Subject: A worse threat than Monica is $$$ meltdown.....
Date: Tue, 25 Aug 1998 060057 -0500 (CDT)
From: "Roy L. Beavers" <rbeavers@llion.org>
To: emfguru@hotmail.com
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Hi everybody:
If you are responsible for the financial management of "a few"
dollars ... you have to be aware of the following...
It is a much worse scenario confronting the U.S. than the Monica
comedy.....
To jump to a simple, fundamental explanation of what the following
news report is all about: The WORLD is now totally relying on the
soundness of the U.S. dollar ... for the maintenance of a sound world
economy....
Not a good idea????? The history of world financial/economic behavior,
when one PAPER MONEY has become the basis for all value, is not
reassuring...
Inevitably that PAPER MONEY becomes "stretched" too thin -- as more
and more people begin to hoard it. Literally, in Russia and elsewhere
outside the U.S., a growing lack of confidence in local currencies is
resulting in people of many nations converting their local assets into
$$$$ (paper money) assets.... This total reliance on paper is vulnerable
to a sudden devaluation of that PAPER ... as would occur (quickly), for
example, in the case of a small turn-around in the inflation rate of the
U.S.
The effect of such a "small" inflation rate turn around would be magnified
-- in the eyes of the money managers -- and suddenly they would prefer to
hold gold, silver, platinum, etc., rather than $$$$$ paper money...
All those $$$$ "stuffed in the mattresses" of the world ... would suddenly
start to lose value....
History makes it plain that in such situations, paper money -- of any
denomination -- is not a particularly good "hold."
What did Warren Buffet do about six months ago??? He started to
accumulate silver! He could now be buying platinum or gold as well, for
all we know ... as the "supply" of those metals begins to look more
vulnerable with the turmoil in Russia......
(I wish I really DID own that gold mine in the Ozarks I often talk about!)
Cheerio.....(P.S. There is NO gold in the Ozarks.... Except in the
joy and goodness of living there!!!!!) Nevertheless, some of you may see
something of value in the following report off the wire this morning.....
I commend it to your attention if you are managing any money....
Roy Beavers (EMFguru)
rbeavers@llion.org..............http://www.feb.se/EMF-L/EMF-L.html
................................It is better to light a single candle ...
than to curse the darkness...............................................
_________________________________________________________________
06:51 PM ET 08/24/98
Global meltdown poses nightmare scenario for U.S.
By Knut Engelmann
WASHINGTON (Reuters) - As U.S. Treasury Secretary Robert
Rubin enjoys a last week of summer vacation, a nightmare
scenario is threatening to unfold for the global economy that
could be beyond the reach of U.S. policymakers.
The financial crisis that started in Asia last year once
looked manageable, but analysts warned Monday it may turn into a
global epidemic.
Billions of dollars in international emergency aid have
failed to contain the turmoil. There is hardly an emerging
market left that has been spared. Russia's economy is crumbling
fast, and now Latin America threatens to become the next victim.
``This is a serious global emergency,'' said Greg Mastel of
the Economic Strategy Institute, a Washington-based think tank.
''It's foolish to think that this problem is going to go away
overnight.''
Rubin has warned time and again that U.S. prosperity and
jobs, among the greatest achievements of the Clinton
administration, could be at risk if Asia's economic sickness
infected other emerging economies.
The speed with which it is spreading around the globe has
left U.S. policymakers scrambling for new solutions. But as they
struggle to keep up with the crisis, officials are running out
of fresh ideas.
``I don't think there's really much left that Washington can
do,'' said Jay Bryson, international economist at First Union
Corp. ``Nothing really sticks out that they haven't tried yet.''
``We must recognize that at best we can make marginal
changes,'' added Mastel. ``The bulk of the work must be done by
these countries themselves.''
Washington has had its successes in preventing a financial
meltdown. Huge rescue packages drawn up by the International
Monetary Fund under the guidance of the United States helped
some of the hardest-hit nations, notably Thailand and South
Korea, regain a semblance of financial stability.
Others have fared less well under the IMF regime, with
political and economic turmoil in Indonesia bringing down the
government of President Suharto.
An IMF-led $23 billion bailout package for Russia, concluded
a month ago, unraveled faster than Washington could have
forecast even in its worst-case scenarios.
What's more, the IMF's kitty has been all but emptied out,
leaving the international community ill-prepared financially for
whatever problem might spring up next.
That next challenge may well be a renewed round of economic
turmoil in Latin America. Last week, markets across the region
were pummeled by fears that Venezuela was about to devalue its
currency, fanning rumors that Brazil might not be far behind.
The financial firefighters at the U.S. Treasury Department
kept out of the limelight in recent weeks.
``We're watching things closely and we're in close touch
with the G7, the IMF, and our counterparts in major emerging
markets,'' a senior Treasury official told Reuters on Monday.
``Ultimately, what is important to a successful resolution
of these problems is sustained implementation of strong policies
to restore confidence,'' the official added.
Yet as Washington continues to lobby for economic reforms in
the affected counties, analysts said years of misguided policies
that helped to bring down many of the world's emerging markets
could only be dealt with effectively at their roots.
Russia, where President Boris Yeltsin has fired the entire
government of prime minister Sergei Kiriyenko because he failed
to address the country's worsening financial crisis that led to
the devaluation of the rouble, may be the best example yet for a
crisis in which Washington can do very little to help.
``This is almost beyond the reach of policymakers in the
Group of Seven (top industrial nations),'' said Thomas
Gallagher, a political economist at Lehman Brothers in
Washington. ``Just look at how impenetrable Russian politics
are.''
President Clinton will have a first-hand chance to gauge the
situation in Russia when he travels to Moscow next month,
accompanied by the Treasury's top trouble-shooter for
international affairs, Deputy Secretary Lawrence Summers.
A financial collapse in Russia alone would have little
effect on the still-booming U.S. economy.
But the Asian crisis already has caused the U.S. trade
deficit to soar, and all that combined with a collapse of wobbly
Latin American economies might all of a sudden ring closer to
home than most Americans would like.
``It's like hurricane Bonnie,'' said Mastel, referring to
the storm threatening the eastern U.S. seashore. ``These
problems are not of our own making, and they are beyond our
power to eliminate.''
^REUTERS@
Archive provided courtesy of WaveGuide, http://www.wave-guide.org
Reprinted with permission of Roy Beavers, http://www.feb.se/EMF-L/EMF-L.html