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To: Hawkmoon who wrote (492)	6/13/2001 1:40:17 PM
From: Raymond Duray	Respond to of 1715

Thanks Hawkmoon, Very lucid explanation of the dollar/euro/yen interaction. You seem to have it about right. :) Gotta Run, Ray

To: Hawkmoon who wrote (492)	6/13/2001 7:54:21 PM
From: DavesM	Read Replies (1) \| Respond to of 1715

ot. the yen and euro I believe there are two additional factors for the decrease in the value of the yen and euro. Japan is in the grips of a decade long deflationary recession, which large deficit spending by the government, and extremely low interest rates set by the Central Bank, have been unable to break (it is my belief that Central Banks are not effective when a country suffers from a deflationary recession - Japan now, and the Federal Reserve during the 30's- and the reason why Greenspan was in favor of Bush's tax cut). The only way left for Japan to recover now IMHO is 1. The government assuming all the bad debt weighing down the banks - ala Resolution Trust. This would free up the balance sheets of the Japanese banks, which will allow them to start loaning money again 2. A large devaluation of the Yen (a result of the Central Government assuming Trillions of bad debt). The devaluation would force consumer consumption. IMHO the Europeans formed the Euro because, it has become increasingly clear that individually the countries of europe did not have the critical mass to compete with the U.S. or Japan. - and at the same time keep their cradle to grave socialism. The Euro is an attempt to economically federalize europe and provide (hopefully) the economy of scale so that first tier contries can keep generous government social programs, and provide fiscal discipline for countries like Italy. I may be wrong, but I think it won't be too long before people get tired of Germans keeping everyone in line fiscally, and the French telling everyone what to do politically.