Conference nyoss1::market_investing

    Re. 0
    
    Is Clinton going to "fondle" the $14 B or funnel the $14 B. Since we're
    talking about Bill Clinton "fondle" is probably correct.

    re: -1
    
    OK, you caught me. I made a mistake. It's only a "slip of tongue".  :-)

    re: -1
    
    I heard that Connie Chung heard the whisper.
    

	I heard a Republican sound bite on the news today that said
	he doesn't blame Clinton for using executive power in this
	case because Congress couldn't get their act together, even
	though Clinton came and sought the help of Congress much farther
	in advance than any other recent President.

	I've got money in Fidelity's "Emerging Markets" and "Diversified
	International" funds, I'm sure at least the former is invested
	in Mexico.  As such, I hope this bail out hopes.

	Our government raising interest rates so quickly over the
	last year supposedly has alot to do with the Mexican crisis.
	Speaking of which, I take it the Fed did not raise interest
	rates today, or if they did, it was less than the expected 1/2
	a point?

    
    On one hand I'd love to see the Mexican economy doing well.  It would, 	
    IMHO, reduce the number of Mexicans coming into the United States, it
    would be a good market for American products and they are our neighbor.
    
    But on the other hand, I see us paying money out to country after
    country (Korea, Haiti and Somalia come immediately to mind) and still
    being hated and despised in those same countries.  On top of that, we
    look incredibly stupid (Korea again!) IMHO.
    
    So, I believe it's a bad thing.  I'd like to see the money not spent 
    (I know it's only a guarantee and we're not actually spending it yet)
    and keep it here.
    
    Glenn McIntosh
    

    re: .4
    
    I know what you are saying. I too have money in the "emerging markets".
    But, is it a good idea to take money out of one pocket and to give it
    to my debtors, so that I can inflate the IOU's in my other pocket? I
    personally think this is a loosing proposition for the US no matter
    which way you look at it. On one hand, if we have to give the Mexicans
    the money so that they can purchase some good from us (with our money),
    we are not gaining anything. All we are doing is to increase the debt
    of the Mexicans from us. Eventually, the debt will build up to a point
    that they will never be able to repay, we'll just forgive the debt.
    (Haven't we heard about that before?) On the other hand, if the Mexican 
    government is really smart enough to know how to use this money to build 
    up their economy, we are paying to build up a future economic rival.
    Just look what the US did to Japan after WW II. Today, Japan is one of
    (if not "The") the US' strongest economic competitor. I don't see how
    we can benefit from this either way.
    
    re: .5
    
    Can you say we are a whole bounch of "suckers"? I don't know if you
    have heard what Nelson Mandala (sp?) of South Africa said after
    receiving $60M (or is it $600M) aid from the US?

First and Foremost:	THIS IS NOT A BAILOUT.

It is a shame that people cannot understand the difference between a *loan
guarantee* and a gift/grant/loan/subsidy.  I'm really disappointed that folks
in a conference such as this will let pedagogery or inaccurate rhetoric color
what could be a reasonable discussion.

I think that this move is essential to the continued/recovering health of the
hemisphere (and our wallets in the process.)  Perhaps the Mexican anti-NAFTA
folks were right, but the last 18 months have been disasterous for the Mexican
economy.  Because of two factors, it behooves us to make sure our trading
partner doesn't flop.

Primarily, we are helping protect a trading partner in our trading zone.  They
are big consumers of American goods.  Greenspan says that a
South-American-style collapse could send *our* economy into recession.

Secondarily, the long-term aspects of open trade policy would be hurt.  Imagine
our talks with, say, Brazil..."Gee, US, you promissed Mexico `Open Trade' and
then let them die on the vine.  You're not going to dupe us, too.  `No Deal!'"

Finally, this costs *nothing*.  We do not have to shell out a penny, just as we
didn't for Chrysler.  The demamgogues in COngress would have you believe that
we are actually paying Mexico $14B -- 'tain't so.

