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Tuesday 23rd December 1997
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On-line research background to the book "Pauline, the Hanson Phenomenon" by Helen Dodd.


International:

How the IMF and the big money screws countries.
See also the MAI

Michel Camdessus, managing director of the International Monetary Fund, doesn't usually tell stories in public about his secret meetings with officials of financially strapped countries. But at a news conference last week, the Frenchman couldn't resist recounting how he and his deputy, Stanley Fischer, had travelled to Seoul in November to privately warn top South Korean leaders that their economy was hurtling toward disaster.

"Mr. Fischer and myself visited Korea separately in a totally discreet way to tell the authorities that it was essential to take action with no delay," Camdessus said. "They had, as many others, a tremendous difficulty in recognising the facts."

So the South Koreans failed to respond to threats of a massive exodus of foreign capital, Camdessus said, and by the time they began scrambling later that month, "it was too late."

Seldom, if ever, in the IMF's 53-year history has it faced such a daunting challenge to its competence in maintaining global financial stability. Although the fund, acting in concert with the Clinton administration, has marshalled more than $100 billion in the past three months to bail out the economies of Thailand, Indonesia and South Korea, the financial crisis in Asia shows only spotty signs of abating. Camdessus's disclosure of the secret meetings in Seoul was strategic, not impulsive, for he is defending the IMF against charges that it misjudged the crisis and is floundering in its effort to contain it.

Critics are citing the grim news from the region's financial markets as evidence that the IMF, a 181-nation organisation based in Washington, should drastically change its approach for rescuing troubled economies. The fund doles out loans to countries that are short of the U.S. dollars and other currencies they need to pay obligations to foreigners. In exchange, the countries pledge to adopt belt-tightening measures and take steps to restructure their economies such as scrapping government regulations and liberalising their markets.

"Since the time the IMF has signed each Asian bailout program, the respective Asian currencies have continued to plummet," Harvard University professor Jeffrey Sachs, a leading IMF critic, wrote in a letter published last Friday in the Financial Times.

The IMF's credibility is on the line not only in Asia. On Dec. 12 it renewed a suspended credit line for Russia's cash-starved government, despite qualms among some experts about whether President Boris Yeltsin has the political clout to implement reforms such as improving tax collection.

Nowhere, though, is an IMF program as dangerously close to collapse as in South Korea, which received a second, $3.5 billion instalment of its $57 billion rescue package Thursday, the same day as longtime dissident Kim Dae Jung won the nation's presidency.

Kim, who is closely tied to South Korea's militant labor unions, had suggested during his campaign that he would insist on renegotiating Seoul's Dec. 3 agreement with the IMF, especially provisions that would entail layoffs and bankruptcies at failing banks and companies.

Even though Kim later vowed to honour the deal, and reiterated that pledge in his first speech to the nation as president-elect, his victory triggered a plunge in the Korean won, a dip many analysts attributed to doubts about his resolve to impose economic discipline. The country can ill afford a further erosion of investor confidence because despite the IMF money and several billion dollars more in emergency loans announced last week, the South Korean banking system holds barely enough foreign currencies to pay debts owed to foreigners before year-end.

"I think they'll just make it through, but they have very little manoeuvrability," said a financial industry official who is studying the money flows closely. The official requested anonymity.

IMF officials predict that South Korea and its ailing Asian neighbours will recover because, after an initial period of half-heartedly accepting the need for economic policy change, they are starting to move more aggressively. One example is Seoul's decision last week to allow interest rates to soar, which helped buoy the won by making South Korean investments more attractive.

"Now we must be patient and persevere on our side in supporting these programs, as the countries themselves must persevere in implementing them," a senior IMF official said. "These programs do not have immediate miraculous effects. No, here we are dealing with confidence; it is very difficult to rebuild it sometimes."

At the U.S. Treasury, officials recall how the 1995 rescue of Mexico suffered through a nerve-wrecking couple of months during which the peso remained quite weak. And they argue that although Mexico had to endure a deep recession, the pain for Mexicans and the calamity in global financial markets would have been far worse had the IMF and United States not led the effort to provide Mexico with $51 billion in credit lines.

In the end, as Treasury Secretary Robert E. Rubin often points out, Mexico not only paid back the United States ahead of schedule, but the United States made a profit of a half-billion dollars on the loan.

Whether the Asian rescues are successful, many critics say these sorts of mega-bailouts simply create longer-term problems, because they allow people who made foolish decisions -- especially bankers and money managers in New York, London and Tokyo -- to avoid being subject to the discipline of the market. Ensuring that a crippled country has the resources to continue paying its debts to foreigners may help keep a panic from spreading globally. But it raises an issue that economists call "moral hazard."

