Friday 15th December 2000
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By Neville Bennett
The year began with widespread fear the Y2K bug would create havoc. The expectation of difficulty was so ingrained it would have taken a brave person to choose to be airborne in the first hours of the new year. But nothing happened. Had the vast expenditure been worth it - or was it a scam?
Panic over, the global economy enjoyed a good rate of growth with trade growing even faster.
The decisive event in currencies was a little noticed minor change in Japanese interest rates - although it was picked up by this paper (NBR, August 18). This kicked the euro out of the big three currencies.
The euro's sharp depreciation led to much lamentation in the EU and was followed by futile market intervention by G8.
Other currencies, most notably the Australian dollar, declined to record lows as investors sought safe havens.
Of the global inflows of foreign capital which totalled $US865 billion, the US received $276 billion, the EU $US305 billion and the UK $US82 billion.
Most of Asia and Australasia suffered a degree of capital flight.
Aside from the US and Europe most of the world began to suffer some adversity. Some also suffered a double whammy of a depreciating currency and rapidly rising costs of oil imports.
There have been some current account problems in consequence; rising debt and hints of rising interest rates to come. Japan and Korea continued to pay the price of corporate indebtedness. Japan was dogged by slow growth and a growing mountain of bond issues. Korea reluctantly sold assets to foreigners.
The US economic miracle continued to fuel the world economy, although many observers expect it to slow in 2001 and perhaps depress the prices of commodities which, except for gold, are presently at their peak for many years.
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