----- Original Message ----- From: "Doug Henwood" <dhenwood at panix.com> To: "lbo-talk" <lbo-talk at lists.panix.com> Sent: Saturday, August 25, 2001 1:12 PM Subject: potentially disorderly rebalancing
> [For you connoisseurs of chaos: from the IMF's recent Article IV
> consultation with the U.S. - the same doc that said that Bush & Co.
> were underestimating the cost of their tax cut by half, and
> expenditures by a few hundred billion
> <http://www.imf.org/external/pubs/ft/scr/2001/cr01145.pdf>.
> "Missions" is always a nice touch.]
>
> Discussions with market participants during the International
Capital
> Markets missions focused on concerns about a renewed sharp repricing
> in U.S. equity and fixed-income markets in the event of a prolonged
> economic downturn in the United States. In such circumstances,
> problems in household and corporate balance sheets and in the
> external imbalance could lead to a significant and potentially
> disorderly rebalancing of domestic and international portfolios and
> give rise to increased volatility and the repricing of assets in
U.S.
> and international markets, including, possibly, a sharp decline in
> the value of the dollar. Spillovers and contagion to other markets
> could also result, including adjustments in European financial
> markets (which had been highly correlated with U.S. markets) and a
> deterioration in external financing conditions for emerging markets.
==========
Looks like they've been reading Martin Mayer's '99 screed on Risk
Reduction at Levy:
< http://www.levy.org >
Ian