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Strategies & Market Trends : Heinz Blasnik- Views You Can Use -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (554)	4/30/2003 10:26:26 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 4912

There has been a certain momentum to leaving money in $US due to history, laziness, reserve status, etc. that you don't take into account not to mention necessity. one of the interesting comparisons i've read lately in several sources (one being, i believe, that CI article ild posted last week, and i think they've mentioned it before) is the similarity between the way manufacturers provide finance to consumers (as in cars, etc.) and the way large parts of the world, especially Asia, "finance" US purchases of their goods by parking their trade surpluses in the US. the composition has shifted from direct investment toward agencies, which is helpful in supporting our housing bubble. which is helpful in allowing consumers to "extract" equity so they can buy more consumer goods made by... our trade partners. how this system ultimately breaks down is anybody's guess. the pollyannas point out that people were wringing their hands about the trade deficit back in the mid 1980s, so what me worry. but we are at an unprecedented juncture here, with GDP growth, the bullish credit cycle and stock market (and all those bullish refis) behind us instead of in front of us, and here we are sitting at a 5% current account deficit and at least 3% fiscal. CI had a nice chart of the historical peaks and valleys of these "twin towers". as i recall 8% was the last peak, and we look to be on course to test 10%. it seems we have never been so dependent on the kindness of strangers, even as we have never been so arrogant (in perception at least) in terms of our geopolitical behavior.

To: LLCF who wrote (554)	4/30/2003 11:05:26 AM
From: GraceZ	Read Replies (1) \| Respond to of 4912

My thesis that markets are better left alone and that the trade deficit has little to do with where the dollar trades? You better hope most people see through this guy otherwise you may have this to look forward to as his solution. It may be hard to adjust to this fact, but a global central bank is needed to control the global money supply. The IMF has the organizational structure and many of the policy tools (including to authority to create Special Drawing Rights) needed to carry out the role of a quasi- Global Central Bank. However, there are three important tasks that the Fund must now master if it is going to succeed in that role. First, the IMF must gain control over the global money supply—that is over the creation of international reserve assets. Second, it must learn how to allocate the future supply of global liquidity (SDRs) in quantities that are neither excessive nor too sparse. Finally, it must learn how to allocate the global money supply in a way that both ensures global economic stability and, simultaneously, supports the global development agenda. Gaining control over the global money supply is the first step. That would stop the excessive credit creation responsible for the bubble economies and systemic banking crises that have occurred around the world in recent decades. However, gaining control over the global money supply would not be sufficient to prevent the inevitable correction of the US current account deficit from ending in a severe and protracted global recession. I believe those countries that are now dependent on export led growth must develop new sources of domestic demand and I believe this could be achieved by an international initiative to put in place a global minimum wage.