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To: Jim Willie CB who wrote (4547)	5/27/2003 10:12:55 AM
From: 4figureau	Respond to of 5423

I see a low of 92.29. Have you seen this chart lately: quotes.ino.com Incredible!

To: Jim Willie CB who wrote (4547)	5/28/2003 9:44:16 AM
From: 4figureau	Read Replies (1) \| Respond to of 5423

Inflation is a bigger danger than deflation By Tim Lee Published: May 26 2003 21:24 The risk of global deflation has become a preoccupation of economic commentators. The Federal Reserve's latest statement on US economic conditions, and a sharp fall in the dollar, have raised concerns once again. Yet those who forecast deflation rarely explain how deflation as a monetary phenomenon can be consistent with developments in money and credit. Deflation, like hyperinflation, involves a marked shift in the value of money and therefore must have a monetary dimension. Can the world really be standing on the brink of deflation when by the vital measures - such as real short-term interest rates, the slope of yield curves and money and credit growth - monetary conditions in the western economies have been loose for most of the time since 1996? Most discussion of the subject implicitly fails to distinguish between monetary policy influences on the economy and the ongoing, slow structural adjustment that has been the inevitable result of the collapsing of the giant financial bubble of the 1990s. The bubble was liquidity driven but became so big that it had structural consequences for the world economy. The financial imbalances in the US, particularly the low personal savings rate and enormous current account deficit, are well known symptoms. What is less well understood is that, as long as these imbalances remain, the asset bubble cannot truly have burst. There is a gradual slackening but a full deflation of the bubble is impossible while financial conditions remain loose. Technology stocks have collapsed but the bubble has been transferred elsewhere, like a partially deflated balloon that is squeezed on one side only to bulge out on the other. This is why government bond yields are inexplicably low and why US equity valuations even now remain above historic norms. A complete deflation of the bubble will occur only when financial conditions tighten globally, particularly in the US. A "financial" tightening can be either the result of higher inflation, or overt monetary policy tightening by central banks. Either outcome would reduce the real liquidity available to support financial asset prices. In the current context, no overt monetary policy tightening is imminent. Nor is it likely as long as economies remain subdued. Logically, therefore, the asset bubble will fully collapse only when inflation becomes a factor, however unlikely such an occurrence may seem to most observers at present. The high level of the dollar has been another manifestation of the remains of the "bubble mentality" in financial markets. The US economy's apparent resilience has, in large part, been due to the Fed's monetary policy aggressiveness. At other times, or in other countries facing similar circumstances, the monetary policy that has been implemented by the Fed would have been impossible. The combination of monetary laxity and weak growth, against the background of the large imbalances, would have resulted in currency collapse. The Fed has got away with it up to now because of the financial markets' irrational attachment to the dollar, helped out both by the Asian central banks' willingness to accumulate dollar reserves and by US fiscal policy. These factors could not have supported the dollar indefinitely. Investors should now be prepared for the dollar's fall to go much further than they might have thought possible. This is because it must eventually suffer both a nominal depreciation and a real depreciation. The real depreciation will be part of the process through which the US economic imbalances correct. The nominal depreciation is the part of the dollar's fall that will ultimately prove inflationary. It is this nominal element of the prospective dollar depreciation that is not expected by mainstream economists or commentators. Yet it is surely an inevitable consequence of the many years' accumulation of excess liquidity in the US economy. The existence of the bubble economy, through supporting the dollar and also through other mechanisms, has helped repress inflation and inflationary expectations. The final collapse of the bubble and of the dollar must be associated with the release of this "repressed" inflation. The US will not be exporting deflation because it will not have deflation to export. A dollar collapse will suppress inflation in Europe, in the first instance. But there will be an obvious central bank response in Europe. In the long term, this could accommodate the dispersion of US inflationary pressures to the rest of the globe. This process could take years to work through but the early indications are already apparent both in the currency markets and in the gradual uptrend in the gold price in dollar terms. These are early signs of the loss of value of dollar money, which is a symptom of incipient monetary inflation. news.ft.com

To: Jim Willie CB who wrote (4547)	5/28/2003 9:47:31 AM
From: 4figureau	Respond to of 5423

Asia seen as fastest growing region despite Sars: EIU SINGAPORE - Asian economies outside Japan are forecast to outpace the rest of the world and grow an average 5.6 per cent over the next four years, with Sars likely to have minimal long-term impact, a report said today. Although the region will continue to have the fastest rate of expansion in the world, the growth will be lower than before the 1999-1998 Asian financial crisis, the Economist Intelligence Unit (EIU) said. Hong Kong was expected to be hardest hit by the Severe Acute Respiratory Syndrome (Sars) outbreak, with the EIU cutting two per cent off its growth forecast for 2003. Singapore and other Southeast Asian nations were forecast to have 0.5 percentage points shaved off their growth rates for the year. At the same time, the EIU tipped China, which has the highest death toll and infections from Sars, to continue powering ahead economically if the spread of the disease there was contained over the next few weeks. "China is still likely to report a growth rate of over 7.0 per cent for 2003, partly owing to a strong first-quarter performance," it said. Overall, the effects of Sars on Asian growth "are likely to be minimal," it said, based on the assumptions that China quickly contained the disease and there were no other major outbreaks in other Asian countries. While tourism and retail sales have been badly hit in many countries, those sectors should rebound later in the year, the report added. However, the EIU's forecast was far more grim if Sars was not contained, with China's handling of the epidemic the most important factor. "Should China fail to contain the disease, which now seems unlikely, the outlook would become more frightening, both in human and purely economic terms," said the EIU, which is part of the London-based Economist Group. "If Sars spreads throughout the less-developed Asian regions, inadequate health systems would make it difficult to contain and it could claim many lives." Assuming Sars is contained, Southeast Asia is expected to grow at an annual average of 4.2 per cent between 2003 and 2007, faster than the transition economies of Eastern Europe and Latin America, the EIU said. The impact of Sars and weak demand in the US market should slow Singapore's growth to 2.6 per cent this year while Malaysia should expand 4.0 per cent. business-times.asia1.com.sg