"The fact is that although millions of people in emerging markets have suffered horribly -- losing their jobs, going bankrupt, sinking into poverty -- the crisis wasn't long enough or deep enough to result in the kinds of corrective measures that would result in a less risky global economy. Indeed, little of a fundamental nature has changed, and in some respects the environment is more fragile today. . ." Indeed. As the new growth regime depends more and more heavily on the fortunes of the dollar, the entire arrangement becomes incredibly prone to collapse. According to UNCTAD, during 1998 the dollar appreciated significantly (upwards of 10%, as much as 77% for Indonesia) against every major currency except 4 (DM, pound, franc, lira--against which it depreciated by less than 1% average). For now, the U.S. can serve the happy functions of consumer of last resort and international finance shelter. As the U.S. accrues more debt and allows its balance of payments deficit to head skyward, the dollar will cease to be able to serve its reserve function--and the low inflation holiday in the U.S. will end. The new prosperity will look very different from that angle. The IMF's resistance to even the most modest of reforms, like Chilean-style capital inflow surcharges, some regulation of short-term cross-border interbank lending, or new terms for contracts (non-acceleration clauses, etc.) has been incredibly short-sighted. Were not the IMF an annex of the Fed-Treasury-Wall St., one has to wonder if we'd understand this to be the scandal it is. Christian
