A Weekly Digest of The World's Financial Press

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The Independent Online

If Latin America and Canada adopted the dollar, it could benefit the United States

THE VALUE of a dollar should not be lessened because of political mistakes. Dollarising the Americas would place an obligation on us to keep the buck steady. Bluntly put, the Federal Reserve uses no reliable gauge to determine if it is providing the markets with a sufficient, non-inflationary or non-deflationary supply of money.

The price of gold is as good a gauge as any. Today's price is 18 per cent below two years ago. The Fed is inadvertently putting its thumb on the world's windpipe. This is one reason we are seeing global currency turbulence and low commodity prices.

- Comment


On the factors behind the Dow Jones' surge towards the 10,000 mark last week

WHAT FUELLED the surge last week were growing signs that crude producers were feeling enough pain to firm up oil prices. And when oil prices popped, so did oil and oil-service stocks. Just in time to take up the leadership slack created by the faltering techs.

[But] higher oil prices have a dark side as well, notably for fixed- income securities. When oil prices go up, fears of inflation stir and bonds sag. We don't want to be a party pooper, but a rally in yields might not be precisely the right stuff for a continuing rally in stocks.

- Alan Abelson, Up & Down Wall St

Business Week

On why the banana wars between America and Europe are not a joke

A UNIFIED Europe must shoulder global responsibilities commensurate with a new global attitude. Right now, the US is the sole economic locomotive for growth. Its huge trade deficit absorbs the exports of Asia and Latin America. Europe, in contrast, is running a $100bn trade surplus. It is unseemly therefore for the EU to defy World Trade Organisation rulings with a wink and a nod. It may be that the WTO should streamline its enforcement mechanisms. But in its short life, it has proved its value time and again. End the banana war before something serious happens.

- Editorial

Wall St Journal

From Warren Buffett's annual letter to shareholders in the Berkshire Hathaway investment company

THERE IS an intriguing disclosure in the annual report of Mr Buffett's publicly traded investing vehicle: CitiGroup, the huge financial concern formed in October through the merger of banking giant Citicorp and insurer Travelers Group, didn't make the list of Berkshire's largest stockholdings.

The omission means that during 1998 Berkshire either dumped at least some of its billion-dollar Travelers holding in advance of the merger, or, alternatively, sold some or all of the roughly 1 per cent Citigroup stake it received when the merger closed.

- Heard on the Street

Financial news

On why internet-based `day traders' are not to blame for overvalued stock markets

SMALL PRIVATE investors trading online cannot significantly move share prices. It is the institutions which, with their vast reserves of cash, cause markets to move.

Agreed, there may be some private online traders who effectively gamble on stocks, as they would at the roulette wheel. In any event, gamblers limit their influence. If they win, no one complains.

If they lose, they remove themselves from the game. The only losers who do not get removed are the ones bailed out by Alan Greenspan's Federal Reserve.

- Alpesh Patel


Oskar Lafontaine's resignation as German Finance Minister will change the EU's direction

LAFONTAINE saw the EU as powerful enough to turn back the tide of raw capitalism. But as Germany's business leaders know, the market's power grows by the day. Their competitors keep pushing them. And so they pushed Lafontaine.

Look for the EU experiment to return quickly to the conservative lines of tight budgets and extremely low inflation. Expect a third way that is less social and more market-oriented. Think of it as the `2.1 way' - a slightly updated version of the familiar capitalist software.

- Richard Medley, chairman of Medley Global Advisors

The Economist

BNP's hostile bid for two other French banks does not herald consolidation in the industry

IN AMERICA and Britain, once banks have launched a merger, they can set about closing branches and sacking staff; this, indeed, is often the rationale for the deal. This is not the case in most European countries. Hence the pains to which Societe Generale and Paribas went to emphasise there would be few, if any, job cuts domestically. And hence the pains that BNP has gone to now to say the same. Every European country seems to want strong banks, but until they can live with lay-offs, foreign shareholders and less nationalistic regulation, they will be disappointed.

- Leader column