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To: d:oug who wrote (37252)	7/17/1999 6:01:00 AM
From: Bobby Yellin	Read Replies (1) \| Respond to of 116764

I got more than I bargained for but you provided a superior commentary.. so many parents are working so hard in this "wonderful economy" that they are not there emotionally for their kids and possibly not there physically either -I just hear too many stories about how many long hours so many "fortunate people work" to survive.. one pays for everything ps if there is no inflation why do the lawmakers need a raise? somebody should tell them to shut up..they might make gold go up

To: d:oug who wrote (37252)	7/17/1999 6:44:00 AM
From: Alex	Read Replies (1) \| Respond to of 116764

Is the Upward March of the Mighty Dollar Near an End? All those capital flows: borrowed money Movements in the world's big three currencies - the dollar, the euro and the yen - are critical to global stability. Of late, the euro has grabbed the headlines by sinking close to parity with the dollar, prompting Wim Duisenberg to hint that interest rates might rise in an attempt to talk up the currency. The yen has also attracted attention, with the Bank of Japan forced to intervene heavily to prevent it from strengthening further. Yet it is the potential for a prolonged fall in the dollar that is set to become the really big issue in the currency markets. The fall in the euro is not a sign of the failure of the single currency project, but a reaction by investors to economic weakness and low interest rates (as well as a correction to an outbreak of pre-euro euphoria at the end of last year). Growth in the euro-zone remains sluggish, particularly in Germany and Italy. There are some signs of improvement, but as yet these are too tentative to have an impact on the currency. In fact, the economic boost provided by euro weakness is helpful at this stage of the recovery. Which makes Mr Duisenberg's comments on Thursday all the more puzzling. With inflationary risks absent across most of the euro-zone, his statement that the European Central Bank is moving towards a bias to tightening can only have been an attempt to talk up the exchange rate. As such, it is unlikely to succeed. Speculation of a rise in rates is not credible (though further rate cuts now look less likely). His remarks also add to a damaging impression that Europe's politicians and central bankers are divided over how to react to the euro's fall. Mr Duisenberg and his colleagues should be patient; as the European economy recovers, so the euro will bounce back. The yen also rises Looking at the latest Japanese growth figures, one might be tempted to conclude that just as the euro-zone economy is weakening the euro, so the strength of the Japanese economy is putting upward pressure on the yen. The truth is not so simple. There is much scepticism over the annualised growth rate of 7.9 per cent for the first quarter. There are still many signs of economic weakness. Another supplementary budget to prop up the economy looks a virtual certainty later in the year - and as Japan's fiscal position deteriorates further, a slump in the bond markets cannot be ruled out. The yen's strength has been driven mainly by western investors looking to cash in on the wave of restructuring hitting corporate Japan. Tiring of bloated western stock markets, investors have been rushing in their droves to the Japanese market; the Nikkei index has risen a remarkable 37 per cent this year, compared with a rise in the Dow Jones index of just over 20 per cent. But there is still uncertainty over how far restructuring will go; so far there has been rather more talk than action. A series of poor economic figures, or signs of delays to the reform process, could see Japan fall out of favour pretty quickly. The dollar marches on Against this background, the strength of the US dollar looks unassailable. The high-growth, low-inflation paradigm appears intact, with the consumer price index up just 0.1 per cent in June. The prospect of higher interest rates is also an attraction for investors. Even the pound, which tends to move in tandem with the dollar, has been left trailing in its wake. But it is still strong against most other currencies, meaning that the prospect of a fall in the pound is a serious inflationary risk. But the exceptional performance of the US economy masks economic imbalances elsewhere. The private-sector deficit (the gap between savings and investment) reached 4.2 per cent of gross domestic product last year, as booming stock markets have encouraged households to save less. This deficit has been financed in part by the budget surplus [budget surplus? What budget surplus?--Orlin] and in part by capital inflows. These inflows have resulted in a current account deficit (the inverse of a capital account surplus), and a strong dollar. With the US economy set to slow, and the rest of the world recovering, sooner or later either capital flows will become less forthcoming or the private sector will readjust its savings. The closest parallel is probably the period between 1982 and 1985, the main difference being that the deficit was in the public rather than the private sector. Then as now, huge capital inflows financed the deficit and kept the dollar strong. But after 1985, the dollar slid into a decline which lasted 10 years. Dollar weakness looks a distant prospect now. Yet that is what the economic fundamentals are pointing towards; the appetite of investors to fund America's yawning current account gap has its limits. Predicting just where these limits lie is the challenge for investors. The Financial Times, July 17, 1999