ChronologyThe global nancialcrisis during 1998by WilliamEngdahlJan. 29: The committee of foreign creditor banks, led byNew Yorks J.P. Morgan, together with the South Koreangovernment, announce anagreement on rescheduling $24 bil-lion of Koreas short-term debt for a period up to ve years(this is 14% of Koreas $170 billion foreign currency debt).The announcement is timed to be made public during theDavos, Switzerland World Economic Forum. Representa-tives of the Group of Seven and central bankers proclaimthatthe worst is over in Asia. Privately, the same ofcials admitthat the Asia crisis has only begun, citing alarming signsabout the collapse of the International Monetary Fund (IMF)talks with the Indonesian government of President Suharto,and the deteriorating condition of the banking and economicstate of Asias largest economy, Japan.Feb. 2: U.S. First Lady Hillary Clinton, addressing theplenary at the Davos World Economic Forum, suggests thatgovernments might discuss what could be done to createmore of a global regulator atmosphere along the lines perhapsof a New Bretton Woods. Lyndon H. LaRouche had beencalling for a NewBretton Woods system since January 1997.Some days before, U.S. Treasury Secretary Robert Rubin, atWashingtons Georgetown University, had spoken of theneed for a new architecture in international monetary af-fairs.Feb. 14: Food riots in Indonesia spread across Java tothe capital, Jakarta. The Suharto regime places 25,000 troopson standby. Several people are killed in the rioting. Suhartoissues a statement warning of an international plot to destroyour economic foundation. . . . There are signs that this mone-tary crisis has been engineered to smash our economic devel-opment of the past 30 years. At the same time, in deance ofIMF demands, Suharto announces his decision to set up acurrency board in consultation with Prof. Steve Hanke. Thedecision brings an IMFthreat to cut off a promised$40 billionemergency bailout fund package.Feb. 17: The Japanese government of Ryutaro Hashi-moto proposes to the Diet (Parliament) a record 30 trillionyen ($223 billion) fund to be used by the Deposit InsuranceCorp. to deal with the seven-year-old crisis involving bankbad loans and the deepening recession being fuelled by bankscutting back on loans. The depressed Nikkei stock marketfails torecover fromthe dangerous lowof 16,200onthe news,EIR August 14, 1998 Special Report 71as Japans March 31 scal year end nears. At that level, thehidden stock reserves of 6 of Japans 19 largest banks woulddisappear.Feb. 23: Chinas Chen Jinhua, chairman of the StatePlanning Commission, announces that the government islaunching a three-year infrastructure housing and industryinvestment program of 8 trillion yuan ($963 billion) as a re-sponse to the worsening global nancial crisis. The project issaid to be modelled on the 1930s U.S. infrastructure programof the Roosevelt administrations New Deal.March 2: Japanese Deputy Minister of Finance EisukeSakakibara, in an interview with the Japanese daily MainichiShimbun, states, I believe that many world leaders may wellbe starting to contemplate the idea of a nancial agreementalong the lines of the Bretton Woods agreement of 1944.He adds that in view of the current crisis of internationalcapitalism . . . many people may now be realizing that boththe International Monetary Funds checks, and its solutions,are insufcient. Criticism of the IMF policies and their lackof positive effect in Asia grows internationally. Sakakibarascall, widely seen as a trial balloon, is endorsed by an ofcialof the Bank of Thailand.March 9: The Bank for International Settlements in Ba-sel, Switzerland, the organization of the worlds leading cen-tral banks, for the rst time admits the systemic threat of theAsia crisis. In a press release, the BIS states, At the turn ofthe year the nancial turmoil in Asia had reached systemicdimensions, requiring an immediate injection of cash and therolling-over of maturing debts. The BIS comment followedMarch 3 testimony by U.S. Treasury Secretary Rubin in theU.S. Senate, in which he stated, In Korea the situation deteri-orated very rapidly and by Christmas the Korean bankingsector was on the verge of systematic default. On March 12,the LondonFinancial Times runs a commentary by Prof. JudyShelton, who calls for discussion of a new Bretton Woodssystem with xed exchange rates.March18: LaRouche, at a policyseminar inWashingtonon the need for a New Bretton Woods, attended by some170 diplomats, government ofcials, political