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To: goldsnow who wrote (5156)	1/3/1998 4:28:00 PM
From: RagTimeBand	Respond to of 116759

goldsnow: >>Yen has to strengthen and quickly<< Or the dollar has to weaken. It's been done before. Regards - Emory

To: goldsnow who wrote (5156)	1/3/1998 4:59:00 PM
From: Abner Hosmer	Read Replies (3) \| Respond to of 116759

Goldsnow - I'm not sure what you are saying. I think Rubin needs to keep the dollar strong in order to attract buyers for US debt. Once the dollar starts to weaken, the current game is over. The US will have to start paying a higher price to finance its debt. I think that Rubin will do anything he can to prevent this from happening on his watch. The day of reckonong for US debt must be pushed onto the next administration. The Japanese are clearly concerned about any excessive weakness in the yen which could lead to a lack of faith or an attack on the currency which would be disastrous for Japanese institutions with foreign obligations. Around 130 yen to the dollar appears to be their line in the sand. At the same time, they start to squeak very loudly if the dollar is allowed to fall below 115-120 yen, as this hurts their exports and probably also the value of their US Treasury portfolios. They appear to be intent on stability at 120-125 yen/dollar, and they start to freak if the yen starts to drift either way. I think what you are saying that the US must lower rates in order to prevent excessive weakness of the yen, because it would be disastrous for Japan to accomplish this by raising their own rates. This would go along with what George has said re the pressure the dollar is putting on the Asain currencies and the resultant deflationary impact on those economies. ( I still get confused by the fact that this deflationary process results in a devaluation of those currencies and hence higher prices for the populace in those countries, which is inflation. It seems to me that you have both things going on at once, deflationary contraction of the economy, and inflationary devaluation of the currency resulting in increasing prices. ) I wonder how a cut in the prime rate will be reflected at the long end of the yeild curve. Tom

To: goldsnow who wrote (5156)	1/3/1998 5:26:00 PM
From: Bucky Katt	Respond to of 116759

Alan Greenspan speaks in Chicago today and says>> ''Even if deflation is not considered a significant near-term risk for the economy, the increasing discussion of it could be clearer in defining the circumstance,'' he said in a speech prepared for delivery to the American Economic Association. Inflation had declined to the point where even an upward bias of a few tenths of a point mattered, he said. ''Inflation has become so low that policymakers need to consider at what point effective price stability has been reached,'' he noted. Turning to Asia, he said a gradual fall in asset prices had contributed to the recent financial crisis there, but added that in most cases this type of deflation could be absorbed by the economy. ''But historically, it has been very rapid asset price declines -- in equity and real estate, especially -- that have held the potential to be a virulently negative force in the economy,'' he said. -- No sh*t, Alan!