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

To: Z268 who wrote (7068)	10/12/1998 6:23:00 PM
From: Stitch	Respond to of 9980

Stephen, I do not have a link for Sachs but a link that has been oft mentioned here is the Roubini web page. It contains a round up of commentary on the Asian financial crisis (though I am begining to wonder if we can call it that anymore) and is one of the most complete that I know of. Most of Sachs' articles are included in the many links provided. stern.nyu.edu Best, Stitch

To: Z268 who wrote (7068)	10/12/1998 10:33:00 PM
From: Derrick P.	Respond to of 9980

Stephen, From your Krugman's link: web.mit.edu So what are the options? Brazil – and many other developing countries – now have three possible courses of action, all extremely dangerous. They are: 1.Hold the line on the exchange rate, and rely on gradual reductions in relative costs – via productivity increases and deflation relative to the rest of the world – to restore internal balance. In principle this should eventually work. However, the operative word is "eventually": all experience (Britain in the 1920s; France since 1987) suggests that this is an extremely protracted process. Even aside from the sheer economic cost, can the social and political fabric stand the strain? 2.Hold your breath, cross your fingers, and devalue or let the exchange rate float – accompanying this with market-friendly policies like sharp fiscal contraction and privatizations, in the hope that the markets will treat you like Britain instead of Thailand. But they probably won't. 3.Impose temporary currency controls to prevent a speculative attack, then use the breathing space to engage in a one-time devaluation-cum-fiscal-stabilization, in the hope that after a little while the markets will calm down and let you return to business as usual. But currency controls are hard to implement and enforce, they disrupt normal trading relations, and they may impair confidence for a long time to come. What is the right answer? Honestly, I don't really know – but neither does anyone else. What is clear is that something has gone tragically wrong with the whole system, if these are the available alternatives. Whooa boy, that makes me feel a whole lot better. BTW, why don't we see '4. Support the currency and economy with an IMF bail out.'? Speculating on the above: 1. Is not plausible because if the situation is bad now what is going to happen in a few years as China and others continue to crank up. It will only get worse. 2. Not likely short term due to political pressures. Everyone seems to want to wait until there is no alternative and it blows up, like Russia. 3. Not likely as this is not politically acceptable. Do you think the IMF and other 'bail out pals' will go along with a Malaysian style opt out of the 'system'. What kind of message would that send. So the answer seems to be postpone 2. as long as possible until it all crashs and burns. Best Regards, Derrick