Hello Karl? It's the dollar...

Jordan Hayes jmhayes at j-o-r-d-a-n.com
Fri Aug 28 10:04:47 PDT 1998



>Al may be worried, as much evidence suggests that those "sound
>macroeconomic policies" are history in some countries.
>
>Take Russia. After the country's panicked devaluation and default last
>week, the free-market reformers have been swept off the board.

One problem that Russia faces is that you can't simply "declare" a free market: you have to be able to support it. A big piece missing from Russia is law and order: without it, any free-market valuation is suspect. In order for free-market policies to work, you must have transparency. Japan found this out the heard way; no one really knew the extent of the losses that were being hidden until it was way too late. Similarly China will have a hard time unless they open themselves up to scrutiny.

Back to Russia: this flip-flopping of policy direction seems inevitible until/unless law and order can be re-established. The stock market will continue to go down as people realize that the only things of value in that country are being stolen. During the last days of Suharto, I heard people say: there *can't* be anything of value left in that country, because if there were, Suharto would have stolen it by now.

/jordan



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