Plymouth, Montserrat mud and lava would have been scorched and left completely non-arable by the heat of the pyroclastic flows. Plymouth was abandoned and the entire southern half of the island was declared an exclusion zone because of the continuing volcanic activity at the Soufrière Hills. The government of the island was moved to Brades, although Plymouth remains the "de jure" capital. , a new port and capital are under construction at Little Bay, on the island's northwest coast. The destruction of Plymouth caused severe economic problems for the island of Montserrat. Plymouth had been by far the largest settlement on the
Long-Term Capital Management invested in other derivatives such as equity options. Under prevailing US tax laws, there was a different treatment of long-term capital gains, which were taxed at 20.0 percent, and income, which was taxed at 39.6 percent. The earnings for partners in a hedge fund was taxed at the higher rate applying to income, and LTCM applied its financial engineering expertise to legally transform income into capital gains. It did so by engaging in a transaction with UBS (Union Bank of Switzerland) that would defer foreign interest income for seven years, thereby being able to earn the more favourable capital gains