The base note said that this should not be about politics, yet the first few
notes were filled with deliberately incorrect statements and fraudian, er,
freudian slips.  Lets talk about Mexico and how its economy colapsed and what
we can do about it.

BobW

    
    >Can you say we are a whole bounch of "suckers"? I don't know if you
    >have heard what Nelson Mandala (sp?) of South Africa said after
    >receiving $60M (or is it $600M) aid from the US?
    
    		I did not hear what he said.  What did he say?
    
    		Glenn McIntosh
    

	One thing I must always ask when deals such as this "loan-guarantee"
  come about is:  Why are we going to help some other country when we have
  not solved all of the problems we have here in the US?  Until we can 
  eradicate unemployment, homelessness and hunger from our own borders, why
  do we attempt to do this elsewhere?
	I can not agree at all to any program that provides either money or
  the promise of money to a foreign country when there are people, businesses
  and government programs here in this country that could benefit from aid
  from our own government.

    As has been intimated by Bob Withers, it's a domino theory.  Default by
    Mexico would lead to defaults in other SA countries, eventually
    depressing our economy.
    
    I agree with some of the sentiments.  It feels like spending money to
    fix an old car.  You just hate to do it because you'd really rather have
    something new.  Sometimes there's no choice.
    
    Mark

> But, is it a good idea to take money out of one pocket and to give it
> to my debtors, so that I can inflate the IOU's in my other pocket?

	the original bail-out request was not in the form of an
	IOU, we would only of been co-signing on a loan(s) mexico
	would be getting elsewhere.  it would only come out of our
	pocket if you believe mexico would default on the loans.
	I had also heard mexico would of actually put up some colaterol
	(future revenue from their oil exports).

	it would also be foolish to think it wouldn't come out of our
	pocket in one way or another if the mexican situation severely
	worsened ......

> I can not agree at all to any program that provides either money or
> the promise of money to a foreign country .....

	You're still mis-informed.  A loan guarentee (ala being a co-signer)
	is neither providing money, loaning money, or even promising (I assume
	you mean like "pledging"?) money.

    re: .7
    
    You say "tomEIto", I say "tomAAto". What's the difference what we call
    it??? The truth of the fact is that the US is helping them to get out a
    ditch. Yes, you are right that we have not yet spent a penny on this.
    But, what happens if they default on the loan? Who is going to pay for
    it then??? If it really comes to that, what are we going to do then?
    Where are we going to come up with the $$$ to pay for it? We are
    ALREADY the #1 debt nation in the world. I don't want to see another
    S&L type of scandle going through. I get enough thrill from this kind
    of things once in a lifetime. Yes, they are our important "trading"
    partners. But, we can just as well build good trading relationships
    with other nations. Let me quote you something Russ Pero has said (even
    though he is not my biggest fan), "people who don't make anything,
    can't buy anything". 
    
    BTW, if Dr. Alan Greenspan keeps on raising interest rate like he has
    in the past year, he doesn't have to waite for Mexico to put our
    economy into a recession.  

> We are ALREADY the #1 debt nation in the world.

	Thanks to 12 years of Voo-doo econmics :-)

> Let me quote you something Russ Pero has said (even
> though he is not my biggest fan), "people who don't make anything,
> can't buy anything". 

	As far as I know Perot never verified that with real facts.
	Mexico is (or maybe was now that they are in trouble) an
	Emerging Markets.  That means their economy is growing.  That
	means increased demand for goods.  We already trade with other
	nations, but demand for goods is usually flat in a developed
	nation (baring the usual economic swings).

I will give Bill Clinton an A+ on this. Once more he has proved that he is
a good leader. 

Rebublicans have screwed up the country with 'macho' type politics.

>>	You're still mis-informed.  A loan guarentee (ala being a co-signer)
>>	is neither providing money, loaning money, or even promising (I assume
>>	you mean like "pledging"?) money.


