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To: GST who wrote (123543)	4/12/2001 1:20:31 PM
From: pater tenebrarum	Respond to of 164684

actually they have cut rates by quite a bit...150 bps. within two months is a lot, coming from 6,5%. quite a contrast to their baby step method of raising rates during the last tightening cycle. actually, they NEVER tightened in terms of the money supply...that is exploding with virtually no interruption since '95. i believe the reason is that to keep the ball rolling, the financial sector needs to increase its leverage all the time...we're basically stumbling from one crisis to the next, since '87, and the Fed's preferred method for battling crises is to open the spigots as wide as possible. the dollar is an enigma at this point, and the various explanations put forward are all unsatisfactory. i do however believe that the dollar's strength, specifically against the Euro, is a bit long in the tooth. note that Euro notes and coins will be introduced at the beginning of 2002...that may be what it takes to wake the Euro up, since many of the former Eastern Bloc nations have traditionally used the DM as a second currency, and are likely to switch to the Euro as soon as that's possible. certainly the Euro is by now undervalued in terms of purchasing power parity, and other comparative variables...the interest rate gap has closed somewhat, and Euro zone economic growth (which happens not to be overstated by hedonic pricing)is currently eclipsing US economic growth. contrary to popular myth, the Euro zone's economic health is not dependent on how the US economy is doing to any considerable extent. 85% of the Euro zone's trade is within its own borders - it's a huge domestic market. and it has none of the macro economic imbalances plaguing the other major industrialized currency areas. its current account is in surplus, it has a positive savings rate, no excessive private sector debt (aside from the telecom cos.) and moderate money supply growth. as a rule, fundamentals tend to win out in the end...so i would expect that over the next 12 months, the Euro will be surprisingly strong.