Fw: Where Do We Go From Here?

["Gunnar Tomasson" <tomasson@xxxxxxxx>]

The following Gang8 exchanges may be of interest to PKTers.

Gunnar

----- Original Message -----
From: "Gunnar Tomasson" <tomasson@xxxxxxxx>
To: "gang8" <gang8@xxxxxxxxxxx>
Sent: Wednesday, December 27, 2000 11:24 AM
Subject: Where Do We Go From Here? [Was: Digest Number 231]



> James:
>
> I have inserted some comments on parts of your thoughtful message:
>
> > If we're right that a crash is well on the way and that, if it comes,
> > it is likely to be the Mother of all Crashes, then the big unknown is
> > what governments will do.
> > Will they try to get some cover from the international organisations
> > or from multilateral consultations?
>
> **********
> For the past quarter century, I have been of the view that, as and when -
> not IF - the world community is faced with collapse of post-Bretton Woods
> world monetary arrangements, the institutional framework that has been
built
> up around the International Monetary Fund will prove invaluable as a
> ready-made forum for multilateral consultation and cooperation on all
issues
> relating thereto.
>
> These include the following:
>
> (a)  Technical analysis of what went wrong;
>
> (b)  Development of technical options for the future; and
>
> (c)  Political consultation on such options.
>
> **********
>
> > Are any of these multilateral "covers" likely to offer anything
> > worthwhile? Might they only convert a disaster into a catastrophe?
>
> **********
> It depends.
>
> The IMF stands, as it were, at an intersection between academic and
applied
> monetary economics.
>
> For the past quarter century, the modus operandi of mainstream and
> monetarist economic theorists - which reduces to 'theorizing' on
incidental
> attributes of the reigning hands-off political approach to world monetary
> arrangements - has obfuscated the existence of a dividing line between the
> academic and applied aspects.
>
> Between the "science" and "art" of economics - theoretical economics as
"an
> apparatus of the mind" that would inform the "art".
>
> As such, the "science" of economics - Gang8's Creditary Approach to
Money -
> is correctly perceived as a threat to The Washington Consensus viewed as
> short-hand for the bureaucratic, political, economic, and academic vested
> interests that have evolved around post-Bretton Woods world monetary
> arrangements.
>
> IF events were to impress upon the incoming Bush Administration that The
> Washington Consensus offers no credible guidance out of a systemic debacle
> of its own making, THEN the IMF can be transformed overnight into a forum
> where the Creditary Approach to Money can be translated into a set of
> principles and working guidelines for new world monetary arrangements.
>
> **********
> > Governments are likely to jump from one
> > desperate expedient to another.
> > Even so - or indeed because the future is so uncertain - gang8 members
> > have, I suppose, a certain responsibility to do the best they/we can
> > to turn policies in the right - or at least something that looks like
> > a rational - direction.
>
> **********
>
> We have the "science" that alone can - and therefore must - inform the
Bush
> Administration's would-be successful "art" in the field of world monetary
> arrangements.
>
> Gunnar
>
>
>
> ----- Original Message -----
> From: "schulte-baeuminghaus" <cresscourt@xxxxxxxxx>
> To: <gang8@xxxxxxxxxxx>
> Sent: Wednesday, December 27, 2000 10:04 AM
> Subject: Re: [gang8] Digest Number 231
>
>
> > Gunnar,
> >
> > I think you are right.
> > It is extremely difficult and hazardous to predict where the dollar
> > will go - and where it will end. It is equally difficult to predict
> > the near-term future of, for example, the Euro and the Yen.
> > As for other currencies, there are just so many variables and so many
> > scenarios prompted very largely by what major governments - not only
> > the Bush Administration - will do that we can only guess or, if we're
> > gamblers, put our money on some horse in a race in which virtually
> > every starter is an outsider.There can be no favourites - at least at
> > this stage.
> > If we're right that a crash is well on the way and that, if it comes,
> > it is likely to be the Mother of all Crashes, then the big unknown is
> > what governments will do.
> > Will they try to get some cover from the international organisations
> > or from multilateral consultations?
> > Are any of these multilateral "covers" likely to offer anything
> > worthwhile? Might they only convert a disaster into a catastrophe?
> > Will governments then act alone?
> > If so, will they stick by "no hands" policies and let the market
> > decide?
> > On the other hand, will some governments at least, say that markets
> > are not the solution but the problem, and intervene quickly and
> > vigorously?
> > Will they act rationally - more or less - or will they hit the panic
> > button?
> > Will they try to "damp down" the economy, for example, if there is a
> > run on their own currency or if the import bill gets too big in
> > relation to savaged exports?
> > On the other hand, will they go for stimulus?
> > Are we likely to get deflation or hyperinflation - or first one and
> > then the other?
> > Will different economies be hit in different degrees? Will economies
> > based on commodities suffer most or will those most closely linked to
> > manufactures or services, including financial services, be hit
> > hardest?
> > Frankly, I think it's extremely difficult to see with any clarity at
> > all what's likely to happen. Particularly with a new man at the tiller
> > in Washington, there's unlikely to be much strong leadership of any
> > kind so the world economy is likely to lurch in several directions at
> > once.
> > Are any of the Europeans likely to emerge as leaders? No one seems to
> > stand out right now; and, in the rest of the world, who is there?
