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To: scotty who wrote (27292)	9/26/1999 4:27:00 AM
From: Dwight E. Karlsen	Read Replies (1) \| Respond to of 99985

Tietmeyer warns on inflation, "bubble economies" By Janet Guttsman WASHINGTON, Sept 25 (Reuters) - The former head of the German central bank, in farewell remarks to power brokers in Washington, said on Saturday that intervention rarely worked and warned about ''bubble economies'' where high stock prices fuel massive spending and unsustainable growth. Hans Tietmeyer, who left the German Bundesbank last month after 40 years in public office, named no country in his brief summary of the risks of financial bubbles. But other experts have not hesitated to point the finger at the United States, where stock prices recently flirted with record highs before falling back some 10 percent. ''It should not be disregarded that bubbles in market segments may also pose macroeconomic risks, especially if the markets in question are such important ones as the equity markets in major economies,'' Tietmeyer told bankers, ministers and central bankers attending a farewell dinner in his honor at the Institute for International Finance. ''Of course it is mostly not until after the bubble that we know whether and to what extent it actually was a bubble.'' Tietmeyer's hosts and invited guests praised the German banker as an elder statesman in international finance, and U.S. Treasury Secretary Lawrence Summers said he missed Tietmeyer's frequent warnings on price stability at Saturday's meeting of the Group of Seven industrialized countries. ''There were times when it seemed we had forgotten for 10 minutes that price stability was essential -- and then I remembered that Hans was not there,'' Summers said, apparently only half in jest. Tietmeyer lived up to his reputation by warning the bankers they could not lower their guard against inflation, and he repeated a long-held view that intervention to change exchange rates rarely achieved its goal. ''If you have sustained overshooting of a currency, then ultimately intervention will not help,'' Tietmeyer said. ''The only thing which helps is the adjustment of underlying policies.'' Intervention, when central banks sell a currency to drive its value lower on foreign exchange markets, could occasionally have a signaling effect on financial markets, but it was no substitute for policy adjustment, he added. The G7 finance ministers and central bankers, meeting without Tietmeyer for the first time in many sessions, issued a statement that expressed concern about the recent rise of the Japanese yen. But they gave no indication they were ready to intervene to drive the currency lower and said Japan needed further action to stimulate its economy and cement a tentative recovery. Tietmeyer also criticized the massive international rescue deals that marked the world financial crisis of recent years. International lenders needed to take a catalytic role rather than stepping in with large bailouts, he said. ''Solving a crisis with generous bailouts is only prone to lead to a larger bailout for the next and worse crisis,'' he said. biz.yahoo.com We should hire this guy to be our Fed Chairman, instead of A.G.