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To: Jim Bishop who wrote (82029)3/16/2001 9:15:19 PM
From: CIMA  Respond to of 150070
 
* Greenspan: Stuck Between Japan and a Hard Place
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* Chinese Fiber-Optics Sales to Iraq Challenging U.S.
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Analysis

Investors fear that the U.S. markets, which are at cycle lows,
have a long way to go before bottoming out. If the economy is not
in a recession, it is doing a good impression of one. The Federal
Reserve, which has received much criticism for not cutting
interest rates faster, seems prepared to let this continue.

Federal Reserve Chairman Alan Greenspan is trying to space the
cuts out as widely as he can; more widely than investors and
financial analysts think is necessary to jumpstart the economy.
To many, this makes no sense. But considered in terms of Japan -
the world's second largest economy - Greenspan's strategy adds
up: Another round of serious interest rate cuts might break apart
the Japanese banking system.

Greenspan sees that the Japanese economy is near its breaking
point. He does not want it to crack and, if it does crack,
Greenspan does not want the United States to be the catalyst.

Japan's economy is so close to the edge it will not take much to
nudge it over. As the United States cuts interest rates, money
flows into countries with higher interest rates, weakening the
U.S. dollar particularly in relation to European currencies. This
makes American exports more competitive with Japanese exports in
Europe. Simultaneously, the slowing U.S. economy will cut
Japanese exports to the United States. While normally of little
significance, a drop in cash flow due to declining exports could
be the straw that breaks the camels back.

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