Bankruptcy

How to Destabilize a Country

By J. Michael McBride

In these times when investors are extremely uneasy and with good reason, it is particularly easy to tip a country into financial chaos. Here is an article which addresses just this subject.

Quote with emphasis supplied:

A month ago, in the first round of this crisis, panicky rumors brought down banks. Now, with trillions of nervous dollars sloshing around the international markets, panicky rumors are bringing down countries.

The case of Iceland, which in recent weeks has nationalized its three major banks, shut its stock exchange, and halted trading in its currency, is by now well-known. Less well-known is the speed with which the Icelandic disease is now spreading. Consider Hungary, once the destination of choice for investors who wanted an East European head office with a 19th-century façade and a pastry shop next door: The currency is in free fall and so is the stock market, flummoxing those previously well-fed investors. (One of them told a Hungarian financial Web site, "I haven't got a clue as to when and how this would end, I'm just staring into empty space.") Or take Ukraine, where the governor of the central bank declared his banking system "normal and reliable" on Monday of last week. By Tuesday, Ukraine had desperately requested "systemic support" from the IMF. … To put it differently: If you wanted to destabilize a country, wouldn't this be an excellent time to do it? If Country X's stock market can crash following the publication of a single article in an obscure newspaper, think what might happen if someone conducted a systematic campaign against Country X! And if you can imagine this, so can others.

Here is a link to the complete article:
http://www.slate.com/id/2202648/

Michael

Full post as published by Texas Lawyer Blog on October 21, 2008 (boomark / email).