activists, andbusinessmen, calls on the Clinton administration to take thelead in proposing a newsystembased on a) periodically xedexchange values of national currencies; b) limited convert-ibility, as may be required; c) exchange controls and capitalcontrols; d) adoption of necessary protectionist measures re-specting tariffs and trade; and e) prohibitions against marketswhich speculate against targetted currencies. The nancialcrisis in Japan assumes a worsening dimension as Japanesegovernment 10-year bond yields fall to an unheard-of low of1.5%, and the Nikkei falls to lows near 16,500, despite re-peated government postal savings and state pension stock-buying PKO operations.March 26: Japans ruling Liberal Democratic Party(LDP) proposes a record 16 trillion yen ($114 billion) eco-nomic stimulus to try to revive the economy amid the worstClick here for Full Issue of EIR Volume 25, Number 32, August 14, 1998 1998 EIR News Service Inc. All Rights Reserved. Reproduction in whole or in part without permission strictly prohibited.FIGURE 1World currencies versus U.S. dollar(percent change from July 1, 1997 to June 30, 1998)British poundChina renminbiHongkong dollarArgentina pesoCzech R. korunaGerman markSwiss francSlovak korunaPoland zlotyBrazil realPeru new solChile pesoMexico pesoVenezuela bolivarHungarian forintSingapore dollarIndia rupeeJapanese yenTaiwan dollarColombia pesoSouth Korea wonPhilippines pesoMalaysia ringgitThailand bahtIndonesia rupiah100% 80% 60% 40% 20% 0% 20%83.5%42.1%38.8%37.1%35.4%20.1%19.0%17.3%15.6%15.2%14.4%11.9%11.5%11.3%9.7%6.9%5.7%4.0%3.6%3.4%1.6%0.1%0.0%0.5%0.5%downturn of the postwar period. The package is subject toharsh criticism for its short-term effect and lack of genuinenew funds. The Nikkei stock market continues to fall and theyen to weaken. On March 31, in a speech at Tufts University,U.S. Deputy Treasury Secretary Lawrence Summers admitspublicly for the rst time the gravity of the crisis. He says thatevents in Asia pose real threats to our wages, savings, andsecurity, and warns that weaker Asian stock markets wouldalso hurt our nancial markets and therefore diminish oursavings.April 1-6: Stock and currency values across Asia plungein what is admitted to be the start of phase two of the Asiacrisis. On April 1, the Japanese government begins a seriesof nancial deregulation measures dubbed the Big Bang,including easing rules for licensing securities trading compa-nies and removing controls on investment abroad in offshoreaccounts byJapanesecitizens, somethingwhichgreatlyaccel-erates the ight of capital out of Japan and the weakening ofthe yen. The chairman of Japans Sony Corp., Norio Ohga,warns that Japans economy is on the brink of collapse.Tokyo Shoko Research Co. releases a report warning that Ja-pan stands on the brink of a domino-style series of bankrupt-cies, after reporting the highest number of company failuressince World War II for the scal year ended March 31. TheBankof JapanTankanQuarterly business surveyshows everyeconomic indicator as being bad. Moodys Investors Servicewarns of a potential future downgrade of Japans sovereigndebt to negative, the only G-7 country facing such a warning.72 Special Report EIR August 14, 1998FIGURE 2Indonesias currency(U.S. dollars per rupiah)7/1978/1 9/2 10/1 11/3 12/1 1/2982/1 3/2 4/1 5/1 6/1$0.00000$0.00005$0.00010$0.00015$0.00020$0.00025$0.00030$0.00035$0.00040$0.00045Moodys cites the sheer size of Japans $3.7 trillion publicdebt, secondonly tothat of the UnitedStates, andinper-capitaterms the highest in the world. On April 3, President Clinton,in a highly unusual step, cites a raging battle in Japan overeconomic policy, urging Japan to take a bold course.April 2: LaRouche addresses a Rome meeting of mem-bers of theItalianParliament anddiplomats, where heoutlineshis proposal to create a New Bretton Woods monetary order.Several days later, while visiting Argentina, Italian PrimeMinister Romano Prodi tells an EIR reporter, I personallybelieve that we must move towarda NewBrettonWoods. Andthis has to be analyzed very carefully, because the risk levelin the international monetary system has greatly increased inthe recent period.April 17: The newly formed Group of 22 governmentnance ministers and central bank governors meets in Wash-ington, hosted by U.S. Treasury Secretary Rubin and FederalReserve Chairman Alan Greenspan. No public declarationsresult, and the talks are characterized as informal.April 18: The G-7 nance ministers and central bankersmeet in Washington during the Interim