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To: David R. Schaller who wrote (3337)	11/20/1997 5:38:00 PM
From: philv	Read Replies (2) \| Respond to of 116836

Dave: Some people say the trade deficit is being financed by foreign buying of debt and foreign investment. Japanese money, Chinese, German etc. finding a home in a variety of investment vehicles. Japanese int. rates are so low (.5%) that they invest heavily overseas. That is why the US fears withdrawl of this arrangement. The acceptance of trade deficit for selling of debt paper. The big challenge is keeping this equilibrium. Japanese PM recently expressed concern that the US would not maintain the US dollar. They are in effect arguing for higher US interest rates, stronger US dollar, and they will in turn continue to buy the US securities. This is my read on the situation. Comments? Phil

To: David R. Schaller who wrote (3337)	11/20/1997 5:52:00 PM
From: Jaakko	Respond to of 116836

It must be the main reason. As long as the US dollar is the currency everybody wants it is not likely to depreciate. When confidence in it goes so goes the dollar. Just like the banking system. It's there because we believe that we can get our money out at any given time, but if EVERYBODY went at the same time to withdraw their savings there would NOT be enough cash to pay everybody. It would have to be printed and a chaos would ensue. Banks operate on a reserve ratio basis. Confidence does wonders. It keeps the dollar and the banking system in place. I suspect that gold is lent out many times over it's PHYSICAL warehouse quantities which helps explain the huge daily trading volumes and the price stability/manipulation in wake of normally disruptive news. I.o.w. the gold sytem is being operated on a reserve ratio basis. I.e.banks are banks after all.