[PEN-L:4276] US econ NOT strong/global econ crisis; US Economy Ready to Burst

[Michael Eisenscher <meisenscher@xxxxxxx>]

FROM: Kim Scipes <sscipe1@xxxxxxxxxxxxxxxxx>

Dear Folks--

Our local weekly labor radio show here in Chicago asked me to write and
record an editorial on the economy for them, and it is scheduled to be
aired this Sunday night on WLUW in Chicago (FM 87.7 at 6:30 if you're
nearby).  They agreed that I could send this out over e-mail now.

This is my best thinking on the economy at this time.

Please feel free to copy and/or distribute widely, or post on web sites.  I
would appreciate knowing about any place it is published.

March 10, 1999
Labor Express Editorial:  The US Economy is Not as Strong as Is Claimed
--Kim Scipes

Over the past two years, the mainstream mass media have irregularly reported
the global economic crisis that is currently taking place across much of the
world.  When they have reported on the crisis, much of the reporting has
only talked about economic changes, such as the decline in Gross Domestic
Production in these countries, the devaluation of their currencies, the
decline of their stock markets.
However, a few of the reports have suggested the range of social devastation
taking place in the affected countries.  They have told us about people who
were once rich who are now selling sandwiches in the streets of Bangkok.
They have told us about grandparents in rural Indonesia, starving themselves
so their grandchildren can eat.  They have even told us about people who
have lost their jobs and have migrated back to the countryside from the
cities; the cities where they had once moved to make their fortunes-and from
where they had hoped to support their parents.
But, again and again, they have told us that the United States economy
remains immune from these global forces.  They have told us our economic
"gurus," especially Federal Reserve Chairperson Alan Greenspan and Secretary
of the Treasury Robert Rubin, have kept our country's head above the water
that threatens to drown the rest of humanity.  We don't have to worry about
such things:  after all, we're Americans!
Labor Express disagrees with this position.  We argue that the US economy has
been already affected by this global crisis, and we expect it to get worse,
especially for working people.  We're going to talk about this in some
detail tonight.
Let us understand what is going on, as opposed to just blindly accepting
what we are being told.  This crisis has been portrayed as a financial
crisis.
Supposedly because of "crony" capitalism and with the support of their
respective governments, corporations in these countries borrowed too much
money from Western banks and, beginning in July 1997, have been unable to
pay back the money they owe.  Western speculators and investors, seeing that
these countries might have to devalue their respective currencies, then
withdrew massive amounts of capital from these countries, ensuring that
possible devaluations would then become certainties.
These countries were then told that, to get money to pay off their debts,
restore the value of their currencies, and keep their international credit
ratings safe, they must approach the International Monetary Fund and get a
loan to help them pay off the banks.  But what has not been emphasized is

that these countries' budgets have generally been in pretty good shape-it
has been private corporations that needed the bailouts, not the particular
countries!
The IMF, however, requires that countries meet certain conditions before it
will lend them money.  In every case, the IMF has required the countries to
accept responsibility for the private debt-in other words, to nationalize
the debt-and then to cut off social subsidies that go to poor and working
people so the country can now pay off its debt!
Countries that have accepted IMF conditions-including South Korea, Thailand,
Indonesia, the Philippines, Russia and Brazil-have all drastically cut back
programs designed to help poor and working people when they exist.  This is
on top of drastic reductions of employment in these countries, and these
countries have almost no safety net protections such as unemployment
insurance.
So we have people all over the region suffering-a past issue of Business
Week described conditions on the ground in Asia as a "depression" for
ordinary people.  And the reason for the supposed problem is a lie.
The problem is that the crisis has not been primarily a financial crisis-it
has been caused by an overproduction crisis.  In plain language, more goods
have been produced than can be sold in the global markets.  Many of the
companies that have contributed to this overproduction in Asia have been
world-class firms owned by Japanese, South Korean and American companies or
firms contracted to them.
Because of their efficiency, banks lent more and more money to these firms
and their owners.  These executives invested further in creating productive
efficiency, along with speculating in office buildings, golf courses, and
financial instruments called derivatives.  The goal was to make themselves
even richer.  At the same time, the Western banks-who must loan money so
they can get even richer-kept offering more and more money to these firms
and their owners.  The ultimate cause of the crisis, simply, is that the
rich were not satisfied with their wealth but who wanted even more, as did
those whose jobs depend on making the rich even richer.
The scam collapsed because of the overproduction of goods.  As more goods
were produced than could be consumed, prices had to fall-and they did.  In
efforts to restore profits and keep jobs through generating more sales,
government leaders began to devalue their currencies in efforts to regain
competitive advantage.  This started in Thailand but spread across Southeast
Asia, and countries whose exports competed with the Thais also were forced
to devalue.
The end result was the massive devaluation of currencies across East Asia,
and capital was violently sucked out of the region, as there were places
where this money could be more  profitably invested:  in 1996, $93 billion
had been invested in Thailand, Malaysia, Indonesia, the Philippines and
South Korea, but in 1997, not only was there no net new investment but $12
billion was taken out of these same countries.  This means that there was a
minimum "loss" of $105 billion to these five countries between the two
years, assuming the same level of investment would have taken place in 1997