Committee Meetingof the IMF, where unprecedented public pressure is placed byIMF Managing Director Camdessus on Japan to take decisivemeasures to revive its economy, clean up its estimated $1 tril-lion in bad loans, and help in the recovery of the rest of Asia.The U.S. Congress refuses to pass the request for an added$18 billion quota increase for the IMF, in effect blocking theentire $90 billion increase, as political criticism of the IMFsrole in Asia grows.April 29: At the annual meeting of the Asian Develop-ment Bank, ADB Vice President Bong-Suh Lee declares,The worst is still to come this year for South Korea, Indone-sia, and Thailand. The actual repercussions are yet to happenin 1998.May 2-3: The heads of state of the 11 founding member-states of the European Monetary Union meet in Brussels toformalize the selection of the 11and to vote in the rst councilof the newEuropeanCentral Bank; DutchNational BankheadWimDuisenberg is selected to head the newECB, which willmanage the euro beginning January 1999.May 7-21: The social crisis in Indonesia spreads, withriots in Medan. Angry mobs rampage through Jakarta andstudent protesters demand Suhartos resignation. On May 21,Suharto steps down after 32 years, swearing in his Vice Presi-dent, B.J. Habibie, as President. Days later, a panic run ondeposits at the Suharto-tied Bank Central Asia PT forces theBankof Indonesiatotakeover thebank. Thecollapseof pricesin stock markets across Asia continues to gather momentum,with Koreas KOSPI index falling 7% on May 26, followedby declines in the rest of the region. Since mid-April, theIndonesia stock market has fallen 30%, and Koreas 40%.The Japanese yen hits a seven-year low, at 139 to the dollar,as Japans ofcial unemployment hits a postwar high of 4.1%.Economic data for Asia show most economies ofcially inrecession or severe depression.May 19: The Russian Central Bank suddenly raises itsbenchmark reporenancingrate from30%to50%, triggeringa 12%collapse of the Moscowstockindexinone day. Russianinterest rates had been kept extremely high since the crisis onRussian bond markets in October, in a desperate effort todefend the ruble, on the assumption that Asia would sooncalm, easing Russian rates with it. The failure of the Asiancrisis toabate, forces the Russiangovernment into a desperatedebt trap of short-termrenancing which reaches its appar-ent limits by the end of May. A national strike of unpaidRussian miners had blockaded the economically vital Trans-Siberian Railway. Inprivate discussionwithEIR, a prominentEuropean central banker expresses alarm that Russias short-term GKO government debt problem is out of control. Bymid-May, the Moscowstockindex has fallen50%since Octo-ber, 14% in just three days, as the Central Bank is forced tohike interest rates to prevent foreign bond sell-off. In testi-mony before the U.S. House Agriculture Committee, FederalReserve Chairman Greenspan admits, We do not as yet fullyunderstand the newnancial systems dynamics. . . . We havetried to confront the current crisis with the institutions andtechniques that we have.May 22: Auto production data released by the JapaneseAutomobileManufacturers Associationreveal a19.3%year-on-year drop in output for April. Japanese steel production isdown sharply, with estimates of a fall of at least 10% likelyfor 1998, as steel exports across Asia continue to collapse.Statistics on Japanese trade with Asia are equally grim. Over-all exports were down year-on-year by 18.1% in April. Ex-ports to select countries were even more damaged: to Indone-sia down 53%, Thailand 43%, and Korea 41%. In turn,EIR August 14, 1998 Special Report 73imports by Japan from those Asian economies were downmore than 14%, further delaying any prospect of stabilizingAsian economies, let alone starting a recovery.For rst quarter 1998, the Bank of Korea announces therst decline inGross Domestic Product since 1980, anannual-ized fall of 3.8%. Korean new machinery investment is off41%, and total investment in plant and equipment is down23%, the worst decline in the postwar period. Construction isdown 39%, and ofcial unemployment, at 6.7%, reaches a12-year high.May 31: The London Economist writes that the UnionBank of Switzerlands Singapore branch is reported to haveincurred nancial losses across Asia over the previous 12months, including in South Korea, in the billions of dollars.According to the Economist, the losses are so great that thereis a danger that the regulatory approval of the planned fusionof UBS with the Swiss BankCorp might