61741    While the US government and the Federal Reserve Board of Governors have promised loan and financing guarantees of 40 forty billion dollars, the Mexican government has announced to offer oil revenues as a security for the loan guarantee; the exchange market finally calmed down last weekend.

61742    The backdrop of this currency crisis in Mexico is the political anxieties in the country as well as the increased trade deficits attributed to the growth of imports.

61743    But the biggest reason is that Mexico's foreign currency reserves have been reduced and foreign debt payments have come up short.

61744    In that sense, the situation is different from Mexico's debt crisis in 1982.

61745    With the monstrous fiscal deficit and mounting inflation, the whole economical structure was in trouble back in those days.

61746    Later on, Mexico's fiscal deficit and inflation improved significantly.

61747    The current crisis is likely to level off as a problem of liquidity, it appears that the aid for Mexico will not have to come from foreign taxpayer's money

61748    International currency and financial markets are becoming increasingly integrated and the flow of money is both heavy and fast.

61749    To keep inflation in check, the Mexican monetary authority developed a foreign exchange policy to maintain the benchmark for the peso to be higher than reality but was met by an aggressive counteroffensive from the market.

61750    However, the problem is that this currency turmoil was not contained to only Mexico, and spread to other regions including other South American countries, then Spain and Italy, and even Asia such as Thailand and Hong Kong.

61751    In other words, currency turmoil is not a local phenomenon and the monetary authorities must cooperate with each other to tackle it.

61752    With regard to the world economy, as a result of the East-West integration after the end of the Cold War, the economy in the East such as China took the lead from 1990 to 1992, followed by the economic recovery in the US, Europe and Japan, and we are about to see a simultaneous boom worldwide.

61753    What has happened as a consequence is a shortage of funds.

61754    While direct foreign investments were covering the US fiscal deficit for a time, as their volume grew less, dollar-buying by central banks in Asia and others made up for the loss, and now funds are mainly from borrowing on the short-term money market.

61755    The bottom line is that the simultaneous global economy boom is intensifying the competition to secure money.