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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
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Posted: Fri Jun 28 14:29:04 1985
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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