Asian Monetary Crisis Holding Down U.S. Interest Rates (190)

KNOXVILLE, Tenn. — The Asian financial crisis is helping the U.S. economy by holding down interest rates, a University of Tennessee finance professor said Thursday.

 “Investment that normally would go into Asian markets is coming here in search of stability,” said Dr. Harold Black of UT-Knoxville. “The flight to quality investments has pushed down interest rates on treasury bills and bonds.”

 The downside is that many U.S. companies depend on stable markets in Asia to sell goods and services, Black said, attributing the financial crisis to failed domestic policies in the region.

“The Indonesians and the Malaysians have tried to push off the crisis on the involvement of speculators in their currencies,” Dr. Harold Black said. “Those are convenient excuses for incredibly bad domestic policies.”

 Representatives of the Washington, D.C.-based International Monetary Fund Thursday earned agreement from Indonesian President Suharto to move more quickly on restructuring the country’s financial system.

 Black said he was skeptical, but that he was unfamiliar with details of the reforms sought by IMF.

 “I don’t know how effective these bailout plans have been in the past,” Black said. “If countries don’t clean up their own mess — if they don’t institute sound monetary policies, fiscal policies and tax policies — such programs are apt to fail.”

The IMF since July has arranged more than $100 billion in funding to shore up Asian financial markets. The fund was established in 1946 to foster global economic stability. Almost 20 percent of IMF’s money comes from the United States.

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 Contact:Dr. Harold Black (423-974-1721)