>Max Sawicky, the incurable optimist and chicken little-basher, might note
>that 4th quarter growth in the U.S. was 5.6% and inflation's reminiscent of
>the 50s. I remember after the panic of 98, LTCM's near miss, and after the
>stock market bounced back Doug said something like the crisis is over,
>refered to '87 and jumped on the
>cooler-heads-will-prevail/chicken-little-poo-pooing band wagon.
>
>I said to keep an eye on Brazil.
So did I:
"Brazil could always blow; the country must make deep budget cuts to please the IMF, cuts that may be easier to promise than accomplish, and cuts that if made will sink the economy into depression. Depressions are never good for servicing debts, but if every penny is squeezed out, interest can be paid at a horrid social cost. A giant IMF package did nothing for Russia -- but Brazil's economy hasn't shrunk by 50% over the last 8 years either, nor is it a country run mostly by thieves. Brazil's creditors could refuse to roll over old debts -- there's little way the country can meet its present repayment schedule -- regardless of how much Robert Rubin, Alan Greenspan, and the IMF press them to. Were Brazil to default, or collapse like Thailand or Korea, then markets would almost certainly crash and the world economy could slip into recession or worse. Markets can punish a small macroeconomic miss with a 50% markdown, and if that happened to Brazil, it would bite the U.S. deeply."
>In three weeks, Brazil's currency has plummeted 43 percent. According to
>today's NYT: "The traumatic loss of value of the real has become the latest
>symbol of a global financial crisis that began in Thailand 19 months ago and
>has spread to East Asia, Russia and now Latin America.
>The plunge in currency has threatened to return Brazil to an era of
>hyperinflation and economic stagnation, possibly even leading to a default
>on its debts."
If Brazil blows - a citation of Volcker's concern that Mexico might "blow" in the early days of the 1980s debt crisis - and world markets blow with it, then the crisis is back on the front burner for sure, and the chances that this crisis is the real thing rise a lot.
>I've heard a rumor, I believe by the way, that Christopher Hitchens and
>Alexander Cockburn are both coming out with books on Clinton in late
>April/early May and will do a joint book tour. Hitchens's will be titled "No
>One Left to Lie To" and Cockburn's - "The Joy of Sex."
You have good sources.
Doug