> > So we face a crisis perhaps of unprecedented dimensions, with no plan
> > or theory or practice to help us formulate policies to deal with it,
> > and no obvious leaders to take charge in any authoritative, let alone
> > wise and experienced way.
> > The outlook's not bright.
> > But you, Gunnar, seem to be right that we can only guess what will
> > happen and even then what will happen immediately will probably differ
> > from the short term and that, in turn, from the outcome a little
> > further down the road. Governments are likely to jump from one
> > desperate expedient to another.
> > Even so - or indeed because the future is so uncertain - gang8 members
> > have, I suppose, a certain responsibility to do the best they/we can
> > to turn policies in the right - or at least something that looks like
> > a rational - direction.
> >
> > James
> >
> >
> > ----------
> > >From: "Gunnar Tomasson" <tomasson@xxxxxxxx>
> > >To: <gang8@xxxxxxxxxxx>
> > >Subject: Re: [gang8] Digest Number 231
> > >Date: Tue, Dec 26, 2000, 5:26 pm
> > >
> >
> > > My two cents' worth:
> > >
> > > As and when post-Bretton Woods world monetary arrangements come
crashing
> > > down, ALL bets are off - the U.S. dollar can go either way.
> > >
> > > And most likely will as financial market psychology bounces between
one
> > > extreme and the other insofar as the U.S. dollar's ULTIMATE role in
> > > post-post-Bretton Woods arrangements is concerned.
> > >
> > > Between now and then - some years down the road ? - there can be NO
> "safe
> > > haven" for the paper asset superstructure that capsized the system in
> the
> > > first place.
> > >
> > > Gunnar
> > >
> > >
> > > ----- Original Message -----
> > > From: "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>
> > > To: <gang8@xxxxxxxxxxx>
> > > Sent: Tuesday, December 26, 2000 3:46 PM
> > > Subject: Re: [gang8] Digest Number 231
> > >
> > >
> > >> Randy, Stephen,
> > >>
> > >> Wait till the drop of imports to the US (due to the market crash and
> the
> > > reverse
> > >> wealth effect) slows the inflow of recycled dollars from foreigners.
> That
> > > plus the
> > >> debt crisis caused by the meltdown of collateral values and the
reverse
> > > wealth
> > >> effect on deflation will create domestic political pressure to lower
> the
> > > dollar,
> > >> similar to 1985 with the Plaza Accord.  (See my post on James Baker).
> Of
> > > course,
> > >> domestic asset deflation can be viewed as a version of strength in
the
> > > dollar.  But
> > >> if domestic asset deflation is measured against a non-delining import
> > > prices, it is
> > >> a version of a falling dollar.  The nominal exchange rate of the
dollar
> > > may not
> > >> drop byond 10% until all the foreigners and Americans who have need
for
> > > foreign
> > >> currencies quietly shifted their needed funds into foreign currencies
> and
> > > the
> > >> domestic asset deflation has hit bottom, but de facto devaluation has
> > > already
> > >> began.  Currency swaps are the big unknown, but many of them have
been
> > > built on a
> > >> strong dollar.  IF the dollar starts to go south, ther will be a lot
of
> > > painful
> > >> unwinging that will make LTCM look like a picnic.  And LTCM ws very
> close
> > > to a
> > >> systemic meltdown. Look at the yen, though its decade-long recession,
> with
> > > wide
> > >> interest rates volatility, the yen fluctuated from 147 to 100,  a 30%
> > > range. And
> > >> the Japanese are fixated on a weak yen policy, the opposite of
> Clinton's
> > > strong
> > >> dollar policy.  A strong currency works only when the global
financial
> > > crisis is
> > >> located soemwhere else.  This time it is located inside the US, and a
> > > strong dollar
> > >> policy will be fatal. Bush's avoidance of the dollar question was
> viewed
> > > by the NY
> > >> Times as having learned a lesson from Clinton's mistake in the first
> year
> > > when he
> > >> made public remarks on his views of the dollar being too strong.  The
> > > Times
> > >> concluded that Bush was either too uniformed to answer or too
informed
> to
> > > answer a
> > >> no-win question.  The long term trend of the dollar over the next
five
> to
> > > ten years
> > >> is down.  A lot of traders are going to get rich and a lot are going
to
> > > get hurt in
> > >> trying to time it.  Us business are pushing the dollar down in hope
it
> > > will help
> > >> their earnings and they have a direct line to Washington.
> > >>
> > >> Interest rate policy will not help, because no new loans will be made
> for
> > > lack of
> > >> surplus collateral, and interest on all old loans have been hedged.
Tax
> > > cut will
> > >> not help because of excessive tax loss and because the Bush package
> will
> > > produce
> > >> more surplus capital rather than purchasing power for consumers.  The
> only
> > > solution
> > >> is higher wages and the Bush administration has an ideological phobia
> > > against that
> > >> measure.  Although, it is encouraging that MSFT is raising pay
because
> > > most of its
> > >> stock options are under water.
> > >> Henry
> > >>
> > >> "Wray, Randall" wrote:
> > >>
> > >> > stephen
> > >> > i agree that the $ will be the safe haven in the crash that has
> already
> > > begun.
> > >> > all other currencies are just leveraged dollars, externally.
> internally,
> > > of
> > >> > course they are not (except in the case of argentinas etc). your
> analogy
> > > w/gold
> > >> > is i think correct. pre-1930s currencies were just leveraged gold,
> > > externally.
> > >> > randy
> > >> >
> > >> >
> > >> > The Gang8 is devoted to Creditary Economics
> > >>
> > >>
> > >>
> > >> The Gang8 is devoted to Creditary Economics
> > >>
> > >>
> > >>
> > >
> > >
> > >
> > > The Gang8 is devoted to Creditary Economics
> > >
> >
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> >
> > The Gang8 is devoted to Creditary Economics
> >
> >
> >
>