[PEN-L:1298] Global margin call?

[Louis Proyect <lnp3@xxxxxxxxx>]

Today's Wall Street Journal has a front-page article that takes an
interesting tack. It describes what is happening as a "global margin call."
David Berry, a bank analyst at Keefe, Bruyette & Woods Inc. in New York,
says, "Everyone in the world wants their money back. It's like there has
been a global margin call."

Which raises an interesting question. What economic historians like to
point out is that the crash of '29 was the result of overextended margin
accounts. Reforms enacted during the New Deal required brokerages to raise
the percentage of cash backing for margin accounts. This supposedly would
prevent another '29.

On the other hand, isn't it true that the bubble of the last 15 years or so
has been based on the equivalent of margin accounts for entire nations.
Billions are loaned to Brazil, Thailand, Russia et al to support
investment, but the beneficiaries of the loans seem to lack the wherewithal
to repay the loans. The shortfall is based on the inability of the capital
investment to produce a profit. Thai office buildings go unrented, Hyundai
cars are stockpiled in warehouses, roads are built to carry the unpurchased
vehicles, etc. Is this any different than somebody loaning me 75% of the
money I need to buy a thousand shares of Hyundai stock?


Louis Proyect
(http://www.panix.com/~lnp3/marxism.html)