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To: Haim R. Branisteanu who wrote (176564)	7/1/2002 11:45:35 AM
From: LLCF	Read Replies (1) \| Respond to of 436258

<DAK, it is not as simple as every one wants to assume. Many have forgotten that Germany lost 20 to 25% of GDP in loans to Russia and other Eastern Europe countries.> Makes them more likely NOT to hold dollars no??? Why is this bullish on the dollar? <In general the London Club lost something like 2 trillion adjusted USD in the process. Now think what would happen to the US if $2 trillion in debt goes "puff".> You mean in the dollars decline??? What about the runup? We're back to a year ago no? <EZ still has a 9.1% unemployment rate and there are small chance of improving due to the influx of cheap labor from CEE and Russia, their problem is more acute than our Mexican problem as the social benefits are more than double those of the US.> Well, we're 6% and I have a feeling if they were measured in the same way, we'd be closer to 8% <On more point 12 years ago we run a substantial budget deficit EZ was in surplus, now the US has 1.5% budget deficit and the EZ something closer to 3%. Small Portugal 3.9% to France Germany and Italy over 2.5%.> But again... these are 'static'... what about over time... we clealy have had the larger deficites <GDP in the big 3 EZ is below 1% this year and they hope for 2.5% next year the US is 2.5% to 3.3% this year next year who knows> The US GDP numbers are all wrong as you know... I don't think there is much difference to be honest. AND I don't think the EZ numbers could possible plummet to where ours are going. <The EUR run up mostly because EZ officials are desperate to have the EUR as a reserve currency and were able to drag along a big chunk of hedge funds who needed "Window Dressing" after a dismissal performance in Q2.> Interesting.... what about 'reserve currency' status? Any chance of a swing??? IMO THE BIGGEST FACTOR, IF it becomes one, is the dollars sloshing around the globe. Do you NOT think this is yet an issue?? I wish I knew... but this is what I'm afraid of... simple supply and demand under stress. DAK