Re: ``globalization'' and poverty

[Colin Danby <danbyc@xxxxxxx>]

Hello Tim,

Just real quickly on your points.

> (1) i agree that firms should be able to raise money, but permitting
> speculation in currency futures is a rather extravagent and dangerous
way to
> do that.

I'm not sure exactly how we moved from one to the other.  Portfolio
flows are going to be important for firms raising money.  Do you
literally mean currency futures?  In any case any cross-border ownership
of claims on payment flows is going to involve exchange rate risk.

> (2) even if, as you say, "Mexican banks have not been especially
wonderful",
> opening up the country's bond markets to foreign exchange risk is not
an
> appropriate response.

I'm not sure what this means.  When did this "opening" take place?
Mexican financial markets have been structurally subject to fx risk for
a long time -- this is part of the argument i made in a paper in the
spring 2000 jpke.

> (3)  it's my recollection that Fidelity and Merrill were both very
exposed
> to the tesobono crash.
> Mexico may not have missed a payment, but at what price and to whom?

as *banks* subject to BIS capital adequacy rules?

I do agree that having the U.S. government as a guarantor of Mexican
payment has over time been a bad thing.  (Jorge Castaneda, now foreign
minister, used to make this argument.)

> (4)  yes, BIS does give out seals of approval.  it's called the Basle
> Accord.  when home mortgages require substantial capital reserves, but

> Mexican government debt requires none, that certainly seems like a
stamp of
> approval.

I know what the Basle accord is, but does the BIS itself ratify
compliance?  I genuinely don't know the answer to this.  One usually
hears of this just in terms of sets of rules that countriew agree they
will try to enforce.

> (5)  yes, neoliberals always blame the "internal conditions" for
currency
> collapse and hardly ever identify the external factors.

As a matter of logic, blaming internal factors does not require one to
be a neoliberal.

In other words, it is possible that state policy is bad, but not for the
reasons that a standard IMF-style Polak model identifies.

To blame all problems on the evil IMF, or on vague metaphors like
"currency contagion," is just as simplistic as blaming all problems on
too much government spending.

Best, Colin