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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: paul ross who wrote (116)	5/15/1998 6:30:00 AM
From: Henry Volquardsen	Read Replies (3) of 3536

Paul, Much has been made of the size of the US debt. It is indeed much to large and we need to reduce it. Many people focus on the size of the US debt as a reason why the US dollar will eventually collapse against the Euro. The problem with this analysis is that it ignores the size of European. The US debt as a percentage of GNP is smaller than every member of the Euro other than Luxembourg. When the Euro is formed the economy of that group will be about the same size as the US and the debt will be much larger. The Euro may in fact initially strengthen against the dollar but it will be for technical reasons and have nothing to do with debt levels. Debt levels would argue for a stronger dollar against the Euro. You post that Over the past couple of months Japan has dumped a substantial number of dollars in its bid to bolster the Yen, causing the Fed to drain reserves and put upward pressure on interest rates. Yes the Bank of Japan sold a huge amount of dollars. But the Fed did not buy any of those dollars. Those dollars sold by the Bank of Japan had very little impact on the currency because the Japanese financial institutions themselves bought all those dollars. The Japanese themselves would rather hold dollar right now than the yen. Also the Fed has not shown any inclination to try and prevent a rise in US interest rates. Turn on CNBC, they keep threatening to raise rates themselves. I read your link to the conspiracy. Please don't be offended as I don't mean this as a rebuff to you but the only phrase I can think of to describe Mr Birch's analysis is complete and total horse shit. I stopped about two thirds of the way through because it was so loaded with outright distortions and errors. The notion that the two main goals of the BIS were to destroy the Soviet Union and destroy the US dollar is silly. Also to claim that the reason the Soviet Union fell is because the BIS arranged loans and then called them is completely out of touch with reality. If Mr Birch really believes this nonsense he is gravely mistaken. However this kind of fevered paranoia is generally the product of people trying to push investments in gold. Nothing but scary stories for the financially immature. Believe at your own risk. Henry

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