In solidarity, Jerry
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TO THE BRINK
+ Global GDP growth fell by half to less than 2% and the world teetered
on the edge of the WORST FINANCIAL CRISIS since the 1930s. Russia
defaulted on its domestic debts in August; Long-Term Capital Management,
a big hedge fund, nearly collapsed. Fears of a global credit crunch
were eased only after America's Federal Reserve cut interest rates
three times.
+ DEFLATION surfaced. In dollar terms, commodity and oil prices sank to
levels not seen since 1986. In real terms, The Economist industrials
commodity price index fell to its lowest since the 1930s and oil prices
to their lowest in 25 years. Even the prices of finished goods fell in
several countries, squeezing the average inflation rate in the G7
economies to a 40-year low.
+ As international capital flows dried up, the EMERGING ECONOMIES
submerged. Much of East Asia plunged into deep recession; Russia's
economy imploded; and, by the end of the year, Brazil's economy was
shrinking, after $30 billion had been spent defending its currency.
Such was the demand for financial rescues that the IMF almost ran out
of money; but at the last minute America's Congress approved new funds.
+ JAPAN'S ECONOMY went from bad to dreadful. By October, it had
contracted for four quarters in a row, despite umpteen fiscal-stimulus
packages. The Nikkei average tumbled to 12,880 in October, its lowest
level for 13 years.
+ Most of the other RICH ECONOMIES flourished. America's economy expanded
by an estimated 3.5%, driven by falling import prices and rampant
consumer spending on the back of stockmarket gains. Wall Street plunged
by 20% during the summer, but it then recovered, to leave the Dow up 17%
over the year.
+ ASIAN BANKS wobbled. In Japan, the passage of a Yen60 trillion ($500
billion) bank-aid package allowed the government to nationalise Long-
Term Credit Bank and Nippon Credit Bank, two of the duffest lenders.
The two insolvent banks had assets equal to 7% of Japan's GDP. In China
GITIC, a big investment group, collapsed.
THE URGE TO MERGE
+ It was the world's biggest ever year for MERGERS AND ACQUISITIONS: they
surpassed $2.4 trillion, 50% above 1997's total. American companies
made two-thirds of the deals. Biggest of all in value terms was the
union of two oil giants, Exxon and Mobil, announced in December: it
will create the world's biggest company in revenue terms.
+ About a quarter of deals by volume were CROSS-BORDER. Daimler-Benz, a
German car maker, joined Chrysler in the largest foreign takeover of an
American firm. In drugs, parts of the biggest French and German firms,
Rhone-Poulenc and Hoechst, merged; as did Britain's Zeneca with
Sweden's Astra.
+ BIG BANKS got even bigger. Citicorp joined Travelers in the largest
ever financial-services merger. A week later came news of another
whopper: the merger of Bank-America and NationsBank to form America's
second biggest bank. Germany's Deutsche Bank paid $10 billion for
Bankers Trust, America's ninth biggest, which had been driven into loss
by the emerging-markets crisis.
+ In the digital world, CONVERGENCE CONTINUED. Compaq, a hungry PC-maker,
gobbled Digital Equipment Corporation; and America Online, the best-
known Internet service provider, paid $4.2 billion for Netscape,
populariser of the web-browser. In telecoms, WorldCom merged with MCI,
a long-distance company. A re-energised AT&T bought TCI, America's
leading cable operator, and linked with Britain's BT.
+ MEDIA MERGERS went transatlantic. Canada's Seagram, which owns
Universal Studios, bought PolyGram, Philips's music-and-films arm, for
$10.6 billion. In doing so it destroyed the nearest thing Europe had to
a film studio. Bertelsmann, Germany's media giant, bought Random House
for a rumoured $1.5 billion, thus becoming the world's largest English-
language publisher.
+ Europe came closer to having a SINGLE STOCKMARKET when the Frankfurt
and London stock exchanges decided to trade jointly Europe's top blue-
chip shares. Other European exchanges said they were keen to join.
+ America's Department of Justice launched an epic antitrust case against
MICROSOFT. Whatever the verdict, an appeal is certain, and the case is
doubtless destined for the Supreme Court.