign investment, and political ostracism and turmoil. Then, of course, the other problem that exists is to avoid enacting policy that throws out the bad with the good. A very real consideration. Sticky wicket this one. Best, Stitch