	Excuse me, but isn't co-signing on a loan saying "If the holder of this
      loan fails to pay the debt back, then I (the co-signer) will be held
      responsible for paying the loan back."  

	

	Since we are only a "co-signer", where is the actual $40+ billion 
      dollars going to come from?  I mean, who is actually going to be the
      bank, person, etc.. giving the money to Mexico?

> Since we are only a "co-signer", where is the actual $40+ billion 
> dollars going to come from?  I mean, who is actually going to be the
> bank, person, etc.. giving the money to Mexico?

	The other day CNN HN flashed a list of countries/entities
	and the amounts, but I can't recall any of it.  The only
	thing that I can see maybe being on the list are some European
	countries.

    
    	US "guarantees" $20billion from our currency Stablization Fund
    (which is mostly used to *prop* up the dollar against Japan and
    Germany).
    
    	The IMF gurantees $10 billion. Everyone else guaratees $17billion
    Japan, Germany etc.
    
    	This is a bail-out the peso plan, folks - pure and simple. We, and
    everyone else are "protecting" the VALUE of our assets in Mexico (and
    the rest of Latin America for that matter).
    
    	The result if we don't do it - a currency meltdown, much like the
    banking crisis in the early '30s. It is nice to know that we have
    learned something about financial debacles, if you let it happen, the
    worst will occur. This is one arena the concept of "free" markets
    causes the most pain.
    
    	This was a good move by Slick Willie, and a sound political
    statement of Corgressional leadership to praise him. If you think this
    is wrong, call someone you know in Texas, Arizona, New Mexico, or
    California and ask them what they think. Those states would have lost
    hundreds of THOUSANDS of jobs.
    
    	Mexico, BTW, is our largest SURPLUS trading partner.
    
    		the Greyhawk

>>    statement of Corgressional leadership to praise him. If you think this
>>    is wrong, call someone you know in Texas, Arizona, New Mexico, or
>>    California and ask them what they think. Those states would have lost
>>   hundreds of THOUSANDS of jobs.


	I have heard this repeated many times by Congressmen, analysts, etc.,
    but when asked what jobs specifically would be lost, they all dodged
    the question.  So far, my gut feeling on this issue is that by bolstering
    the peso, we are helping businessmen and investors regain some of the
    money that they have lost in Mexico, and that this loan guarantee will
    allow them to attempt to make more money.
        However, I still have not seen any great benefit the average American
    citizen will see.  Since it has been said that many 'hundreds of thousands'
    of jobs will be lost if this is not done, what are the jobs that will be
    lost?

    I've seen several statements in here that really scare me. 
    Particularly .9's comments along the line of forget the rest of the
    world, people here need it more.  I'm just completing an economics
    degree here in California and have been studying it for over 10 years
    watch the various problems and examining historical policies.
    
    First, the US is one of many countries in the world.  The US does not,
    can not, and will not ever be able to produce all the goods and
    services it needs.  As a matter of fact, no country can.  Each country
    specializes in some areas of trade.  The US is good in agriculture,
    others are good at oil, textiles, or whatever.  If you let a trading
    partner 'wither on the vine', to use another's words, then the slack in
    the economy must be picked up somewhere else.  This will result in less
    efficient sources of the goods or services in question thus higher
    prices, or a plain lack of a needed factor of production. 
    Additionally, the items that we sell to them will not be bought since
    we let their source of income die.  They can't sell, and can't buy then
    we can't buy and can't sell.  THIS WILL EFFECT OUR ECONOMY.
    
    If instead we just give the money out in our own ecomomy, as we have
    been doing for several decades, we end up with subisidized companies or
    people that can not compete on their own, producing inferior goods and
    services with antiquated capital.  This is exactly what happened to a
    country that was a leader in steel production and now barely produces
    any...the US.
    
