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To: pater tenebrarum who wrote (38115)	1/26/2000 10:11:00 PM
From: NucTrader	Read Replies (2) \| Respond to of 99985

>>some interesting thoughts by Paul Krugman on the liquidity trap<< Gee, Heinz, I did have 3 semesters of calculus (no economics) but I found this article somewhat, er, arcane. On 2nd thought, believe I'll try to reread it tonight in bed....;-)

To: pater tenebrarum who wrote (38115)	9/7/2000 3:41:04 PM
From: Don Green	Read Replies (1) \| Respond to of 99985

The euro's crash: Should Asia care? By Uwe Parpart* Not really, is the quick answer, but it should take to heart the reasons it's happening. Remember the heady days in late 1998 when euroland finance ministers partied in Brussels and toasted the birth of the common European currency with French-supplied champagne? This was to be the currency to quickly challenge the almighty dollar in international trade finance and reserve holdings, strong and getting stronger, a new safe haven for investors concerned about the stability of dollar assets. Japanese investors, in particular - insurance firms, pension funds, exporters - bought into the hype, to their everlasting and ever increasing regret. In Asian trading Thursday, the euro fell to new record lows against the dollar and the yen, 0.8637 and 91.51 respectively. Since early post-launch highs, it is now down 26 percent against the dollar and there is no early end in sight. It could well fall to 0.80 in coming months as assumptions - foolish to begin with - that eurozone economic growth would outpace American growth are proving untenable. Among the biggest losers from their wrong bets on the euro are Japanese life insurance companies, and now, as they are dumping their euro-denominated assets to cut additional losses, they are a major force behind the euro's continuing collapse. The precise magnitude of the losses incurred has not been tallied, but it is estimated that the break-even point on euro-denominated bonds purchased from 1999 to early 2000 is 100 yen per euro (after allowing for appreciation in bond prices) and 145 yen for bonds bought from 1998 to early 2000. At present euro/yen levels, that translates into very nasty red numbers, indeed. Well, friends, live and learn. And learn, in particular, not to trust bankers, economists, and politicians - whether European or Japanese - who will try to persuade you that the euro's weakness is only temporary, that "given economic fundamentals" the currency is oversold and that a comeback is just around the corner. One man in Japan who started a lot of this nonsense talk with his chatter about the US bubble economy was Eisuke Sakakibara, the former vice minister of finance for international affairs (the "Mr Yen" of old) and now a Keio University professor. Japanese money is safer in Europe was the message. Others hyping the euro and warning of dollar risk were (and are) European private and central bankers with an obvious ax to grind and European politicians anxious to sell their constituents on the new hard currency. But it's precisely the "economic fundamentals" they try to invoke that make it perfectly obvious why the dollar is strong and the euro weak and getting weaker. The most fundamental of economic fundamentals is productivity. The most recent quarterly figures put US productivity (output per man-hour) growth driven by strong and increasing IT investment at 6.2 percent while that of the eurozone lingers in the 2 percent range. And worse than that, eurozone productivity growth (what little there is) is clearly cyclical in nature, driven by export-led economic expansion, while accelerating US productivity is driving an expansion phase that will continue as IT investment continues to increase. Take away European export growth aided by the weak euro and most economic growth disappears with it. No, folks, the combined bet on US economic demise and enhanced euro strength is a losing proposition if ever there was one. Only "old economy" growth in the US has been hurt by rising US interest rates. The IT sector that drives overall growth expanded in July at 50.2 percent year-on-year while non-IT industrial production growth decreased by 0.2 percent. Europe has no such IT fallback position. As the European Central Bank tightens monetary policy, expansion across the board will disappear and capital will flee to safer, higher-reward US assets. *Uwe Parpart is Editor of Asia Times