be in danger. Thereport of losses comes on top of admitted UBS derivativeslosses in London and Hong Kong of at least $1 billion.June 2: In an economic symposium in Tokyo sponsoredby Japans Institute for International Monetary Affairs, Ma-laysian Prime Minister Mahathir bin Mohamad articulates thethoughts of many Asian governments in issuing a call forglobal nancial system reform: Our task is to focus on theremedies . . . if we are to ensure the revitalization of Asia,he states. The present system, if there is a system at all, ismessy, unreliable, and destructive. . . . I believe the time hascometodeal withtheentireissueof reformof theinternationalnancial system to ensure currency stability and contain theactivities of those who buy and sell money for no other pur-pose than to make prots. . . . We feel threatened. We aretold if we dont do those things, then our currency would bedepreciated further. . . . And so we try to followthe IMF, andit is very damaging to us. When you raise interest rates andsqueeze credit and increase taxes, which is the standard for-mula for all countries having problems like that, the onlyresult is that companies go bankrupt. And when companiesgo bankrupt, governments eventually go bankrupt. I thinkthere is some basis for fearing the medicine being doled outby the IMF.June 8-9: The worlds leading central bankers and -nance ministers meet in emergency session to discuss theglobal unravelling crisis. On June 8, central bankers of theOrganization for Economic Cooperation and Developmentassemble in Basel for the BIS annual meeting. No publicstatements are issued, beyond the admission by BIS Manag-ing Director AndrewCrockett that the Asian crisis is not yetdenitively over, conrming the failure of the months-longefforts at crisis management. Crockett states, This was therst crisis in the postwar period featuring the combination ofbanks as the principal creditors and private sector entities asthe principal debtors. Principles of howtomanage andresolvea crisis of this sort were not known in advance and, indeed,are still under discussion.The lack of any visible consensus on June 9, in the emer-gency G-7 nance ministers meeting in Paris, further under-scores the policy disarray among leading governments. Un-conrmed reports are that the growing Russian crisis andthe Japanese banking and yen crises were the major topicsdiscussed in Paris. Germanys Der Spiegel reveals that Rus-sian President Boris Yeltsin had just telephoned his friendBill Clinton to discuss the Russian debt crisis.June 10: The Japanese yen falls to a seven-year low at140 to the dollar, a drop of 8%since April 1. Global attentionis drawn to the probability of a yen free-fall, triggeringpossible devaluation of the Chinese yuan and Hong Kongdollar and competitive further currency devaluations acrossAsia. Ofcial Japanese government data reveal the effect ofa new law which has allowed Japanese capital ight abroadsince April 1 without restriction: For the rst time, theamount of Japanese savings being invested abroad exceedsthat invested in domestic savings. The stock price of a majorJapanese bank, the Long-Term Credit Bank, plunges, amida report in a Japanese magazine, Gendai, that the LTCBfaces a liquidity crisis. The Japan Ministry of Financepressures Sumitomo Bank to agree to a merger with LTCB.The Japanese government releases rst-quarter data whichreveal an annualized GDP decline of 5.3%, far worse thanpredicted, and conrming that the economy is in deep reces-sion, the rst since 1974-75. The Hashimoto governmentavoids using the term recession to describe the crisis,however, and predicts that by the second half of the yearJapan will return to positive growth.June 11: The government of China makes an unprece-dented public call on Japan to show courage and wisdomto stop the falling yen. Foreign Ministry spokesman ZhuBangzao declares, We hope Japan and the relevant countriescan face the reality and use courage and wisdom in takingeffective measures to stopthe further devaluationof the yen tocreate necessaryconditions for the recovery of the economy.The previous day, stock prices on the Hong Kong exchangehad fallen to three-year lows because of growing fears thatChinaandHongKongwouldbeforcedtodevalue, inresponseto the cheaper Japan and Asia rival currencies. China revealsthat rst-quarter exports to Association of Southeast AsianNation member-nations are down 10%, and to South Korea24.5%. Hong Kongs ofcial interest rates of more than 11%,needed to defend the xed dollar peg, are cited