U.S. Households Might Riot As Their Pensions Melt

June 5, 2002

WIESBADEN, June 3 -- U.S. HOUSEHOLDS MIGHT RIOT AND DEMAND GOVERNMENT INTERVENTION AS THEIR PENSIONS MELT DOWN, states the German daily Frankfurter Allgemeine Zeitung in its weekly financial market overview.

FAZ notes that investors are now finally realizing "the full extent of manipulation and fraud that was behind the tech stock euphoria of the century." Obviously, the criminal actions by Enron and German "New Market" companies are just the "tip of the iceberg," as more and more large corporations become the subject of fraud allegations. Even positive government data can no longer impress any investors.

Since the start of the year, the Nasdaq is down 23% and the London tech market lost one-third of its value. In the last two years, the share of tech stocks in the global market capitalization plunged from 40% to 20%.

FAZ then picks up an "apocalyptic -- let's hope fictional --" scenario by Barton Biggs of Morgan Stanley. Biggs was talking about a further crash of tech stocks leading to a panic flight out of investment funds. In particular, the pension funds might run into disaster. Private households, recognizing the "devastating performance of their pensions funds" will ask for government aid. The first large protest rally by angry has pensioners already taken place in Harrisburg, Pennsylvania.

On top of this, another catastrophe is looming in the housing market. Once interest rates start to rise, housing prices will fall, triggering "the collapse of the consumption miracle."

Source: "U.S. Does Not Foresee Regional Collapse," by Andres Oppenheimer, June 3]

WILL THERE BE "A GENERALIZED COLLAPSE IN LATIN AMERICA"?

This is being debated in Washington, according to the latest report by the Miami Herald's Andres Oppenheimer. Various Ibero-American diplomats in Washington fear "the domino effect" moving north from the Argentine crisis, hitting Uruguay and Brazil, Oppenheimer writes. But, his contacts in Washington say not to worry, such "fatalistic scenarios" are exaggerated.

"If Washington is nervous about the possibility of a generalized collapse in Latin America they are hiding it pretty well," he notes.

Oppenheimer also fears the region could break with free trade. Argentina's Ambassador to Washington, tango fan Diego Guelar, told Oppenheimer: "The anti-system banner is growing.
Many people in Latin America wrongly believe that Argentina was the best student; they one who privatized the most, the one who carried out the greatest policy of opening its economy, and that is why it ran into trouble."

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