> Today's (June 26, 1995) Globe and Mail reprinted a piece from the NYT in > which Joe Mysak, ediotr of Grant's Municipal Bond Observer did a flame. > He's enraged that Orange County, one of the riches counties in the US, > has opted for bankruptcy rather than undergo the local government > equivalent of structural adjustment. (The article's sub-head is: Shan't > Pay/ The California municipality betrays investors.) > > If Orange Country, which has tons of valuable assets, can do this and get > away with it, why not Mexico and many other countries hobbled by > endebtedness to international banks and investors? > > Curious minds want to know. > > Sid Shniad > There should be more such flames -- so many absurdities so need attention these days! The debtor's assets analogy works rather differently in the two cases, Mexi- co and OC. In Mexico's case, the assets were there but unmoveable. The political elite had nowhere to go to get their punishment reduced. So their assets couldn't actually be removed -- as, say, might be collateral from a bankrupt business firm. At the same time, the Mexicans couldn't just say hands off. In the 1980's debt crisis, the easing of rules on foreign-ownership of Mexican assets, and the privatization/securitization episodes were effectively part of making Mexican assets available for purchase or exchange in some (weak) sense. In the most recent case, the attachment of oil-based earnings dramatically indicated that this hook is still at work. The OC situation differs in that OC has political recourse and resources lacking for Mexico. It's wealthy residents include, among others, some of the very highest-priced political consulting talent on the planet. These are people that MATTER. A second factor is, that while there is de facto a foreign-exchange balance between, say, OC and the rest of the world, there is no OC currency balance that must be maintained. So the deal is cut more invisibly; and the markets cannot "move against OC dollars" as against the Pesos. Clearly the markets CAN move against OC bonds -- but so what! The bond holders -- such as the source you mentioned -- must simply eat their losses. PS Tomorrow (Tuesday) OC voters are deciding whether to ante up for a 0.5 % sales tax to pay for their own bailout. A low turnout will yield a turn down, a high one (acc. to pundits) passage. PPS The Cal assembly already decided to pass on the Lender-of-last-RESORT role (pun intended) for OC. OC people gave us Prop 13 -- nuff said. PPPS An OC crisis unmitigated by 0.5% sales tax will merely hasten the rapid shift toward privatized services of all kinds, including parks, schools, etc., that Mike Davis documents so well in one chapter of his City of Quartz. Gary D. PPPPS And the Angels are finally in first place, with everybody too strung out politically to even care! Gene Autry just can't ride again. Gary A. Dymski, Dept. of Economics [EMAIL PROTECTED] Univ. of California, Riverside CA 92521 (909) 787-5037 ext 1570
