Y2K's heartbeat - the financial markets. Y2k wave one - two and three?greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Hi friends - one and all,
This is the first time I have started a thread - so please don't growl at me too much. I can't include a link because I don't know how.
Wave one. The currency crisis. It started in Thailand on the 2nd of July 1997 and continued until around the 8th of October 1998 when the U.S. Fed' cut interest rates. (The big money in financial markets sold early - and continued to sell, finally creating a panic. Wave one completed.)
Wave two. Markets recover - traders and everyone singing and dancing, borrowing to speculate at the bottom of what and is still perceived to be at time of writing, the continuation of the greatest bull market (sorry bubble) of all time. (Asian and other developing countries markets soar as we buy everything from them that we think might be in short supply post the year 2000. Be we I mean governments - all businesses large and small - and of course us. This creates a perception that the currency crisis is buried forever as their stock markets boom once more. Wave two incomplete? as some essential commodities soar - particularly oil. International air carriers - (In Australia - Qantas) - also expect a boom from now on with as much international freight being carried as possible before the main event.)
Wave three the currency crisis resumes. U.S. dollar starts to rumble higher. Euro goes to parity with the dollar. Unprecedented dollar buying as the international banking system sells assets to raise cash and increase reserves ahead of the main event. Funds are reinvested in short term treasury bills. I think the dollar call seems logical - the banks will have to do this. They too have to prepare - just in case - instead of just in time. Indeed they could have already started - witness the currency gyrations in Latin America last week. (The big money is going to have to sell this new boom in these not compliant developing countries - in my view not if - but when. As for stock prices - (this is much more tricky) I am going to pay attention to Ed Downs daily reports (see Omnitrader) and try and listen to the market.)
Once again, thanks for this forum. Many links have proved invaluable to me and my clients. I earn my living in financial markets.
ref: See Financial Times Y2k and Latin America 16.7.99 Omnitrader - Ed Downs. If you can catch BBC World Business Report - you must see Brian Fabri - (Bank Paribas) being interviewed on Y2K. Y2K HAS ARRIVED ON THEIR RADAR SCREENS. Stay tuned and mind how you go. cheers Pam.
-- Pamela J Lawrence (firstname.lastname@example.org), July 17, 1999
How fortunate your clients are to have someone like you that truly cares about THEM.
Your call on the dollar is contrary to many economists but on the mark I believe. During the last ten years as the the financial markets in Japan tumbled the Yen climbed ever higher.
Pamela, can you give us a URL (address) for any of this info?
-- Ray (email@example.com), July 17, 1999.
You may want to read the creeps (Bill Clinton) speech from last September --- he describes a financial crisis. Funny how this never really made the news. Little has changed since then. Of course you have to wade through his lies, but his admition of a financial crisis and his one-world view is plain to see. Heres the link address and a snip (its a very long speech):
You may have read about the Presidents speech in your local paper or seen it covered on you local news station. Did your newspaper, radio, or TV station tell you the speech was held at Council on Foreign Relations Headquarters, and delivered to members of the Council on Foreign Relations? How many Council on Foreign Relations members are mentioned in the speech?
THE WHITE HOUSE
Office of the Press Secretary
(New York, New York)
For Immediate Release
September 14, 1998
REMARKS BY THE PRESIDENT TO THE COUNCIL ON FOREIGN RELATIONS
Council on Foreign Relations Building
New York, New York
12:00 P.M. EDT
THE PRESIDENT: Thank you very much, Pete. Hillary and I are delighted to be here with you and Joan, and I'm glad to be joined by Secretary Rubin and Jim Harmon, Gene Sperling, other members of our team. I'm glad to see Dick Holbrooke over here. I hope, if we can overcome the inertia of Congress, he will soon be a member of the team again. (Applause.) And I thank David Rockefeller and Les Gelb and others who welcomed us here today.
