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Western Press Review: Decade Of The Bull --- Is It Over?

  • Don Hill

Prague, 28 October 1997 (RFE/RL) -- Western press response to Monday's sudden acceleration of falling global financial markets is focusing on two questions. First, how do this week's events compare to those of October 1987, when a 23 percent fall in the major U.S. stock market index presaged financial disaster for many? Second, is this the end of the 1990s' world prosperity wave? The consensus answers: One, this time is different; and, two, prosperity remains likely for the near future.

NEWSDAY: The mood wasn't like 1987

Writing today in the U.S. newspaper Newsday, Harry Berkowitz answers the first question tersely: "On the floor of the New York Stock Exchange (Monday), it was glum, it was tense and it wasn't pretty. But it wasn't 1987."

NEW YORK TIMES: The U.S. economy's vital signs are strong

The paper editorializes today an the globalization and the tremendously expanding interdependence of money mechanisms around the world. The Times says: "There is the worrisome image of Japan, where stock and real estate markets crashed (a decade ago), dragging the economy along with them for most of the 1990s. But Japan's banks were buried in bad loans (then), and its central bank reacted slowly and ineptly.

"Last week's turmoil in Hong Kong and financial capitals in Southeast Asia probably frightened investors on Wall Street enough to spark self-fulfilling waves of selling. But Southeast Asia has a limited impact on the American economy, and if the American stock market had not been spooked by Hong Kong it would almost inevitably have been spooked by something else.

"There remains a danger that currency disruption and stock market crashes will spread from Asia to other regions, but such contagion, given that scared foreign investors (probably) will pour their money into the United States as a safe haven, ought to pose a limited danger here. The economy's vital signs are strong, which reflects many years of solid monetary and fiscal policies that should now serve Americans well."

DIE WELT: Buying shares in Asian companies has gone out of fashion

In the German newspaper today, Bernd Weiler comments that a great difference between the present slump and the 1987 plunge is in the magnitude of thenumbers. Another unique element, he says, is in the end of illusions about the Asian tiger economies.

He writes: "So how far up was the world's leading stock exchange, Wall Street, before the Dow Jones industrial average shed more than 22 percent on October 19, 1987? It was standing at just over 1,700 points. And today? The world's most studied index has fallen back to 7,700 points, after having overshot the record 8,000 mark in previous months. Despite the index plummeting in 1987 and a couple of 'mini-crashes' in between, that is an impressive trend."

Suddenly, Weiler writes: "Buying shares in Asian companies has quite gone out of fashion. The waves made by Thailand's currency and monetary crises has created a strong undertow: Malaysia, Indonesia, the Philippines and now Hong Kong, too, have all been pulled into it. Japan is on the brink of recession and now fears for loans and investments in its neighbouring states."

And this, he says, "has little to do with autumn, even though memories of the Great Crash of 1929, which also occurred on a day in October, are now resurfacing."

"It has much more to do," the commentator says, "with an end to exaggeration in South-East Asian markets. Unrealistic links to the dollar fall away. The strength of the free markets gains the upper hand. The result is realistic stockmarket prices. That also applies to the German market, which has developed solidly this year."

TIMES OF LONDON: The market's emergency shutdowns went into effect for the first time

The economic correspondent describes the situation glumly in an analysis today. "Wall Street went into freefall last (Monday) night," Alasdair Murray writes, "suffering its biggest one-day points drop on record as the global financial markets crisis gathered pace. The plunge prompted the first emergency shutdowns of the New York market under rules introduced after the 1987 crash, but that failed to halt the decline."

Murray says there's one positive sign: "The mechanisms introduced after the Wall Street Crash in 1987. . . functioned effectively and the U.S. Treasury was monitoring markets with financial officials throughout the world and would continue to do so."

NEW YORK TIMES: 'It's about time' for the drop

The stock market movement was exptected and overdue in the eyes of many experts, writes Leslie Eaton today in an analysis. Eaton says: "Many emotions swept over Wall Street (Monday) -- horror, panic, pain. But for a lot of long-time market gurus, the strongest feeling was of relief. "That may sound odd on a day when stocks fell further and faster than they have in a decade, with the Dow Jones industrial average plunging a record 554.26 points. "But as traders and investors watched the lines on their computer screens head steadily south, one thought flashed across a lot of minds -- 'It's about time."

WASHINGTON POST: Japan's banking system might become more strained

Writers Paul Blustein report today that U.S. economic officials didn't find any need for strong action. The writers' analysis said: "After hours of watching fretfully and conferring intensively, Washington's economic policymakers responded to Monday's stock market plunge with little more than soothing words about the underlying strength of the U.S. economy." The Post writers said: "Officials decided no policy action was needed because they concluded Monday's stock market turmoil was not nearly as alarming as the crash of October 1987."

But, "a number of elements of the current situation remain deeply worrying to policymakers," they wrote, "not the least of which is the danger that Japan's fragile banking system might be put under even more strain as the result of economic troubles afflicting East Asia, where Japanese banks have lent heavily in recent years."

LOS ANGELES TIMES: No one can say that stock prices haven't crested

And in a news analysis, Tom Petruno writes: "(The) U.S. stock market dive, vicious as it was, doesn't by itself answer the question on most investors' minds: Is this the end of the great 1990s bull market, and the beginning of a long period of weak or falling stock prices?

"It could be, of course. Just as the market's stunning rise in this decade was largely unexpected, no one can say for certain that U.S. stock prices haven't crested, and now are set up for a prolonged period of poor performance. But many Wall Street veterans say the reason that broad stock market declines feel so painful to many American investors is simply that the 1990s have seen so few such declines."

WASHINGTON POST: Analysts predict investment will flow out of Asia and to the U.S.

The role of Asia in the economic perceptions of U.S. residents has changed radically since the 1980s, Steven Pearlstein comments today. He writes: "Fifteen years ago, economies all across Asia were booming and Americans were scared that Asians would take our jobs, buy up our best real estate and have a permanent stranglehold on our financial markets. Americans are still Asia-obsessed. Only now our worry is that Asian economies will become so weak that they will curb our booming exports and slow the extraordinary run-up on Wall Street."

Also, Pearlstein writes: "The Asian economic crisis is likely to be felt differently by Americans in the role as consumers, investors and producers. As consumers, they will likely benefit from lower prices they pay for imported goods' (and), while American investors are smarting from the broad decline in stock markets around the world, many analysts were predicting that many of the billions of investment dollars flowing out of Asia will make their way to the safer haven of the U.S. stock and bond markets, driving prices up there. (Finally), if there is any noticeable negative impact, it is likely to be on investors and workers in American firms that export to Asia."