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To: orkrious who wrote (236)	1/17/2003 6:18:27 PM
From: yard_man	Respond to of 1210

Why would liquidation of foregin holdings of USD reserves, US bonds necessarily shrink the money supplies of foreign nations? Not sure I follow the reasoning. Exhchanging one reserve currency for another doesn't have any direct impact on a foreign country's ability to increase its own money supply as far as I can tell -- that's a matter of their own public policy. An re consumer of last resort -- if folks in the US hit the wall and retrench, what difference does it make that some company in country X likes selling us stuff -- if we are no longer willing to buy it?? I don't get some of his reasoning. Foreign purchases of USD assets slow as a result. His analysis seems rather static -- it is not a question of foreigners propensity to simply keep USD assets or USD reserves -- it is and has been about their willingnes to increase their purchases of USD assets. >>The dollar is held by all central banks around the world. It is the reserve currency for their own financial systems not held in dollars, but mostly US Treasuries. If central banks sell dollars it shrinks their own national money supply. They cannot do this under current conditions of weak economic activity around the world. <<

To: orkrious who wrote (236)	1/18/2003 1:51:09 AM
From: Jim Willie CB	Respond to of 1210

a few thoughts in response to fellow's letter to Russell he overlooks the obvious pursuit of alternative reserve assets, which will first head into euro and gold, then as the European (EU) economy falters further, into gold primarily... there is a colossal sum of money out there in reserve, as the world is utterly awash in reserves from the stinky wealthy... despite hardship all around us, plenty of enormously wealthy people with millions and billions to find a home... they will turn away from the dollar in droves!!! so what if a recession hits worldwide... they will turn to alternatives as their reserves decline in value South America is absolutely positively indubitably insignificant in the world currency markets... their destruction is written, well underway, and meaningless to the dollar index... outside oil and some minerals, they offer us very little... heck, even Mexico has turned to China to produce sombreros!!! South America is offering us a future view of the dollar's effect on our economy, while nobody seems to regard it as such a preview the guy describes vaguely the Japanese Liquidity Trap, like it is something new... no, low rates slow down the economy in this environment, THUS THE NAME "TRAP"... the untold story pertains to the Velocity of Money... with lower rates, velocity slows further... state sales tax, income taxes, all depend on fast velocity... thus govt coffers will crumble... the failure of Keynesians becomes utterly stark in this K-Winter environment, as economies slow from the low rates, then transmissions slip from debt levels oy, where was Russell's response? / jim