The subject that I want to discuss -- let me just say one thing in advance -- I'm going to give you my best thoughts. We have been working on this for three years at some level of intensity or another, going back to the Naples G-7 meeting in the aftermath of the Mexican financial crisis. I have done everything I could do personally to reach out across the country, and indeed across the world, for any new ideas from any source. I'm going to give you my best thinking today about what we can do, but I want you to know that I'm here, and if I had my druthers, this would be about a three-hour session where I'd give this talk and then I would listen for the rest of the time.
So I want to encourage you, if you think we're right, to support us. But if you have any ideas, for goodness sake, share them, because I agree with what Pete said: this is the biggest financial challenge facing the world in a half-century. And the United States has an absolutely inescapable obligation to lead, and to lead in a way that's consistent with our values and our obligation to see that what we're doing helps lift the lives of ordinary people here at home and all around the world.
The Council on Foreign Relations has always stood for political and economic freedom, since right after World War I. And I think one of the things that has impacted all of us, and it was implicit in what Pete said, is that for the last decade the growth of freedom around the world, with more than half the people in the world living under governments of their own choosing, more than half the villages, the one million villages in China now, even electing their own governments, and this sweeping replacement of command and control economies by market economies. I think it seems to have happened so easily, so effortlessly, so inexorably, that I think we think the trend is inevitable and irreversible.
But if you consider today's economic difficulties, disruptions, and the plain old, deep, personal disappointments of now tens of millions of people around the world, it is clear to me that there is now a stark challenge not only to economic freedom, but, if unaddressed, a challenge that could stem the rising tide of political liberty as well.
Obviously we have profound interests here. It is a great irony that we are at a moment of unsurpassed economic strength at a time of such turmoil in the world economy. We, I think all of us in this room, know that our future prosperity depends upon whether we can work with others to restore confidence, manage change, stabilize the financial system, and spur robust global growth.
For most of the last 30 years, the United States and the rest of the world has been preoccupied by inflation, for reasons that all of you here know all too well -- and it was a good thing to be preoccupied with. Today the low and stable inflation we enjoy has been critical to our economic health, and low inflation has also contributed to that of many other nations as well. But clearly the balance of risks has now shifted, with a full quarter of the world's population living in countries with declining economic growth or negative economic growth.
Therefore, I believe the industrial world's chief priority today, plainly, is to spur growth. It seems to me there are six immediate steps we should take to help contain the current financial turmoil around the world, and then two longer-term projects in which we must be involved.
To take the immediate first, we must work with Japan, Europe, and other nations to spur growth. Second, we will expand our efforts to enable viable businesses in Asia to emerge from crippling debt burdens so they can once again contribute to growth and job creation. Third, we've asked the World Bank to double its support for the social safety net in Asia to help people who are innocent victims of financial turmoil. Fourth, we'll urge the major industrial economies to stand ready to use the $15 billion in IMF emergency funds to help stop the financial contagion from spreading to Latin America and elsewhere. Fifth, our Ex-Im Bank, under the leadership of Jim Harmon, will intensify its efforts to generate economic activity in the developing world immediately, in the next three months. And sixth, Congress must live up to its responsibility for continued prosperity by meeting our obligations to the International Monetary Fund.
Secretary Rubin has been working with his counterparts in the G-7 to get cooperative support for several of these measures. I understand Chairman Greenspan is also consulting with his counterparts on these items as well.
As we take these immediate steps, we also must intensify our efforts to reform our trade and financial institutions so that they can respond better to the challenges we now face and those we are likely to face in the future. We must build a stronger and more accountable global trading system, pressing forward with market-opening initiatives, but also advancing the protection of labor and environmental interests, and doing more to ensure that trade helps the lives of ordinary citizens across the globe.
Above all, we must accelerate our efforts to reform the international financial system. Today I have asked Secretary Rubin and Federal Reserve Board Chairman Greenspan to convene a major meeting of their counterparts within the next 30 days to recommend ways to adapt the international financial architecture to the 21st century.
-- Jon Johnson (firstname.lastname@example.org), July 17, 1999.