    Next, as I recall from looking at various graphs last semester, Mexico
    is on the verge ecomonically of falling into a category where the
    economies of countries practically explode in growth.  Countries that
    get going like this, usually buy a great deal from the industrialized
    nations to build the infrastructure that is usually (and is in Mexico's
    case) serverely lacking.  What does this mean...well jobs for you and
    I.  What do they need?  Telephone systems, computers, electrical
    generation, utilities, etc.  US compnaies right now are making major
    improvements to Mexico's telecommunications systems.  What else does it
    mean?  It means that people like myself will not have to vote for
    things like Proposition 187 to make a political statement that ILLEGAL
    aliens are a problem because the people will want to stay home where
    opportunities are available.  Finally, it also means that we become
    more competitive as we attempt to get that business over other
    countries like Japan.
    
    Adjusting an economy to fit with the rest of the world always hurts and
    sometimes help is needed.  But it usually, as long as the politics
    hold, turns out be be an investment that's better than anything you'll
    in the best days of the stock market.  It just takes time.

    re: .20
    
    Now, that is a discussion I'd like to see and can sit down and listen. 
    :-)  Thanks for sharing it.

>     	This is a bail-out the peso plan, folks - pure and simple. We, and
>     everyone else are "protecting" the VALUE of our assets in Mexico (and
>     the rest of Latin America for that matter).

	And me thinks people are also forgeting that Japan relatively
	recently just helped us out to stabalize the dollar when the dollar
	was falling to new lows against the yen .....

    Let see if we understand the -immediate- problem here. I believe the
    situation runs along these lines (corrections welcome):
    
    On or about the 2nd of February a number of "Mexican T-bills" were due
    to mature. That is, short-term government debt instruments denominated
    in dollars.
    
    Because of the artificially high value of the peso, dollars were
    "cheap" and therefore Mexican citizens converted pesos to dollars 
    to buy imported American goods. Americans do the same thing with Yen
    when they buy Japanese consumer electronics, Japanese convert Yen to
    dollars to buy oil, and so on.
    
    This caused a number of dollars to exit the Mexican Treasury heading 
    North to American suppliers of goods and services. The Mexican Treasury 
    was losing foreign exchange reserves.
    
    This left the Mexican Central Bank without enough dollars to pay off
    maturing short-term loans. Actually it wasn't THAT serious back last
    December, just that the rate of dollar loss was high enough to raise
    that possibility if something wasn't done.
    
    So the government devalued the peso, meaning dollars became more
    expensive so prices rose on those imported American goods. Ordinary
    Mexican citizens saw prices rise on American goods and bought fewer
    goods, which was what was intended. But people holding assets in Mexico
    ALSO withdrew their cash, fearing losses. I don't think there was
    anything the government(s) could have done differently, except perhaps
    to do the devaluation earlier. But that's 20-20 hindsight.
    
    As the situation deteriorated it became quite possible that those
    Mexican T-bills would not have enough dollar backing to redeem them
    come 2-Feb. Thus we were facing the prospect of an imminent default.
    When a government defaults on its debts, very bad things happen.
    This was to be avoided at virtually any cost.
    
    Congress fiddled as the deadline drew near. Clinton, realizing that
    he'd never get this controversial a measure through Congress this week, 
    took action on what is alleged to be his own authority, granted him by
    a 1934 law probably intended for other purposes. I have not heard of
    any court challenge to this action.
    
    Which brings us to:
    
.16>    Since we are only a "co-signer", where is the actual $40+ billion 
.16>  dollars going to come from?  I mean, who is actually going to be the
.16>  bank, person, etc.. giving the money to Mexico?
    
    Here's what's going to happen. Those maturing Mexican T-bills will now
    be paid in cash (dollars) that Mexico will borrow from commercial banks.
    But the new bank loans will have a longer maturity, so won't become due
    for some time to come. Thus the -immediate- problem will go away.
    Mexico's debt will not change significantly, it will just have a longer
    maturity. The pressure to have a pile of dollars at hand will subside.
    
