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To: Robert Douglas who wrote (920)	10/21/1998 9:38:00 AM
From: Chip McVickar	Read Replies (1) \| Respond to of 3536

Robert, This is certainly part of the reason...."willingness of industrial nations to extend excessive credit without properly weighing risk...." Rubin has all but stated that the excessive leverage of debt is the backbone of the event....(the event is now old news and by-the-way nolonger a crisis....) It's possible that we have only seen 50% of the problem...if the international monetary system manages to cover up the other 50%...we may never see it blow-up. I'm expecting they can take care of any further dust-balls and keep everything going on an even keel.... Unless that is some major new event disturbs the safe haven status of the US economy. Chip Rubin Aims Blame for Economic Mess By PETER ALAN HARPER .c The Associated Press NEW YORK (AP) -- If you want to point fingers regarding the global economic crisis, Treasury Secretary Robert Rubin has a suggestion: the world's industrial nations. Speaking Tuesday at a Woodrow Wilson International Center dinner, Rubin said the willingness of industrial nations to extend excessive credit without properly weighing risk contributed significantly to the world's ongoing fiscal problems. Emerging markets with their flawed financial systems, flawed financial systems, other structural problems and inadequate fiscal policy share responsibility, Rubin said. But he held off on castigating Thailand, where the crisis first surfaced. ''Thailand was simply the first country in which financial institutions erupted,'' he said. ''This crisis is the result of problems that developed over many years.'' Financial capitals worldwide had invested in emerging markets with relish, banking on rapid returns on securities investments, real estate and construction. But giddiness among investors prevented them from seeing underlying risk where emerging countries lacked legal, banking or other infrastructures, he said. When the Thai baht folded in July 1997, currencies and other financial markets collapsed in Southeast Asia, and the problems eventually spread around the world. The Russian economy is near collapse, some countries are in recession or depression and international bankers are trying to prevent any further spillover in Latin America by putting together a $30 billion bailout package for Brazil, the region's strongest economy. ''And, just as capital once flowed into emerging market countries without, in too many instances, proper analysis of risks, it is now too often flowing out in a nondiscriminatory, overly negative reaction to the risks,'' Rubin said. The solution, Rubin said, lay in several areas that cross political boundaries. First, political leaders must be willing to confront problems with politically unpopular answers, he stressed. Following that, the leadership needs to build coalitions. He cited Korea, where the government brought unions and companies together. As a result, short-term interest rates have fallen from 25 percent to 7 percent, he said. ''In Russia and Indonesia ... the political system never took ownership of reform and both economies are in dire straits,'' Rubin said. The Treasury secretary also called on industrial nations to be more involved. He criticized leaders in Japan for failing to handle their economic problems for the past seven years and also leaders in the United States for failing to pay arrears at the United Nations. ''One difference now is how much it all matters in the interdependent global economy, where decisions can affect not only the country involved but, to a far greater extent than before, other countries around the globe,'' he said. AP-NY-10-21-98 0037EDT