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What If There Is No Tomorrow?
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A flood of aggressive hedge fund players into the global foreign exchange place today, long has been dominated for wholesale bankers, makes it harder for central bankers to police the giant foreign exchange market. Central banks responsible for stable financial systems have long used commercial banks and their eyes and leads in the 24 hour global exchange market which mainly operates on an unregulated basis.
Wholesale interbank traders operate under market conventions developed under the gaze of central banks. But they are being placed by as major players of the foreign exchange market which values a1.9 trillion dollars a year by the often opaque trading activities of financial funds.
This situation worries central bankers, especially in developing countries, who still remember the way hedge funds savaged the pound in 1992, forcing Britain to withdraw from European Global Exchange mechanism, and almost caused a global meltdown when Long Term Capital Management had been collapsed in 1998.
Hedge funds are gaining more access offered by services of brokerage banks like Saxobank. Although there is a considerable depth for developed markets, it is hard to say it for developing countries and unstable markets like Thailand, Turkey, South Africa or even Hungary an EU member. When we think even Great Britain was forced to withdraw from European Global Exchange Mechanism in 1992, how can developing countries stop such a force?
Hedge fund participates can easily manipulate the price and exploit the service if there is not enough regulation and monitoring.
For example: An IMF backed (?) country, Turkey’s central bank which has 57 billion dollars of reserves ( $30 billion reserved for short term payments), is totally open to international capital inflow and outflow without any time limit. That’s the reason Turkey is number 1 country in the world, provides 13% real interest rate and nominal of %20-21.The attractive return is the reason there is no immediate currency crisis and the Turkish government is sure that it is sustainable for a couple of more years.
We are living in a world that even middle size hedge funds 1-10 billion dollars under their management. Some of the best-known macro funds are trailing the Vanguard 500, which has $112 billion of assets. Tudor BVI, a $5.6 billion fund run by Jones's Greenwich, Connecticut-based Tudor Investment Corp., Moore Global Investment Fund Ltd., run by Bacon's Moore Capital Management Inc. in New York, New York-based Soros Fund Management LLC, run by Soros's sons Robert and Jonathan, in its Quantum Endowment Fund.Madrid-based Ravi Mehra's Vega Select Opportunities Fund Ltd., with about $1 billion in assets. Rubicon Fund Management LLP, a London-based hedge fund has $2 billion macro fund. These are just the samples of hedge fund industry coming to….
Then what if the hedge funds bet on Turkey for it is not sustainable anymore? What if there is no tomorrow? |
| Tarih
: 30.10.2006 |
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Copyright
© 2006 Mert TOKER All Rights Reserved. |
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