Fw: The Nasdaq Bubble

["Gunnar Tomasson" <tomasson@xxxxxxxx>]

My following e-mail message of today's date may be of interest to PKT Forum
participants:

> While at the IMF, I visited Kuwait a few times, beginning soon after the
> Souk al-Manakh crash.
>
> As I recall it, the crash left worthless paper "assets" with face value
> equivalent to some US$90 billion, mainly in the form of post-dated checks.
>
> With "investors" holding one another's worthless IOUs, the post-crash
> cleaning-up operation by the Kuwaiti Government - a.k.a. "investors" -
> reduced to netting out IOU "debts" and "assets" of "investors" and using
oil
> revenue to make whole net "creditors".
>
> After the netting-out process, the final cost to the Kuwaiti Budget of the
> Souk al-Manakh crash was much less than the gross total of US$90 billion.
>
> While the technical details of the S&L "crash" and subsequent "rescue"
> operation by the U.S. Government are different, the final cost thereof to
> U.S. taxpayers is likely to be perhaps 10-20 times greater than the amount
> of oil revenue used to ease "investor" pain in the Souk al-Manakh affair.
>
> An initial Nasdaq Crash would produce a mountain of worthless IOUs that
> would dwarf the amounts involved in the S&L Affair.  While individual
> "investors" - speculators - may be left holding the greater part thereof,
> the U.S. BANKING SYSTEM would presumably be stuck with US$X00 billions
worth
> of worthless paper "assets in the form of claims on clients wiped out by
the
> Crash.
>
> Thus, an INITIAL Nasdaq Crash would immediately jeopardize the U.S.-World
> Financial System.
>
> In this respect, I am reminded of the words of Sir Thomas Balogh delivered
> to senior IMF officials in the IMF Executive Board Room in the 1980s:

> "There are two ways to be sorry.  You can be sorry when you see trouble
> coming, or you can be sorry when trouble comes.  The IMF is determined to
be
> sorry when trouble comes."

Gunnar