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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (895)	10/15/1998 8:03:00 PM
From: porcupine --''''>	Read Replies (3) \| Respond to of 1722

Globaloney Crisis ESSAY / By WILLIAM SAFIRE -- October 15, 1998 WASHINGTON -- Every economic seer, sage and pundit has an incentive to predict what Jimmy Durante used to call a "catastrostroke." If disaster comes, you can boast of your prescience to those still around. If, however, the sky does not fall, you need not confess to false alarmism; you say smoothly that tragedy was averted because the world took your warning to heart. That's what we see in panicked assessments of "global economic crisis," or "meltdown in Asia spreading to Brazil," or "financial collapse and hyperinflation in Russia," or last week's Newsweek cover, "The Crash of '99?" Harvard's Prof. John Kenneth Galbraith declares Japan to have been in a depression for years. Times may be tough in Tokyo, but I always thought that when economists used the word "depression" they meant 25 percent unemployment, bread lines, Okies fleeing the Dust Bowl, etc., none of which has been happening in the world's second-largest economy. Instead, slug it "sluggish." Global crisis-itis is the palpitation du jour. Because default, dear Brutus, is in our stars, Velikovskian catastrophists will next predict solar-systemic breakdown. (Time out for the to-be-sure graph.) To be sure, a 30 percent drop in small stocks in the U.S. and a hangdog Hang Seng abroad augur ill for consumer spending. The spectacle of bankers stuffing money blindly into loopy-leveraged hedgehogs calls for fuller disclosure and higher margin requirements. And feared loss of American export sales induces Alan Greenspan to recite John Donne's "No man is an Island. . . ." But global crisis-itis is no excuse for puffing up the International Monetary Fund into some New World Financial Order -- the newest dream of regulatory globocrats. Nor is today's bailout fever any reason to stop the free flow of capital. If investors cannot take their money out of a country, they won't put it in. Welcome to Contrarian Corner. Last October, here is where the New- Age, new-paradigm new-economists, gaily waltzing with Goldilocks and Rosie Scenario, were admonished that markets went other ways besides up. This October, the contrarian message is: That pail of cold water in the face can be good for you. Take the Russian economy. Pojaluista! The I.M.F. is Primakoving the pump with billions that will slip out the back door. But Russians keep dollars in mattresses, not rubles in banks. Disintermediators in babushkas barter goods cash-free. Someday they'll elect a leader who understands capitalism under contract law. Prices of Russia's huge national resources will rise, and private investment will pour in. Now take the American economy. We're the locomotive that pulls along the world, the great consuming blotter that sops up the products of needy nations. With our full employment and price stability, the misery index has become the ecstasy index. That's why Congress and the President get high poll ratings. The same forecasters who a couple of years ago envisioned deficits "as far as the eye can see" now smell surpluses as far as the nose can sniff. They're wrong again. One of these years we'll go into recession, and farewell surplus. Although we've successfully amended Joseph's interpretation of Pharaoh's dream -- eight fat years are now followed by two lean years -- we have not repealed the business cycle. How, then, do we counter the hand-wringing hoo-hah of the crisis-mongers? Because the world depends on America's engine for its locomotion (and because we all much prefer the fat years), we should act now to soften the inexorable slump. But we're not. Though the Fed has shaved a smidgen off interest rates for stimulus, Clinton fiscal policy is pulling us in the opposite direction -- toward slowdown. Beware the fervor of the convert: Clinton's got such budget religion he doesn't know when to stop praying. To cushion a downturn and save jobs, we should stimulate now with solid tax reduction. But Republicans, fearful of Clinton sloganeering that the surplus must be "saved," await Election Day to bring the votes to override a veto of tax cuts. No global catastrostroke hysteria needed. If we want to help our neighbors and ourselves through a rough patch, we should stimulate the growth that lifts the world. Copyright 1998 The New York Times Company