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To: Softechie who wrote (4631)	1/8/2003 2:13:45 PM
From: Softechie	Respond to of 29600

Bill Gross Says Dollar Should Fall. It Does. By TSC STAFF 01/08/2003 14:03 Bill Gross, the Pimco bond fund crusader who in the last year trained his sights on General Electric's capital structure and stock valuations, took aim at the dollar Wednesday. Dollar traders listened. In a widely followed market commentary on the Pimco Web site, Gross suggested that a gradual devaluation of the U.S. currency would boost growth and help win what he characterized as a global war against deflation. "To this mix of potential reflationary palliatives must be added one additional and perhaps the one most dangerous hole card for U.S. policymakers to play," Gross wrote. "I speak of the dollar and its potential depreciation, which -- if done gradually and without causing investor flight -- would correct a number of global imbalances that are holding down growth and inflation at the same time." The publication of Gross' essay coincided with otherwise unexplained cratering in the dollar; it fell from about 120 yen to 119.2 yen recently. While traders were reluctant to ascribe that kind of power to a bond manager, even one as powerful as Gross, few other catalysts were apparent. "As far as we know, Pimco has no more official say in the direction of the dollar than anybody else," wrote Tom Arnold on TheStreet.com's sister site, RealMoney Pro . "This is all to say that if Pimco did make a negative dollar comment, and if it was the reason for the dollar fall, we find that to be beyond analysis." Gross said a weaker dollar would encourage labor and banking reform in Europe by hampering export growth and forcing policymakers into tough decisions. He said the European Central Bank would have more leeway to bring interest rates into line with U.S. levels, because a higher euro compared with the dollar would lower inflationary pressure. Gross lamented the success of former Treasury Secretary Robert Rubin's strong dollar policy. "Mr. Rubin succeeded beyond anyone's most bubblish dreams, but now with the trade deficit at 6% of GDP, and our need to attract nearly 80% of all the world's ongoing savings just to keep the dollar at current levels, an end to the party is clearly in sight," he wrote. "Future investment by foreigners in anything with a dollar sign attached is at risk." Gross said the main reason for the dollar's strength has been the U.S.' role as the world's lone superpower, as well as a "perceived superiority in generating productivity and capital gains." Given the geopolitical situation, he argued, the premium is in jeopardy. "If the dollar is to decline, it will sink of its own weight, not from the pronouncements, or lack thereof, from Wizards on high," he wrote. "Still, it would be a kick in the pants for others to speed things up, to reflate at an accelerated pace in order to avoid the Japanese malaise of the past decade."