as the majorcause for the continuing fall of the HangSeng stock prices andHongKong real estate, the two pillars of the island economyscredit system. On the same day, the Taiwan Central Bankcalls an emergency meeting to discuss the continuing fall ofits currency.June 16: A senior World Bank economist uses the worddepression to describe the effects of the Asian crisis. At aconference of the UN Economic and Social Committee forAsia and the Pacic, in Melbourne, Australia, World BankAsia/Pacic Vice President Jean-Michel Severino declares,We are probably at the end of the rst cycle of the Asian74 Special Report EIR August 14, 1998crisis, and we are entering into a deep recession, or you couldeven use the term, depression. This depression may be verylong-lasting if one does not manage it very, very carefully.He adds, Since the beginningof this crisis, about $115billionhas ed out of the ve major crisis countriesKorea, Thai-land, Indonesia, Malaysia, the Philippines, about 10% of theGDPof these countries. In addition, banking credits have alsobeen reduced by about $88 billion, which is about another 8%of GDP. Severino points out that 40%of all credit to the veAsia countries had come from Japanese banks, as well asbeing the market for more than 20%of all Japan exports. Thedepression thus is being communicated from one country tothe other.June 18: A surprise, concerted intervention by the Bankof Japan together with the NewYork Federal Reserve, actingon behalf of the U.S. Treasury Department, succeeds tempo-rarily in halting the yen free-fall, which had reached 147 yento the dollar. The yen rises to 137. The intervention is timedwith the arrival in Tokyo of a high-level Clinton administra-tiondelegationconsistingof DeputyTreasurySecretarySum-mers, New York Federal Reserve President William Mc-Donough, Federal Reserve Board member Roger Ferguson,and, little-publicized, a Special Presidential Envoy, formerFederal Deposit Insurance Corp. head William Seidman, todiscuss details of theearly-1990s U.S. bankrescueoperations.The surprise U.S. action to support the yen reportedly is takenafter telephone assurance to Clinton by Prime Minister Hashi-moto that Japan will now take aggressive action to clean upits bank bad loan problems and to restart the Japanese econ-omy. The Chinese pressure on Washington to intervene tosupport the yen, coming one week before a planned Presiden-tial visit to Beijing, is reported to have been a major factor inthe surprise U.S. intervention.The United States reports that the April trade decit in-creased 9.5%over March, as exports to Asia dropped sharplyand imports rose. Mexico announces it expects a trade decitof $7 billion for 1998, because of the Asian crisis and fallingoil export earnings.Russian debt negotiator Anatoli Chubais announces thatRussia needs $15 billion fromthe IMF in order to stabilize itsnancial crisis. On June 22, an IMF team arrives in Moscowfor talks.June 20: In an article in the Minneapolis Tribune, Fall-ing Yen Raises Questions about Floating Currency, re-searchers at the Minneapolis Federal Reserve District arequoted arguing that uctuations in international currenciesare a cost that governments, businesses, and consumersshould not have to bear. They think they have a better way, apath that was tried and abandoned earlier this century: xedcurrencyexchange rates. The article quotes Catherine Mann,an economist at the Washington Institute for InternationalEconomics. We need something on the order of a new Bret-ton Woods, a top-down serious reassessment of what the ex-change rate system should look like, she says.June 22: Ministers from the Organization of PetroleumExporting Countries (OPEC) convene an emergency meetingin Geneva, in the third attempt this year to slash output to tryto stabilize falling world oil prices. As OPEC met, averageprices for crude oil were down 49% since October 1997. De-spite formal agreement for large additional output cuts, oilprices fail torise, owingtoexpectations of weakeningdemandfrom Asia and the rest of the world, combined with record-high inventory.June 24: President Clinton departs for a nine-day trip toChina, the rst by a U.S. President since the 1989 TiananmenSquare massacre. Clinton is joined by Treasury Secretary Ru-bin and some 1,000 U.S. business leaders. Despite extensivetalks with the Beijing leadership, no public announcementregarding the need for a new monetary order is issued duringthe visit, conrming reports of Washingtons desire, for thepresent, to adhere to crisis management.July 