Look for the advent of the Euro -- the new "unified" European currency to have a salutory effect on the continent's role as a source of long term debt financing. Interest rates will lower, and deflation, while rampant world-wide, is least virulent here. The principal beneficiary, strangely enough, will be the major London based banks and investment houses. While Britain has chosen to eschew initial participation in the Euro, its EEC membership will provide access combined with a sophisticated financial base free of the constraints of a communalized currency. Long-term, however, this early advantage will backfire.

Amid all the pre-occupation over Y2K, the fact that many older systems view the the sequence "9999" as meaning end-of-file, has been overlooked. Let's see what happens on Thursday, September 9, 1999.

Expect several major disasters in internet stocks that will quickly cool investor's ardor for the "dot-com" investment bubble. With increasing pressures on profits already yielding substantial layoffs and worldwide deflationary pressures, this is the straw that will break the back of the U.S. speculative fever.

A sudden market crisis, spurred by the above scenario (most likely occurring in late summer and early fall) will shake faith in the policies of a Democratic Party already weakened by the consequences of impeachment. American voters, no less enamored of Republicans after their over-the-top behavior on that issue, will look for a viable alternative. I see the next Presidential election as the occassion for the first substantial multi-part fragmentation in American politics in over 100 years.

This fragmentation will create a worldwide decline of confidence in American security markets. The principal beneficiary -- Hong Kong.

All right folks -- place your bets.

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copyright 1998 by Kenneth M. O'Brien
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