without the crisis as was made in 1996.
The value of the Indonesian rupiah, to refer to the most extreme case,
dropped 80% against the dollar.  That means that people had to earn 80% more
just to maintain their same standard of living-and I'm willing to bet that
wages and salaries didn't jump 80% to help them out.
This crisis generated problems beyond just devaluation and economic
devastation in East Asia.  The production boom in Asia had been based on
using massive amounts of oil and other petroleum products, as well as other
raw materials.  When economies collapsed in East Asia, this greatly reduced
the demand for raw materials that are produced around the world.  This meant
that the raw materials-producing economies were also hurt.
In other words, raw material-producing economies were producing for markets
generating great demand and high prices for their raw materials.  These
countries were basing their budgets and economic programs on the
continuation of money coming in to fund them.  The collapse of East Asia
knocked them on their butts.  This is what caused the crisis to spread to
Russia.
It has taken a few minutes to draw a more accurate picture of what's going
on-and we could develop this further, but we think we've given enough
information so that what we say now is going to make sense.  With this
understanding that what we're seeing is a crisis of overproduction that has
economically devastated a number of countries in East Asia, plus
economically devastated a number of countries whose economies were devoted
to supplying the demand for raw materials from East Asia, we now want to
shift attention from overseas back to the United States.
First of all, despite statements to the contrary, the US economy has been
hit already by the global financial crisis.  While the economy as a whole
has not been hurt, sectors of it have:  for example, tourism in Hawaii has
been devastated, as Korean travelers in particular have cut back their
traveling, and tourism underpins Hawaii's entire economy.  In the Midwest,
agriculture has been hit:  there have been massive losses among grains, corn
and hog producers, as their export markets in East Asia have dried up, and
as a result, agricultural machinery manufacturers such as John Deere have
been hurt.  And steel imports into the United States have been priced so low
that US steel producers and the United Steelworkers Union have been lobbying
for import restraints and increased tariffs to counter low-priced imported
steel.  There are no indications that any of these situations are going to
turn around in the near future.
Second, the situation is going to get worse, especially among US exporters.
Already, Boeing has announced that it has terminated or will terminate
48,000 workers in the near future-and these are overwhelmingly skilled,
high-waged jobs.  Because of the economic crisis across Asia, airline travel
is off, drastically reducing the demand for more aircraft.  Layoffs of this
magnitude, and especially of workers who earn such high wages, will
reverberate throughout local economies in places like Seattle, Long Beach
and perhaps even Wichita, Kansas.