2: The ruling Japanese LDP issues its long-awaitedproposal to clean up Japans banking sector and its estimated$1 trillion in bad loans. The Bridge Bank plan is unveiledby the Hashimoto government, which will present it to theDiet for ultimate passage following the July 12 Upper Houseelections. The nancial markets react negatively, with the yenagain falling below 140 to the dollar, as the ne print of theproposal leaves most critical questions unclear. Among otheritems, it is revealed that nances to fund the Bridge Bank areAdisAbaba.....0100*Amsterdam. .. . .2300Anchorage. . .. . .1300Athens.. . . . ...2400Atlanta.. . . . ..1700Auckland.. . .. . .1000*Baghdad. . . . ..0100*Baltimore . .. . .1700Bangkok.. . .. . .0500*Beijing.. . ... . .0600*Belfast. . ....2200Berlin ... . ...2300BohemianGrove..1400Bogota.. . . ...1700Bonn.. . . .. . .2300Bombay.. ... . .0330*Boston. . . ...1700BrettonWoods. . .1700Bucharest . .. . .2400BuenosAires. . .1900Buffalo.... . ..1700Cairo.. . . .. . .2400Calcutta . ... . .0330*Caracas.. . ..1800Casablanca. ...2200Chattanooga. . ..1700Chicago ... . ..1600Copenhagen . ...2300Denver.. . ...1500Detroit ... . ..1700Dublin.. . ...2200Gdansk. . ...2300Guadalajara.. ..1600Havana.. . ...1700Helsinki . ... . .2400HoChiMinhCity..0600*Honolulu . ... . .1200HongKong .. . .0600*Houston . ... . ..1600Istanbul. ... . .2400Jakarta . ... . ..0500*Jerusalem.. . ..2400Johannesburg...2400Karachi ... . ..0300*Kennebunkport . ..1700Kiev.. . ... . .2400Khartoum ... . .2400Lagos.. . .. . .2300Lima. . ... . .1700Lincoln.. . ..1600Lisbon ... . ...2300LittleRock.... .1600London.. . ...2200LosAngeles....1400Madrid.. . ...2300Manila ... . ...0600*Mecca . . .. . .0100*Melbourne. . . .0800*MexicoCity... .1600Milan.. . .. . .2300Minneapolis.. ..1600Montreal . ... . .1700Moscow . ... ...0100*NewDelhi . .. . .0330*NewYork.. . .1700Nogales ... . ..1500Norfolk . ... . ..1700Oslo ... . ... .2300Paris.. . .. . .2300Philadelphia.. . .1700Pittsburgh.. . ...1700Prague .. . ...2300Rangoon.. . ....0430*Richmond.. . .1700RiodeJaneiro...1900Rome . ... . . .2300St.Louis... . .1600St.Petersburg...0100*SanFrancisco. . .1400Santiago . ... . .1800Sarajevo ... . .2300Seattle .... . ..1400Seoul ... . .. .0700*Shanghai ... . .0600*Singapore . .. . .0530*Stockholm. . .. . .2300Sydney ... . ..0800*Teheran ... . ..0130*TelAviv ... . .2400Tokyo ... . .. .0700*Toronto ... . ..1700Vancouver .. . .1400Vladivostok. . ..0800*Venice ... . ...2300Warsaw ... . ..2300Washington . ...1700Wellington. . ...1000*Wiesbaden. . .. .2300Winnipeg . ... . .1700Yokohama . ... .0700*Yorktown ... . .1700* MondaysON SATELLITESaturdays 4 p.m. ETGalaxy 7 (G-7)Transponder 14.7.71 Audio.91 Degrees West.SHORTWAVERADIOSundays, 5 p.m. ET2100 UTCWWCR 12.160 mHzCassettes Available toRadio StationsTranscripts Available toPrint MediaLaRoucheONRADIOInterviews with Lyndon LaRouche andassociates on EIR TalksLocal Times for EIR Talks Sunday Shortwave Broadcast on WWCR 5.070 mHzLISTEN ON THE INTERNET:ht t p: / www. l ar ouchepub. comEIR August 14, 1998 Special Report 75to come from the March vote by the Diet of 13 trillion yen($93 billion) for the Deposit Insurance Corp., far less than the$500 billion or so deemed necessary. There are no indicationsthat the LDP is prepared to go for a Chapter 11 reorganizationof the nancial system, and liquidation of the bank bad debtswhich are paralyzing the Japanese economy and most of Asia.July13: Japanese Prime Minister Hashimotoresigns fol-lowing disastrous results for his party in the July 12 UpperHouse elections. Intense back-room political faction ghtsover who will succeed Hashimoto as LDP leader and, thus,as Prime Minister, fail to resolve the nancial and politicalcrisis. All attention focusses on the July 24 announcement bythe LDP of the new leadership choice.On the same day that Hashimoto resigns, the IMF and theRussian government announce a record $22.6 billion two-year debt restructuring package to ease the Russian crisis. Inorder to raise its $11.2 billion share for this year, the IMFannounces that it must resort to provisions of its GeneralAgreement to Borrow, a procedure last used by the IMF in1978, when the Carter administration used it in a vain effortto stabilize the falling dollar. With stock markets in Europeand the United States inated to historic highs, largely fromthe inow of ight capital out of Japan and Asia, MorganStanleys chief investment strategist, Barton Biggs, predictsa 20-30%fall in the U.S. stock market in the coming months,which would spread to Europe.