    Over the years it is anticipated the Mexican economy will grow enough
    to cover the interest and principal payments so nobody gets stuck
    with a bad debt. Argentina and Peru are two examples of Latin American
    countries that have worked miracles recently, so this anticipation is 
    quite reasonable.
    
    The "$40B" is the guarantee in the event that over the years Mexico 
    becomes unable to pay its debts. In that case the banks doing the
    lending will be repaid proportionately by the various co-signers,
    including the U.S. Treasury. As .11 implied, the U.S. would then
    collect from Mexico by (essentially) taxing Mexican oil production.
    This agreement is part of the whole package, and would be enforced
    by Mexico selling its oil thru an intermediary -- the very banks doing
    the lending now. Admittedly this is not something Mexico would find
    pleasant but the alternative is basically to default, which is the
    situation as it exists now. Default is to be avoided if at all possible.
    
    It is fair to imagine what might happen if, down the road, Mexico fails 
    to repay its loans and decides to violate the terms of the loan by
    refusing to sell its oil thru the intermediary banks. The U.S. Treasury, 
    the IMF et. al. would pay the debt due and then collect from Mexico
    through other means, ranging from military action to outright debt
    forgiveness, all depending on the politics of the times.
    
    I believe similar prospects are in store for the U.S. dollar at some
    point in the future when OUR interest payments exceed our capacity
    to repay.
    
      John

> Republicans have screwed up the country with 'macho' type politics.
    
    	Sounds to me like alot of pent up anger here.  
    	The Republicans had nothing to do with the Mexican bail-out.
    	Clinton wanted it and got it.  Republicans, on balance, didn't
    	want it but lost.  Blaming the Republicans in relation to the
    	Mexican bail-out is absurd.
    
    	Glenn
    

  RE:  .20


	I agree with much of what you say.  My statement in .9, about
    disagreeing with providing money or 'promise of money' to other countries
    while we still have problems here in our own country may have come 
    across a little stronger than intended.  However, I still feel it is
    rather hypocritical to provide money and goods free to other countries
    (not just Mexico) when we are already in debt to ourselves and have many
    of the same problems here in the US that we are trying to prevent in
    other countries.
        The following comment struck me as a little odd:

>>    Additionally, the items that we sell to them will not be bought since
>>    we let their source of income die.  They can't sell, and can't buy then
>>    we can't buy and can't sell.  THIS WILL EFFECT OUR ECONOMY.

        Since a company accrues "wealth" and "buying power" based on the
    goods they produce, how are we to blame for their lack of money?  If they
    used to have money, and now they don't, the question is why?  Where was
    their former source of income, and why is it no longer there?  Was their
    source of income from capital investments made by foreigners?  Was their
    source of income from goods sold to foreign countries?      

        To go along with your previous statement, the following is a little
    bit humorous:

>>    If instead we just give the money out in our own ecomomy, as we have
>>    been doing for several decades, we end up with subisidized companies or


        I agree that handouts anywhere are not in the best interest of the 
    economy.  So, why are we providing a 'handout' to Mexico?  Whether some
    want to call it a "loan-guarantee", a "handout", or whatever, it is
    still providing something (money) in return for very little or nothing.
    ( When the deal was first proposed last week and it was said that the US
    would ask for some of Mexico's oil revenue as collateral, the Mexican
    government said that it was "deeply insulted" that the US would ask for
    collateral, and that they would explain their demands for the loan
    guarantee, but not negotiate.  It now seems that the loan will be 
    guaranteed by revenues from oil exports)
        

	Something does need to be done to help the Mexican economy.  It's 
    just too bad that our own government does not show the same initiative
    to trying to solve problems right here in the US.  Roughly 5% of our
    "legal" population is unemployed (that's roughly 12.5 million people).
    It would be nice to be able to help everyone that needs it, and I am
    not against helping foreign countries, but since I pay taxes to the
    federal government, I feel that they should first attempt to deal with
    problems here in this country.
    	

    re: .22
    
    I thought the slipping of USD against the Japanese Yen is a deliberate
    act by the US. I remember a couple of years ago, then newly appointed
    treasury secretary Lloyd Bensen made a comment that he is not worried
    about the US dollar was slipping against the Yen. He actually wanted to
    see the dollar slipping further. His reasoning was that a weaker dollar
    would help the US to boost exports to Japan. 
    
