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To: PaulM who wrote (21859)	10/17/1998 4:12:00 PM
From: Alex	Respond to of 116764

Soros on Asia.................. GEORGE SOROS, since the start of the currency crisis, has been the hedge fund manager Asia loves to hate. The head of the Quantum Fund profits from the free market but worries about its side effects. He spoke recently about the global financial crisis with Asiaweek's Washington contributor Sam Gilston: What is your reaction to the growing acceptance in Asia of capital controls and other forms of interventions? If I'm saying that markets are inherently unstable, I'm also saying that imposing market discipline means imposing instability. Markets are imperfect, but regulations are even more imperfect, so we have to be very careful what kind of regulations we introduce. Some restraints on capital movements would have been very useful in protecting countries against the onslaught of the attacking world. I don't think it is the right thing now because money is flowing out [of Asia], and to impose capital controls on inflows would be like building a Maginot Line after the First World War. But looking forward, I think that obviously the totally free flow of capital is not advisable, so you need to create some mechanism for introducing stability. What will be the fallout from the imposition of capital controls and the jailing of Anwar Ibrahim in Malaysia? It shows the danger - if you close off your market, you can do all sorts of things behind that curtain. What [Prime Minister] Mahathir is now doing is outrageous. But . . . having a strong political base, he may be able to get away with it. In the short run, it allows him to pump up the stockmarket, he can pump up the economy by issuing more money, he can bail out his own supporters. So in the long run the economy suffers terribly, but in the short run, it may look very good. Are there any Asian economies doing the right thing? Thailand is really moving, but none of them have really done enough in restructuring their economies. The basic problem remains: too much debt and not enough cash to support it. It's a problem for China also. It's a structural problem that none of them have really properly tackled yet, although Thailand has done more than most. South Korea has been following the IMF's prescriptions, but its economy isn't getting better. I will tell you exactly what is wrong. You've got companies with 500% to 600% debt-to-equity ratios and not enough profits. Until that problem is solved, Korea will be depressed. What do you think about Hong Kong's recent intervention in the stock market to protect the dollar peg? I think that they managed to dissuade speculators from being in the Hong Kong market because they managed to inflict some losses. Did they do the right thing? That is very questionable, but I can't really disapprove of what they did. pathfinder.com