Thanks Pamela. Good post. Increasingly, some folks are viewing Y2K as the pin for the bubble, as well as a trigger event itself for other potential serious problems. The people sleep still, with an occasional stir.
The rampant currency speculation by the big players continues unabated, as national debt continues to grow faster than GDP, and we have a negative savings rate coupled with high levels of consumer debt. Not healthy. Add in the vast amount of leverage in derivatives, chronic trade deficits, the steadily increasing money supply, and a fiat system that rests on confidence during a time of increasing uncertainty and what do you have?
Trouble, imho. As I have posted so often, follow the money.
-- Rob Michaels (email@example.com), July 17, 1999.
"Y2K as the pin for the bubble." Good analogy, Rob.
Thanks for your insight Pamela.
After "follow the money" I'd suggest "follow the oil to it's source, then back track over the potential choke points for global delivery."
Then speculate on the economic repercussions, next year, for the global trading system.
-- Diane J. Squire (firstname.lastname@example.org), July 17, 1999.
Link: BBC Workd Service: World Business Report
-- Tom Carey (email@example.com), July 17, 1999.
(Guess I'll have to stay after school and write "World" on the blackboard a hundred times.)
-- Tom Carey (firstname.lastname@example.org), July 17, 1999.
Yes but... Tom... will that "Work" or not?
-- Diane J. Squire (email@example.com), July 17, 1999.
The currency crises has only been masked.
The fact that interest on yen is lower than the interest on gold leases speaks volumes. Think arbitrage, futures, currency trading, and propping the Japanese economy. Yen can be created by printing presses, yet it has a lower interest than gold - a material with finite quantities?
The gold from the British sale is not hitting the street - 25 tons! - where did it go? Physical delivery is tight, yet millions of ozs (paper) are traded regularly - which entity is pinched so badly that only a physical transfer of 25 tons could satisfy an untenable short position? Recall LTCM's Fed bailout.
I believe that in retrospect the British sale will be viewed as the beginning of the pricked bubble - other parties have just talked re gold sales, England did the walk.
Watch Japan. Watch the biggest trading houses. Both groups are doing the Wile E. Coyote dance in mid-air.
"The fate of the world economy is now totally dependent on the growth of the U.S. economy, which is dependent on the stock market, whose growth is dependent on about 50 stocks, half of which have never reported any earnings."
- former Federal Reserve Chairman Paul Volker May 1999
-- Mitchell Barnes (firstname.lastname@example.org), July 17, 1999.
The millennium (Y2K) bug poses additional dangers, with some analysts predicting investors will pull money out the region for fear of a New Year's Eve financial meltdown.
"We fully expect a rush of private capital out of emerging markets sometime before the Y2K bug evolves into a problem," says Carl Weinberg, chief economist at High Frequency Economics. "If so, huge capital outflows from emerging markets before the end of this year will cause monetary implosion across the developed world and reverse all the incipient economic recoveries."
-- Linkmeister (email@example.com), July 17, 1999.
If anyone saw CRASH on Frontline on PBS, it explained a lot. WE are not the good guys in all this--we--and the IMF, which we control--are the capitalist vultures, breaking down economies with the help of currency traders. It's an evil scene. Pop, indeed. I'm 90 percent out of the market, watching my other stocks because they are low enough to want a little something to go up. Other than that, I am gambling that the government will hold. But it might not.
-- Mara Wayne (MaraWayne@aol.com), July 17, 1999.
You have raised legitimate concerns.
I watch each new market high with disbelief that my assessment of the Year 2000 set of problems has any validity, but I only have to think back to market activity in Aug, Sep 1987 to remember the lesson.
Bad things happen fast, and no one rings a bell to announce the event.
IMO, the only thing holding this market up is the tax code, the worker bees and the pension funds are carrying the load.
A few people are looking ahead to Jan, but if the GPS rollover goes poorly the exits could get jammed.
I don't believe we have one hundred and sixty some days, but I would be glad to be wrong (again).
-- Tom Beckner (firstname.lastname@example.org), July 17, 1999.