"In fact, one of the reasons we have Asia is that we bailed out Mexico," said Lawrence Lindsey, a former Federal Reserve governor who is now a fellow at the American Enterprise Institute. "We signalled to creditors around the world that you could feel free to lend in Asia, and the U.S. Treasury and the IMF would bail you out if you got in trouble. Now if we bail this one out, we'll have established a second precedent, and the next time, it will be bigger and arguably something we can contain less easily."

IMF and Treasury officials retort that thousands of investors in Asian bonds and stocks have suffered horrendous losses, and that while some big lenders are escaping unscathed, the number is relatively small. But the clamour from critics is making it increasingly difficult for them to persuade the U.S. Congress to approve Washington's portion of a scheduled increase in the IMF's badly depleted war chest of currencies.

The idea that perhaps it would be best to pull the plug on a country like South Korea, and allow it to default on its debts as a lesson to the world's governments and bankers, does not sit well with the IMF.

Yes, IMF officials say, when a country simply refuses to restructure its economy, the fund must not shrink from withholding support. "But the ramifications of a Korean default -- in Japan, and in the rest of the world -- could be on a big, big scale," the senior IMF official said.

And even if the U.S. economy might well be strong and distant enough to weather the fallout, he asked, shouldn't the effects on South Korea's neighbours be taken into consideration? "This would be a tremendous blow," he said, "for these other countries that are painfully trying to recover."

Putting a personal face on the tragedy we have the example of a South Korean mother of a 26 year old student who could no longer afford to send her son to Australia (following the currency crisis). She jumped from a 16 floor building after having a fight with her husband over her son's future.

Republican debate a non-event.

The Republican debate, a drive by the elite to change a system that works (ie the Monarchy), has palled well under 50% of the potential vote. Monarchists are believed to have ignored or boycotted the "Constitutional Convention".

As a result the Republican candidates dominate the poll with eight Republicans and five Monarchists making up Queensland's representatives.

The whole state of affairs begs the question, "Why break something that ain't broke?"

Examples of massive foreign ownership of Australian land.

The Sultan of Brunei, the world's richest man, owns five cattle ranches in the Northern Territory covering land slightly larger than Brunei itself, almost 1.5 million acres.

The Australian-born media baron Rupert Murdoch, now a U.S. citizen, is also a major landowner.

So is the nation's biggest life insurance company, the Australian Mutual Provident Society, and its rival, National Mutual, which is now owned by the French company AXA.

A subsidiary of DKP Sabah Malaysia owns four properties stretching over 2.2 million acres. Indonesia's Bakrie family owns eight properties covering 4.6 million acres, an area almost as large as Israel.


Making the news"  -
an indepth exposé of media and political collusion at the highest possible levels in Australia.


Political:

John Sharp, who resigned from the ministerial portfolio of  Tourism in September, was found guilty of rorting his travel expenses in a report prepared by the Auditor General.

The report, which cost Au$220,000 to compile, found that Sharp had incorrectly claimed about Au$9,000 in travel allowances.

The other man at the centre of the scandal, David Jull, the Minister for Administrative Services, got off with a soft smack on the proverbial backside and is expected to return to his portfolio shortly.

The main findings of the Auditor General's report were:

But Sharp is not alone, a number of Federal Ministers are currently being questioned following allegations that they have rorted their travel expenses. This follows the Mal Colston travel rorts affair that broke earlier this year.

You Say:

email the editor

Subject: Referendum needed to debate the future of our youth

To the Editor,

Dear Sir,

In the beginning, God gave us ten Commandments which families, through the ages, have used as a guide.

Then came the experts who gradually eroded each one which interfered with their way of life, without any thought for the youth of the future.

Left without any guide or discipline, and fed on a diet of sex and violence on film and television, many of our youth have emerged confused, violent and resentful of authority.

To whom do they turn?

Encouraged by experts to leave home, these angry, homeless children, feeling totally abandoned, seek comfort and security from groups who adhere strongly to the very Commandments considered outdated by the experts.

When introduced, Citizens' Initiated Referenda (CIR), will enable us to have a say in the future of our youth, through honest, healthy debate.

The experts don't approve of CIR for that reason.

Pat Sturge

Business:

Melbourne's Crown Casino suffered extraordinary losses of Au$55 million because of the winnings of big punters. The result was a dramatic drop in the value of the Casino from Au$2 billion to just Au$500 million with shareholders suffering the biggest losses.

In fact the share price was in free-fall until Kerry Packer put his hand up and suggested a capital injection of Au$90 million in exchange for a large slice of the action.

What is of particular interest is the relationship of the Packer's with Victorian Premier Jeff Kennett who jumped up and down with proverbial excitement when the Casino was launched. He looks likely to get egg all over his face... and in steps Packer, his mate.

During the critical stage leading up the decision on changes to media laws earlier this year it was Kennett who said, "If Mr Packer wishes to buy The Age from the Fairfax Group and can obviously afford to do so, based on what he has done today within this country, I see nothing wrong with him seeking that asset."

Personal trivia, from the global office:

Another beautiful day in paradise.

Have a good one.


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