Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.2.fluke 9/24/84; site vax2.fluke.UUCP Path: utzoo!watmath!clyde!bonnie!akgua!whuxlm!harpo!decvax!tektronix!uw-beaver!fluke!kurt From: kurt@fluke.UUCP (Kurt Guntheroth) Newsgroups: net.invest,net.misc Subject: Re: Re: "World Banking Crisis" -- what is it? Message-ID: <771@vax2.fluke.UUCP> Date: Fri, 28-Jun-85 14:29:04 EDT Article-I.D.: vax2.771 Posted: Fri Jun 28 14:29:04 1985 Date-Received: Fri, 5-Jul-85 05:26:27 EDT References: <11154@brl-tgr.ARPA> <2287@sun.uucp> <161@idsvax.UUCP> <6022@ucla-cs.ARPA> Distribution: net Organization: John Fluke Mfg. Co., Inc., Everett, WA Lines: 49 Xref: watmath net.invest:702 net.misc:8188 A note on FDIC insurance: FDIC insurance does not protect all your investment. Individuals are protected up to an aggregate maximum of $100,000.00 by the FDIC. I do not believe corporations are protected at all. The purpose of FDIC insurance is to reassure people that their money is safe in banks -- that they won't be wiped out by a bank default as happened at the beginning of the depression. Personal savings is the most lucrative source of bank funds since it pays the lowest interest and Roosevelt (or advisors, whatever) wanted to lure people back to banks so their savings would be available to stimulate the economic recovery. This is one of the few federal regulations which does not favor the very rich. How our strong currency affects trade: Say the US and Germany produce identical tractors for the equivalent of $100,000 each in 1980. Over the next five years the US dollar increases in value compared to the Mark. It now costs $120,000 in Marks to buy the US-made tractor. But the German-made tractor still costs only $100,000 in Marks. In 1980 a German would be just as likely to buy the US-made tractor as the German-made tractor, but now he has a strong motivation to buy the German tractor. He shuns US-made products. His US counterpart sees that the German made tractor is cheaper, and imports a German tractor, paying the import duties and shipping costs out of the difference in price. The US buyer prefers foreign goods. The trade defecit increases. This is acturally happening to Caterpillar Corp. How our strong currency affects our debtors: If US currency rises in value against your currency, and your loan must be repaid in dollars, you must pay back more of your currency than the stated amount on the loan. It is as if the interest rate had risen unexpectedly. Even if your country is in good economic shape, you find a rising percentage of your budget going to these outstanding loans, and there is nothing your country can do to improve the problem, because the problem is really caused by an underlying weakness in the US financial situation. Now, a question: The national debt is rapidly mushrooming. Can we estimate a time when the debt becomes a critical problem (it is now, of course, but I mean can we say when it will have a direct, noticable effect on things like our credit)? For instance, what measures are used for corporations? How much debt can a corporation have before it is judged unhealthy? As a percentage of assets? As a percentage of Revenue? -- Kurt Guntheroth John Fluke Mfg. Co., Inc. {uw-beaver,decvax!microsof,ucbvax!lbl-csam,allegra,ssc-vax}!fluke!kurt