But almost all manufacturing industries that depend on export markets will
get hurt.  These are industries that pay higher than average wages, so the
impact will go beyond those laid off and their immediate families.
But things are going to get worse. Brazil's economy is now going into the
tank, and hurting Argentina's along the way.  These countries have been two
of the top 10 importers of US goods over the past few years, and they will
no longer be able to import at anywhere the level that they did in the past.
And, at the same time, economies in Europe are also now slowing down.  Even
Germany, the locomotive of the European economy, lost ground at the end of
last year.  Since exports to Europe have been helping keep US exports as
high as they've been, any contraction in Europe will come back to hurt US
exporters-and that means more jobs will be lost.
At the same time that US exports have been undermined, because our economy
is so strong, US imports have climbed.  The balance of trade gap-the
difference between our exports and our imports-was bigger than ever in 1998,
reaching a -$230 billion gap.  It looks like a $300 billion deficit in 1999
is almost a certainty.
Are we being "chicken little"-like here?  After all, the economy is in the
best shape it's been in a very long time-at least that's what our leaders
tell us: we now have the lowest unemployment rate in 28 years.  And yet,
according to MSNBC, over 50,000 manufacturing jobs were lost last month,
with 337,000 manufacturing jobs lost since March of 1998.  In fact, 1998 had
the greatest number of layoffs in a decade.
What is happening is that higher paying manufacturing jobs are being
destroyed and jobs in the low-end of the service sector are being created
and, statistically, everything looks wonderful.  But last month, in February
1999, aircraft manufacturing lost 6,000 jobs; industrial machinery
manufacturing lost 7,000 jobs, and electrical equipment manufacturing lost
2,000 jobs.  At the same time, 123,000 jobs in retail trade were created.
And, of course, the retail jobs paid a lot less than those lost in
manufacturing!
But we can't stop just yet-the financial sector must be considered.  The
fact that we have both a stable society and a very profitable stock market
has sucked in much money from around the world.  This means two things.
First, it has been this vast influx of money into the US that has kept
inflation low.  There has been so much money available that banks have had
to compete to make loans, and that has meant that their interest rates have
gone down.  Reduced interest rates have fueled home and car sales, both
which have contributed to the economic growth.  These reduced rates have
also fueled consumer spending on all kinds of things.  Altogether, these
factors are responsible for about 2/3s of all spending in the US-our
economic good times have been based on spending by American families.
Tied into this, are the reduced costs of both manufactured goods imported
from areas such as Southeast Asia and the reduced cost of raw materials
imported into this country--most importantly, the price of oil has gone
down, as we've seen at the gas pump.  Thus, American families have been able

to buy even more goods than they have before and their standard of living
has been raising, and so running up their debt to buy consumer goods can be
considered "rational."
However, there is a time bomb ticking here.  Consumer debt is higher than it
has been ever before, and so are the number of bankruptcies:  bankruptcies
per year have jumped from over 800,000 in 1987 to over 1.4 million last
year.  No one wants to talk about this-but we cannot ignore it when we
realize bankruptcies are at their highest level ever, and this is during
good times when so many of us are employed.  And because of the low
unemployment rate, workers have been getting raises that exceed the rate of
inflation as firms try to hold on to their employees.  So at a time when
people are employed and wages are going up, the number of bankruptcies is
mushrooming:  what is going to happen when the economy slows???
Second, as money has been flowing into the US economy, the stock market has
soared.  Something like 44% of all Americans now own stock, the highest
level ever, although most stock ownership is concentrated among the rich.
At the same time, the baby boomer generation is starting to hit its peak
earning years, and they are throwing money into the stock market so as to
maximize their returns for retirement.  Accordingly, the stock market's rise
has been so spectacular and so many people have shifted their money from
savings in bank accounts into mutual funds or other stock-based financial
programs, that today Americans have a negative savings rate-what this means
is that, overall, as individuals, we don't have any money in the bank.  In
other words, when the stock market tanks, as it must, people are going to
really be hurting.
The stock market's performance thus becomes even more critical to our
economy-not only as a measure of financial well-being, but perhaps more
importantly as a symbol of personal financial health and well-being.
People's confidence in the future is ever more dependent on the continued
strong performance of the stock market.
But there are real problems in the stock market.  Supposedly a measure of
future earnings potential-and thus a measure of real value-there has been an
incredible volatility in the stock market for at least the last six months.
Not only has it gone up 100 or even 200 points in a day, but sometimes there
has been a couple hundred points fluctuation during the same day!  This
shows that the value of stocks are not based on real value, but on what
folks think other folks will think about a particular stock.  The stock
market is now, in a way not seen since before the Depression, an elaborate
set of psychological relationships among traders-and that is scary.
At the same time, the great run-up in stock prices is based on an
ever-narrowing base of stocks:  you have too much money chasing too few
stocks, and so that is also helping to drive prices even higher.  The market
becomes a subject of fads.  Bio-technology firms used to be hot; now, they
are nothing.  Internet and computer-related stocks are now hot:  but
according to the Wall Street Journal, Dell Computer alone lost over $40