    Now, on the other hand, I see no prove that the Japanese "helped" the
    US in stabalizing the dollar is purely out of the goodness of their
    hearts. The Japanese have alot of investments and business ventures in
    the US. I think it is more in their best interest to see a stronger
    dollar. This will not only help them to protect their investment
    interests in the US, it will also help them to protect their business
    profits for corporations such as Toyota, Honda and many others. 

> Roughly 5% of our "legal" population is unemployed (that's roughly 12.5
> million people).

	The 5% figure is almost useless by itself.  You also need to know
	the average/median length of unemployment.  For example, it's
	possible that the unemployment rate nationally is 5% but that
	the turnover rate of whose on unemployment from one month to the
	next is 100%.

> It would be nice to be able to help everyone that needs it, and I am
> not against helping foreign countries, but since I pay taxes to the
> federal government, I feel that they should first attempt to deal with
> problems here in this country.

	Guess you missed the important point that's been stated several
	times.  We are helping to deal to deal with problems in this
	country by helping other countries.  It Mexico were to go
	bankrupt that would directly and indirectly affect us negatively.
	That would in turn trickle down.

	As has also been said, we live in a global world.  Our country
	does not have the abundant natural resources of everything
	we need to live in isolation of the rest of the world (not even
	the USSR with it's large land mass could do it).

> Now, on the other hand, I see no prove that the Japanese "helped" the
> US in stabalizing the dollar is purely out of the goodness of their
> hearts. The Japanese have alot of investments and business ventures in
> the US. I think it is more in their best interest to see a stronger
> dollar. This will not only help them to protect their investment
> interests in the US, it will also help them to protect their business
> profits for corporations such as Toyota, Honda and many others. 

	In the above replace "Japanese" with "US" and "US" with "Mexico"
	and that's exactly what we've been talking about with the
	bail-out ......

>	In the above replace "Japanese" with "US" and "US" with "Mexico"
>	and that's exactly what we've been talking about with the
>	bail-out ......

I understand the logic here. What I really worried about is that I don't want 
to see Mexico default on the loan and leaving us holding the bag here. Do you 
have any idea what Japan did to help strengthen the US dollar? I am total 
ignorant of that subject. 

> I understand the logic here. What I really worried about is that I don't want 
> to see Mexico default on the loan and leaving us holding the bag here.

	None of us want to see a default.  Another important question
	is what are the alternatives?  "Do nothing" may be worse ....

> Do you have any idea what Japan did to help strengthen the US dollar?

	It's relatively recent history, but long enough in the recent
	history for me to forget also.  They may of bought up some of
	our currency?

    
    	This is all well and good...Excellent thread, and it saves me the
    trouble of getting into advanced macroeconomics and history lessons.
    
    	As for jobs being lost, just take a look at who is doing the
    purchasing of American made goods and services. For example, the
    retail economies of most American border towns heavily rely on
    cross-border trade. Nearly 20% of all California agricultural
    production is estimated to exports to Mexico. The Tuscon Chamber
    of Commerce stated just last week in the WSJ that nearly 80% of
    its warehousing and shipping industry growth the past three years
    is directly attributable to Mexican bilateral trade (they used the
    figure of 2800 jobs created alone).
    	Since each direct trade job creates several more along the way
    (remember this is original *new* money so the old economic theories
    on the velocity of money thru the economy apply), the rammifications
    of a Mexican default are truly frightening. After all, the total
    bilateral trade with Mexico last year was $31-billion dollars.
    
    		the Greyhawk