Breaking Global Pessimism

Prudence is assuredly a virtue. But too much prudence sometimes may not be, well, prudent.

Case in point: the flight of investment capital from healthy emerging markets as well as suspect ones. Hong Kong, for example, was No. 1 on the Wall Street Journal-Heritage Foundation's 1998 Index of Economic Freedom, a thorough study of 10 influential factors affecting the economies of 154 nations. Singapore was ranked 2nd; Taiwan 7th, tied with the UK and Luxembourg, just behind the US.

Are millions of workers in those lands any less skilled than they were at year's start? Are their new factories outmoded? Have they proven inept in adapting products to meet world demand and tastes? No. No. And no.

We raise this subject as a prime reason for praising Alan Greenspan and the US Federal Reserve Bank for moving to lower interest rates. That action should have several much-needed results:

1. It should puncture widespread gloom that no leader is doing enough to halt the spreading global crisis.

2. It will stimulate US economic activity - consumer buying, real estate, investment - particularly buying of emerging market products.

3. It should push other rich nations' central banks to follow suit, despite their recent failure to agree on coordinated interest cuts.

4. It hints that a further rate cut stimulus by the Fed is likely.

5. It should nudge some global investors to edge their money out of low-interest America back to the healthiest overseas markets where high interest rates prevail to defend besieged currencies.

6. It should help change the atmosphere surrounding the crucial $30 billion rescue package being crafted to defend Brazil. That, in turn, should help to make the likely reelection of Brazil's President Cardoso on Oct. 4 a more decisive turning point.

Literally billions of people around the globe would benefit from a turning of the tide. The world is far from having a glut of food, shelter, transport, and products that make life better for deprived people. In that sense, the Fed's stimulus - and others that should follow - are precisely the prudent thing to do.

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