The Washington Times of February 1, 1998, reported, “The United States is starting to take a hit from Asia’s deepening financial crisis, with American manufacturing reporting weakened demand, the Federal Reserve reported January 21.… Asia’s economic woes are expected to wash up on U.S. shores this spring. U.S. producers are braced for a flood of cheap cars, computers, semiconductors and other products from South Korea and the rest of Asia.… Economists predict the 1998 trade deficit to more than double from current levels, hitting between $250 billion and $300 billion.” In that same issue, another article quoted Senator Carl Levin, a Michigan Democrat, as saying, “If Japan tries to export its way out of this economic slowdown while keeping its markets effectively closed to competitive American products, then there’s going to be…a very severe reaction in the United States.”
In December 1997, factory orders in the United States took their sharpest monthly drop since 1991. Commodity prices on items such as oil, agricultural products, gold and aluminum “have plunged at a startling rate since last summer , when the Asian turmoil began,” states the February 5 Wall Street Journal. “Damage is mounting fast in this economic sector that is often likened to a canary in a coal mine: an early-warning system for hazards that could eventually endanger the entire economy.”
As usual in American politics, a great deception is occurring about the supposed “balanced budget” touted for the U.S. government’s next fiscal year. In spite of “balancing” the budget, the national debt is projected to grow from its present bloated size of $5.4 trillion to an even-worse $6.3 trillion in 2003. The reason is because the budget will not truly be balanced! Next year, just as in years past, the government will borrow an extra $184 billion from trust funds like Social Security to pay current bills! This gives the appearance that the U.S. economy is healthier than it is. The truth is that the budget is not balanced and America is continuing its rapid descent into deeper and deeper debt!
And then there is always the threat of foreign-selling of U.S. treasuries, which began in mid-1997 and accelerated in December. By the end of 1997, about $50 billion worth of foreign-held treasuries had been sold. The Weekly Standard of January 26 says ominously, “How much further the process [of selling U.S. treasuries] goes depends not only on the Fed, but on those foreign central bankers who still have the most policy discretion.” That means foreigners are in the driver’s seat regarding this biggest of the potential threats to the U.S. financial system!
U.S. Federal Reserve Chairman Alan Greenspan, testifying before the Senate Budget Committee on January 29, appeared to be warning that events could still spin unpredictably out of control when he said, “We have as yet experienced only the peripheral winds of the Asian crisis. A continuation of the Asian crisis should give us pause in assuming that our economy will remain robust indefinitely.” Many other economists agree with Mr. Greenspan about the financial dangers now rippling ashore in what may well turn out to be a financial tidal wave, of gargantuan proportions.
Nick Guarino, in his Samurai Gold Forecaster newsletter of January 27, 1998, summed up the danger America is facing when he wrote, “The gun on the U.S. stock market is cocked. It’s just a question of which of three major events will pull the trigger: the continuing Asian crisis; the gross overvaluation of U.S. stocks; or the destruction of the Clinton presidency [due to scandal]. Anyway, one or more of these events is about to shoot the U.S. stock market down.” ▪