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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: jjkirk who wrote (4562)	8/14/2002 9:39:10 PM
From: orkrious	Read Replies (5) \| Respond to of 89467

here's an incredible interview with Ian Gordon, editor of The Long Wave Analyst financialsense.com

To: jjkirk who wrote (4562)	8/14/2002 11:45:32 PM
From: Jim Willie CB	Read Replies (2) \| Respond to of 89467

Dollar Has Biggest Drop in 8 Weeks vs Yen, Slides Against Euro By Alison Scott, 08/14 (view from Europe) London, Aug. 14 (Bloomberg) -- The dollar had its biggest drop in eight weeks against the yen and fell against the euro as the Federal Reserve suggested a U.S. economic rebound may falter. ``The dollar is under pressure,'' said Adrian Cunningham, who helps manage $150 million at Abbey National Plc's Talorcan hedge fund in Glasgow, Scotland. ``It's hard to see where growth is coming from.'' Cunningham holds fewer dollars than his benchmarks recommend, preferring euros, Norwegian kroner and Swiss francs. The U.S. currency dropped to 116.85 yen at 12:25 p.m. in London, from 118.96 late yesterday. That's its weakest level since July 26 and brought its decline for the year to 11 percent. The euro rose to 98.70 U.S. cents, from 98.06. Fed policy makers said ``weakness in financial markets, and heightened uncertainty related to problems in corporate reporting and governance'' are hurting the world's biggest economy. The U.S. central bank yesterday left the target for overnight bank lending at a 41-year low of 1.75 percent. Economic expansion slowed in the second quarter to an annual 1.1 percent, from 5 percent in the first three months of the year. The third quarter may not improve, economists said. Manufacturing and services stalled in July, and the economy added 6,000 jobs, less than a 10th of the number created a month earlier. ``People are nervous,'' Cunningham said. ``The picture remains negative for the dollar,'' which has tumbled 9.9 percent against the euro this year. `Pivotal' Reports Figures tomorrow are expected to show industrial production was unchanged in July after output increased 0.8 percent in June, according to a Bloomberg News survey of economists. That would make July industrial production the slowest this year. A report on initial jobless claims for the week ended Saturday, due tomorrow, will probably show an increase in the number of people filing for benefits, economists said. Minutes of the Fed's June 26 meeting are also due tomorrow. ``The reports will be pivotal,'' said Adam Myers, a currency strategist at Westpac Banking Corp. ``They could undermine support if they're worse than expected.'' Losses in the dollar -- down 8.5 percent against the euro in the past three months -- have been fueled by declines in stocks that have sent the Standard & Poor's 500 Index down 23 percent this year, analysts said. Investigations into accounting at WorldCom Inc., the telecommunications company that has admitted $7.2 billion in inflated earnings, and Enron Corp., the Houston-based energy trader, have soured overseas investors on U.S. assets. `Worse' in Europe The euro's gain was limited after the ZEW Center for European Economic Research yesterday said its index measuring expectations for economic growth in Germany fell by the largest amount in two years, declining to 43.4 points from 69.1 in July. Economists had expected a reading of 65. The index is based on a survey of 315 investors and analysts. The European Commission last week trimmed its forecast for growth in the 12 countries sharing the common currency. The region's economy will probably expand 0.6 percent to 0.9 percent in the third quarter, a 10th of a percentage point lower than its previous estimate, it said. ``I think data out of Europe has been worse'' than U.S. figures in recent weeks, said Stuart Kinnersley, who helps oversee $4 billion at Nikko Global Asset Management in London. ``The U.S. is exhibiting superior growth.'' In other trading, the dollar weakened to 1.4790 Swiss francs, from 1.4899 in London yesterday. Against the British pound, it weakened to $1.5420, from $1.5322.

To: jjkirk who wrote (4562)	8/14/2002 11:50:37 PM
From: Jim Willie CB	Read Replies (1) \| Respond to of 89467

Asset bubbles as harmful as inflation: BIS August 14, 2002 Central banks must rethink monetary policy, says study me: incorporating asset values (S&P bubbles, housing bubbles) into CPI measurement and monetary policy would be very prudent... the Federal Reserve cites consumer spending to be strengthened and supported by such assets, so why not factor into CPI? THIS IS PRECISELY HOW BUBBLES OCCUR - end me (FRANKFURT) With implicit criticism of the US Federal Reserve, the Bank for International Settlements says it is time to rethink monetary policy and recognise that asset price bubbles can do as much harm as the old enemy of high inflation. As the Fed weighs another rate cut to shelter the economy from falling stock markets, a BIS working paper traces booming asset prices back over 100 years and finds that they nearly always end in a financial crisis which does lasting damage. The Fed has come under fire for initially warning against the risks of 'irrational exuberance' as US stocks climbed in 1996, but quietly putting its reservations aside as prices continued to soar without sparking inflation. Some claim the Fed was worried about a backlash in public opinion for being seen to oppose greater prosperity. As a result, it aided a bubble which burst five years later, tipping the US economy into its first recession for a decade. This has been dubbed the 'Greenspan put' by those who argue that Fed chairman Alan Greenspan allowed a perception to take root that he would not obstruct a rising market and would cut rates to protect consumer confidence in case it fell. Implicitly sharing this criticism, BIS notes that central bank actions can create long-lasting problems. 'Lowering rates or providing ample liquidity when problems materialise, but not raising them as imbalances build up, can be rather insidious in the longer run. They promote a form of moral hazard that can sow the seeds of instability and of costly fluctuations in the real economy,' it said. Analysts do not rule out another rate cut after the Fed slashed borrowing costs to the lowest level in 40 years, amid fears that the US faces Japanese-style deflation and a double-dip recession. Modern monetary policy puts asset markets to one side because of big problems in knowing when prices have become 'overvalued' and because the main task has been to squeeze out inflation, which did so much harm in the last century. Shaped by memories of recessions of the 1970s and 1980s, or even harking back to German hyper-inflation which propelled Adolf Hitler to power, institutions like the Bank of England and the European Central Bank have specific mandates to curb prices. But the BIS report's authors argue that this measure is not proving sufficient and wants a broader debate on the role of asset prices. They feel policymakers don't have to prove there is a bubble to know that action is needed. 'The difficulties in identifying financial imbalances are artificially magnified when the question is put in terms of asset price bubbles,' they say. 'The identification difficulties, however, look less daunting when the issue is articulated in terms of the set of conditions that are likely to generate significant strains in the financial system.' Although current wisdom is against taking asset prices into account for monetary policy, the authors argue that thinking has changed in the past and ask: 'Might not a subtle paradigm shift be worth considering again?' - Reuters