billion worth of value in the first half of February as its stock price
declined!  Business Week reports that technology-related stocks are not
meeting analysts' expectations of profitability in the first quarter of
1999.
The prices of Internet stocks have gone through the stratosphere, and many
of these companies have never even made a profit.  When you consider that
prices supposedly indicate profit-making potential, and you see prices like
we've seen on Internet stocks that have never shown a profit and might not
show any profit in the next few years, you know something is wrong.
Our economy is in much worse shape than anyone is admitting, at least anyone
in a position of power.  The resemblance to a shell game grows greater
almost daily-on Friday, March 5th, the unemployment rate climbed from 4.3%
to 4.4%, and the stock market celebrated  this increase in unemployment by
jumping 267 points to all all-time high.
The problem is that the economy threatens to get out of control.  Because of
all of the money going into the stock market, the value of chosen companies
is increasing, they can get additional credit from the banks to help them
expand, and the economy is growing faster than is normally sustainable.
Stock traders are scared that the Federal Reserve will raise the interest
rates, and that the stock market will then fall.  Interest rate hikes scare
traders because the increases will slow the economy and traders are afraid
that investors will take their money out of the stock market and put it into
bonds, which are more stable in times of insecurity.  Shifting money from
stocks to bonds means less money is available to buy stocks, so as the
demand for stocks declines, so will stock prices-and stock traders and
investors will lose money.
The stock market plunged last September, and it recovered only after the
Federal Reserve cut interest rates three times.  In other words, like a
junkie with his heroin, the stock market needed a money infusion, and it got
it through lower rates.  Likewise, a withdrawal of money, through higher
interest rates, threatens to really bum the market out, as it does without
its fix.
However, as bad as this scenario appears-with the Federal Reserve increasing
interest rates to slow the economy-this is the good situation.  The worse
situation comes from the growing trade deficit directly caused by the global
economic crisis.
Let me explain.  As the trade deficit expands, this puts additional pressure
on the value of the dollar, and it is likely to weaken.  The Clinton
Administration has consistently sought to maintain a strong dollar, and this
policy will be challenged.  A weaker dollar will ultimately help our trade
balance in goods, but will hurt our trade in services-our services won't
cost as much to importing countries, so this contribution to our economy
will be reduced.  At the same time, a weaker US dollar will mean that it
will cost more for US investors to acquire companies and property overseas,
and so they won't be as able to take advantage of the IMF-imposed
"austerity" plans overseas, which we are convinced are intended to weaken
competing economies in the so-called "third world."

In other words, Clinton and his friends in the high-end of the service
sector, like the multinational banks and international law firms, want the
US dollar to be strong against other currencies.  But the growing trade
deficit is now so large that it threatens the strength of the dollar.
Unless other currencies fall more than the dollar-and here I'm thinking
especially of the new European euro-then the Federal Reserve will have to
raise interest rates so as to maintain the strength of the dollar.  And if
that happens, if interest rates rise, then I think we'll see a big drop in
the stock market.
When we see a big drop in the stock market-and I said "when," not "if"-then
the economy will slow.  Even more people will be thrown out of work.
Particularly hard hit will be the people at the bottom, and with the drastic
cutbacks under Clinton of the welfare system, there will be little to catch
those who loose their jobs but really have no skills to get another in a
slowing economy.
And yet, we're not there yet.  But even so, for many working people, there
is considerable economic uncertainty, even now, in the so-called good times.
Job loss in 1998 was higher than it had been in the last decade.  Averages
hide great disparities, and we're confident that the differentiation of
incomes and wealth between those on the high end and those on the low end
has become greater, even though real incomes as a whole increased:  after
all, we're already back up to what people were making in 1989!  The problem
is that this is still below what people made in 1979.  Our expectation is
that income inequality has continued to grow.  One out of five children
under the age of 18 live in poverty, and something like 37% of all Americans
have no medical insurance:  for allergy sufferers, to give one "small"
example, although its not small if you suffer from allergies, this means you
must pay $78 for 30 tables of Claritin-D..  And again, they tell us these
are the best of times.
How long can the "good times" continue?  Quite frankly, we don't know-it
could go on for a while.  But when it comes, it is going to be nasty-and the
more regulations and controls on the economy that are removed now, the
greater the economic impact is going to hit those of us below the top 20% in
income.
The reality is that our governmental leaders are reshaping our political and
economic situation to benefit those that already have power and income.
They are hiding this behind the increased number of "bread and circuses"
that they are feeding us, whether its professional sports, different
versions of Nike tennis shoes, or the blather that they put on TV.  They are
telling us that it is in our best interests.  They are telling us that the
US is not being affected by changes currently taking place across the world.
They are lying.  And we're going to be the first to hear about it when the
economy goes into the tank.
What can we do?  We don't have a program to put out to you.  We don't think
any one person or one group can create that, nor do we think they should.
We think that there needs to be thinking, discussing, interacting all across
the country, and the world, about what kind of world we want to live in, and

