from Follow the Money

2006: 1998, only in reverse

December 18, 2006

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In 1998, oil collapsed.  In 2006, oil soars. 

In 1998,  Russia defaulted after Treasury Secretary Robert Rubin refused to throw good money after bad, and blocked NSC pressure to continue disburse more than $5b of the IMF's $15b credit line to Russia.  In 2006, Russia added over $100b to its reserves even as it repaid almost $25b of debt to Germany and a host of other official creditors.

In 1998, credit spreads blew out.  Volatility went crazy too.    In 2006, credit spreads collapsedVolatility fell to record low -- some would say crazy low -- levels. 

In 1998, private capital flowed out of emerging economies in a big way.   In 2006, private capital flowed into emerging economies in an even bigger way.    Into emerging market funds.   But also into emerging economies -- and specifically into the coffers of emerging market central banks.

In 1998, an Asian emerging economy facing responded to pressure on its currency by imposing draconian capital controls.   Well, that hasn't changed.  In 2006, another Asian emerging economy responded to pressure on its currency by imposing draconian capital controls.

Back in 1998, Malaysia was worried that speculative pressure was driving the ringgit down too far and too fast.    Thailand, by contrast, is currently worried that speculative pressure is driving the baht up too far and too fast.    

A sign of the times.

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