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To: Raymond Duray who wrote (491)	6/13/2001 1:21:37 PM
From: Hawkmoon	Read Replies (2) \| Respond to of 1715

It's not really too perplexing to those who have a basic understanding of the difference between the US economic and financial structure, and that of Europe and Asia and the trends that are driving them. Overall, the industrialized nations are going through major demographic changes with their aging populations. In Europe and Japan, we see decreasing workforce equating to a decreasing domestic consumer economy. In fact, some suspected, including myself, that the trade deficit was really more of a case of European and Asian UNDER CONSUMPTION, then over-consumption by the US. Thus, they were becoming overly dependent on a US export market to prop them up. European growth would have been even less had it not been for the decreasing value of the Euro that made their goods more competitive with US produced goods. But they pay a price because their energy costs are denominated in USDs (oil). Anyhooo... The reason the dollar was destined to increase against the Euro and Yen is because of this dependence they have built upon US markets. And part of this is because leading European nations, like Germany, are incurring tremendous costs in modernizing East Germany, thus requiring US capital to fund it. Japan... well what can we say. 1/4 of Japan will be over age 60 within the next 5-10 years. Lacking the cultural will to import permanent immigrants to maintain their tax base, Japan is facing a serious round of critical decisions they will have to make fairly soon. This stands in stark contrast where the US has more people than they know what to do with trying to get into the US and this will maintain, or increase, our tax base well into the future. Thus, when times get tough, money flows to the greatest safe harbor, where they can anticipate a continuing government surplus (making US Treasuries quite attractive), fewer regulatory issues to oppose capital returns, and most importantly, an established pension funding program where if money doesn't flow into equities every quarter, it will flow into money market accounts, thus boosting the value of the USD. And besides that, why would anyone want to hold the currency of a weakening economy dependent upon the strength of the US economy. Again, the Euro has crashed over 25% against the USD during the past 1 1/2 years. Had the ECB managed to intervene and keep the Euro at its original value, Europe would be in recession right now. Hawk