Hi, Rob, You are probably right that Camdessus is just covering his rear. The IMF is intellectually bankrupt. Its traditional function as a cross border monetary ambulance has been heavily damaged by events of the past two years. Having been criticized heavily for failing to detect the Asian financial crises until after the first one broke out in July, 1997 and failing to realize its seriousness even after it broke out, and having dispensed harmful prescriptions that exacerbated the crises, Camdessus is finally learning to talk like Greenspan: there is nothing wrong with being "exuberance as long as you realize its exuberance." The IMF, realizing that real reform in Asia and in international institutions cannot be realistically achieved, is aping American policy of defying classical economic theory with a policy of free market manipulation. Instead of economic fundamentals leading the financial and foreign exchange sectors, it's new approach is to create artificial financial momentum to lead economic recovery. Camdessus hopes the new approach will work if no one is rude enough to ask embarrassing questions for 18 months, until the damaged economies can be lifted from financial euphoria. The key words now are: low interest rates, high liquidity, price stability that resists both deflationa and inflation, and fantastic p/e ratios based on future potentials while discounting current difficulties. If it works for America, why not Asia. After all, it worked in Asia until "confidence" vanished overnight, spooked by the fixed exchange regime to which both Summers and Camdessus are both now opposed. There is only one problem: the American bubble miracle may burst before Asia can benefit from its doctrinal spill over. If NY can hold for another 10-18 months, Asia can probably recovery for another cycle. But that is a big IF. One thing is true: with every cycle of boom and bust, a huge amount of wealth is transferred from the indigenous population to the globalists. Henry C.K. Liu Rob Schaap wrote: > G'day Henry, > > Might the 'irrational euphoria' discerned by Camdessus not be a bit of > hedging - y'know, money trickling out of Wall St in anticipation of hikes > and such? Mebbe Asia's stock markets are slowly taking on the countenance > of relative safety for money that can still not find options as 'attractive' > in the sphere of new production. > > Out of an anticipated fire into the frying pan sorta thing. > > Nonsense? > > Cheers, > Rob. > > >Tuesday May 18 1999 SCMP > > > > Camdessus urges caution > > > > DAVID SAUNDERS > > > > Recent rallies on Asia's financial markets are > > premature and smack of "irrational euphoria", > > according to the International Monetary Fund's > > managing director Michel Camdessus. > > > > Speaking in Hong Kong, Mr Camdessus > > warned that while the new-found optimism > > across the region was understandable as > > economies started the process of recovery, > > much work needed to be done in terms of > > financial restructuring. > > > > The recovery on stock markets, while > > appropriate after almost two years of turmoil, > > was happening a little too rapidly, he said. > > > > "People were talking about a deep recession in > > the making for Asia . . . Now we are possibly > > at a turning point, or even possibly after the > > turning point," Mr Camdessus said. > > > > "But I am a little bit concerned that after > > instances of excessive pessimism, we are now > > in a phase . . . of a degree of irrational > > euphoria. So we must be careful in our > > judgment." > > > > However, during a speech beforehand, at the > > Pacific Basin Economic Council's international > > general meeting, Mr Camdessus noted > > considerable progress had been made towards > > improving the international financial system. > > > > "We are at the point now where - let me be a > > little impertinent - central banks no longer > > compete for a reputation for secrecy but for > > one of transparency," he said. > > > > He called for full liberalisation of capital > > movements in a "prudent and well sequenced > > fashion". > > > > He said that while the ultimate goal of financial > > institutions and all governments should be for > > trade liberalisation and greater regulatory > > transparency, he acknowledged there was > > sometimes a case to argue for capital controls > > to be imposed on a temporary basis. > > > > "Generally, consensus is emerging that capital > > controls do not deal effectively with > > fundamental economic imbalances, but may > > only be useful in certain circumstances," he > > said, adding they were in fact accounted for > > within the IMF's own articles of agreement. > > > > "[But] controls may have a place when there is > > the risk of a crisis, but only to allow a breathing > > space for other fundamental measures to take > > effect." > > > > Such controls were generally more effective > > when imposed on capital inflows rather than > > outflows, such as those erected by the > > Malaysian Government in September. > > > > Any future work on financial reforms needed > > to include social consideration, he said. The > > financial crisis had exposed the inadequacy of > > social welfare systems across Asia, where > > people had traditionally relied on family-based > > support. > > > > Mr Camdessus also said stronger nations had to > > do more to integrate developing states, which > > were not benefiting from the global economy. > > > > "Too little is being done by industrial countries > > to facilitate this integration, for instance by > > opening their markets or by extending official > > development assistance," he said. > > > > Mr Camdessus said all financial institutions, > > including the IMF itself, had to ensure that they > > evolved in line with the changing global > > economy and that all countries were given an > > opportunity to participate in the > > decision-making process. > > > > Asked for his observations on the Hong Kong > > economy, Mr Camdessus said the IMF > > believed it had reached a turning point, > > although unemployment remained high. > > > > He said the SAR Government was right to > > defend the peg and retain it even though it had > > undergone immense pressure. > >