what kind of societal organization we should be fighting for to make that
happen.  Obviously, this means there is a long road ahead of us.
But one thing we know for certain.  This individualism that the elites have
been trying so hard to get us to adopt-where we only care about ourselves
and our immediate loved ones and to hell with our friends, neighbors and
everyone one else in the world-is an absolute guarantee, an absolute
guarantee for disaster.  It's nothing more than the old divide and rule.
Our only hope is to build connections and trust with our friends, neighbors
and people around the world.  This doesn't come automatically because we all
live in the same neighborhood, or we are all of the same race, or of the
same gender, or do the same kind of work-this togetherness, this unity, must
be created and we must consciously work to create it.  In unity, there is
strength; in division, we can all be picked off one by one-or more likely,
one million by one million.  As people in the American revolution in the
late 1700s said, "Either we all stick together or we all hang separately!"
We each have a choice.  We can either build unity with our neighbors, people
across our city and country, and with the large number of people around the
world-or we can let those with power and money destroy us all.  A bit
melodramatic, perhaps, but we firmly believe that the choice is that stark:
we either build unity, stick together and create ways to change this sick
system that threatens all of our well-being, or we are doomed.
This has been a Labor Express editorial.  Good night.

===========================================================

US ECONOMY A BUBBLE WAITING TO BURST
By Rich Miller, USA TODAY
Six months ago, Federal Reserve Chairman Alan Greenspan warned Congress
that the United States couldn't remain an oasis of prosperity in a
world economy racked by financial distress.
So far, he's been wrong.
Virtually alone among the world's top economies, the United States is
thriving. Unemployment is low, productivity is rising, inflation is
flat and the stock market is at a record high.
European economic growth is faltering. Germany's economy even
contracted last quarter.
Latin America remains on the brink of disaster. Ecuadorean troops and
police clashed with protesters Wednesday, injuring at least nine people
on a first day of a two-day strike against economic austerity measures.
And Asia's once-dynamic economies are still struggling.
"While the overall (U.S.) economy has been doing well, there is a risk
associated with what
is going on outside our borders," U.S. Treasury Secretary Robert Rubin
said Wednesday in an interview. "That risk is going up." Federal
regulators warned U.S. banks Wednesday that wobbly global markets are
likely to produce increased losses on their loans to foreign borrowers.
Experts say the lopsided pattern of global growth is creating bubbles
in the U.S. economy that eventually could burst and set off a
recession. Though few economists expect that to happen this year - in
fact, most have been raising their growth forecasts for 1999 - the
risks of a downturn in the next century are growing.
"This is not a long-term healthy situation," Rubin said. "To have a
healthy global economy over a sustained period of time, all the major
parts need to be healthy."
Rubin said he still expects the U.S. economy to enjoy solid growth with
low inflation this year. But he warned that the world economy was
becoming dangerously dependent on the United States for growth and
urged Japan and Europe to pump up domestic demand to bring things into
better balance.
Rising risks for USA
Experts say that the imbalances in the world economy are skewing the
U.S. economy as well, increasing the risk that it eventually could be
knocked off course after nearly eight
years of continuous expansion.
"There is a triple bubble developing in the U.S. economy," says Nariman
Behravesh, international economist for Massachusetts-based consultants
Standard & Poor's DRI. He puts the chance of a global and U.S.
recession this year at 25%-30%.
The three bubbles:
A rising trade deficit The trade deficit soared 53% last year to a
record $169 billion as exports fell for the first time in 13 years and
imports continued their inexorable rise. More red ink is expected this
year as foreign companies confronted by weak demand at home seek to
export to the United States.
The soaring shortfall already has prompted protectionist pressures in
Congress to shield the United States from competition from abroad. It
was tit-for-tat protectionism that helped trigger the Depression in the
1930s.
"If we look as if we're closing our market, that would set off
protectionist pressures around the world," Rubin said.
An inflated stock market The Dow Jones industrial average jumped 79
points Wednesday to a record 9,773 and is closing in on the 10,000
mark, a level that would have seemed inconceivable just a few years
ago.
The steep rise has been partly fueled by an influx of cash from foreign
investors seeking to tap into one of the world's few healthy economies.
The value of all stocks listed on the New York Stock Exchange now
amounts to more than 125% of total U.S. economic output. The previous
all-time high was 87% of gross domestic product in 1929, just before
