Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: goldsnow who wrote (26133)	1/13/1999 9:25:00 PM
From: Gord Bolton	Read Replies (1) \| Respond to of 116877

Looks like the Gold Genie is trying to get out of the Bottle in Hong Kong, spiked, leveled. smacked and it is comming back. Could be very interesting.

To: goldsnow who wrote (26133)	1/14/1999 5:24:00 AM
From: Alex	Read Replies (1) \| Respond to of 116877

Alarms Ring Anew on World Economy "A Point of No Return Has Been Reached" LONDON - After two months of renewed optimism in financial markets that drove stock prices up to record heights, Brazil's decision Wednesday to devalue its currency provided a dramatic reminder that the world economy still has huge imbalances that could undermine confidence in Wall Street and the dollar and slow growth around the globe, economists and analysts said. The move by Brazil, and the resignation of the president of its central bank, Gustavo Franco, represented a major blow to the credibility of Brazilian policymakers as well as to the United States, its Group of Seven partners and the International Monetary Fund, which worked frantically last autumn to avoid just such a devaluation. Their failure to draw a line under the Brazilian real with a $41 billion loan program has revived the threat that the financial instability that swept Asia and Russia during the past 18 months will spread throughout Latin America, economists said. ''I'm very afraid a point of no return has been reached,'' said Charles Wyplosz, professor of economics at the Graduate Institute for International Studies in Geneva. ''It's the big, bad crisis.'' ''You're bound to get a short-term repeat of all that happened after Russia because people are going to think the worst,'' said Richard Fox of the credit rating agency Fitch IBCA. ''Argentina will be next in the line of fire.'' Given the importance of Latin American markets to corporate America's profitability, the latest instability risks piercing the optimism on Wall Street, where share prices have risen to records so quickly in recent weeks that some analysts have talked of the market as a bubble waiting to burst. A sharp drop in share prices could force companies and consumers to retrench, dragging down an already-slowing economy. And any U.S. weakness could be rapidly transmitted to Europe and Asia via a depreciating dollar. ''This is to some extent a wake-up call,'' said Bruce Kasman, chief economist at J.P. Morgan & Co. ''It is another indication that the global economy is quite fragile.'' There are some grounds to believe the impact of Brazil's move can be contained. For one thing, the country's long-running budgetary problems make this ''probably the most well-anticipated crisis of this decade,'' Mr. Kasman said. And Brazil's importance to Latin America and the United States provides reasonable assurance that the country will get help from abroad. President Bill Clinton indicated as much Wednesday after being briefed by Treasury Secretary Robert Rubin. ''We have a strong interest in seeing Brazil carry forward with its economic reform plan, and succeed - and we think they will,'' he said. But the Brazilian devaluation represented a blow to IMF and U.S. efforts to defend fixed or semi-fixed exchange-rate regimes as part of their recovery strategy for emerging market economies. ''It's the same mistake three times in a row,'' Mr. Wyplosz said. ''Asia was a mistake, Russia was a mistake, and now they've done it again.'' The strength of the U.S. economy, which grew at a rate of nearly 4 percent last year and created close to 3 million jobs, suggests it is well-placed to absorb any shocks. Low inflation in the United States and Europe also gives central bankers leeway to ease monetary policy if growth flags, as they did last autumn. Some money managers said the financial shocks of the autumn, including the near collapse of the big American hedge fund Long-Term Capital Management LP, have wrung a lot of speculative excess out of world markets. ''I don't think this will lead to a systemic shock like we saw in August,'' said John Praveen of Credit Suisse Asset Management. ''We don't have the same degree of leverage that existed at the time of Russia's default.'' Nevertheless, analysts said the risk of a free fall in the real was great after Brazil eliminated the daily trading band for the currency and doubled its depreciation target for this year to as much as 15 percent. The currency plunged as much as 9 percent Wednesday, and recent figures have indicated that capital flight has increased in recent days. The uncertainty caused by the devaluation is likely to prevent Brazil from lowering interest rates, worsening the country's recession. Even before the move, the government was forecasting that output would contract by 1 percent this year, while some analysts were forecasting a decline of at least 4 percent. Brazil also is committed to cutting its budget deficit to 4.7 percent of gross domestic product this year from 8 percent in 1998. The impact of the fall of the real could spread to neighbors like Argentina, which would have to raise interest rates to defend its currency. Mr. Fox of Fitch IBCA said Argentina's economy could register zero growth this year, compared with a government forecast four months ago for up to 5 percent growth. Brazil is the United States' No.15 trading partner, but it is a rich source of profits for many blue-chip American companies like Whirlpool Corp., which registers about 10 percent of sales in the country. Bill Martin, chief economist at Phillips & Drew, the fund management arm of the Swiss bank UBS, said rising share prices have encouraged U.S. consumers and companies to spend more than they earn. If the stock market falls and consumers and companies retrench, the U.S. growth rate could be slashed by 2 percentage points a year for the next five years. International Herald Tribune, Jan. 14, 1999