the stock market crash.
Booming borrowing by consumers The Federal Reserve said last week that
consumer borrowing climbed $14.7 billion in January, the biggest
increase in more than three years.
The personal savings rate, as measured by the Commerce Department, fell
to 0.5% of income last year, the lowest level since 1933 and down
sharply from 1997's 2.1% rate. Experts say the booming stock market -
and the big gains it has brought - have convinced many investors they
don't need to save anymore.
"People are living too far beyond their means," says David Wyss, chief
economist at Standard & Poor's DRI. "They can't keep it up forever."
If any of these bubbles burst, experts say, they could bring down the
economy and trigger a recession. The trouble, they add, is that no one
- not even Greenspan - knows for sure when that might occur.
The Fed chief has been cautioning investors for more than two years
that the stock market may have risen too far. But any investor who
heeded his initial warning in December 1996 would have missed out on
the 52% rise in the Dow.
Shrinking the bubbles
One thing experts do agree on: The bigger the bubbles, the greater the
risks for the economy.
That's why they say it's so important that the rest of the world
economy starts to recover. That would help take pressure off the United
States and allow the bubbles to shrink slowly rather than burst.
"There are two ways to balance out the world economy," says James
Griffin, strategist at Aeltus Investment Management in Hartford, Conn.
"Either we chill out to their level or they heat up to ours."
Faster growth abroad would mean higher U.S. exports and a smaller trade
deficit. It also
could give the Fed a chance to raise interest rates without fears of
upsetting the global economy. The higher rates in turn would help cool
off the stock market and rein in consumer borrowing.
Year of recovery?
That was the scenario that international economic policymakers had been
hoping for this year. This year was supposed to be a year of recovery
for the global economy, led by a long-awaited turnaround in Japan and
faster growth in Europe after the introduction of a new currency.
But it hasn't turned out that way.
In Asia, Japan's economy is struggling to recover after suffering its
worst recession since World War II last year. Rubin said the world's
second-largest economy at best is expected to be flat this year.
Economists are divided over whether Japan is near a turning point in
its long-running efforts to revive its recession-riddled economy. Some
economic data, such as household spending and applications for housing
loans, are pointing up. But corporate and consumer confidence remain
depressed.
Faced with dwindling demand at home, some of Japan's top companies
finally are moving to streamline operations and lay off workers. Sony,
one of the nation's premier electronics makers, unveiled a
restructuring plan Tuesday that will see its workforce shrink by 10%
over four years.
Experts say such moves are necessary in the long run for the Japanese
economy to regain its former vitality. But in the short run, the job
losses cast a pall over workers.
"Of course it's in the back of your mind, and you don't feel like going
out and spending much," says 39-year-old Tadashi Nakajima, who works as
an engineer for a major
electronics firm. "I don't see things getting better; I think they're
getting worse."
In Europe, hopes for an economic pick-up after the Jan. 1 introduction
of the continent's new currency, the euro, are fading. Rubin said
growth in Europe is projected to be "very slow" this year.
Stefan Bergheim, an economist in Frankfurt with Wall Street broker
Merrill Lynch, sees a 1 in 4 chance that Europe's largest economy,
Germany, will slip into a "technical recession," or two straight
quarters of contraction.
Eager to establish its credentials as an inflation fighter, the new
European Central Bank has resisted calls that it cut interest rates to
boost growth throughout the region.
Rubin warned Europe against trying to export its way out of its
economic troubles and urged it to boost domestic demand instead. He
called for a restructuring of Europe's economy to boost investment and
employment. But experts say that will take time.
Almost 28% of U.S. exports go to Europe. About 15% of U.S. corporate
profits come from operations and sales there.
In Latin America, the region's largest economy, Brazil, is set to
suffer a sharp downturn this year in the aftermath of a financial
crisis that saw the value of its currency plummet by more than 35%.
Economist Joseph Petry of broker Salomon Smith Barney expects Brazil's
economy to shrink nearly 5% in 1999.
"Latin America's economy will be soft," Rubin said.
About 20% of U.S. exports are shipped to Latin America. Half of those
go to Mexico.
Rubin said it is "enormously important" for the world economy and for
the United States that other major industrial nations act to bring
global growth into better balance.
The current situation, he said, "is not sustainable in the long-term,
either economically or politically."
Contributing: Paul Wiseman in Beijing; Peter Hadfield in Tokyo;
Katherine A. Schmidt in Stuttgart, Germany; and Traci Romine in Sao
Paulo, Brazil.