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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: RagTimeBand who wrote (457)	1/5/1998 12:20:00 AM
From: Rational	Respond to of 9980

Emory: <<My question is: wouldn't it be quicker and accomplish the same thing if the dollar were devalued?>> Yes, I agree. But, the Fed does not know where the fundamental level for US$ value is and how fast the money supply growth should be. There is a lot of guess work at the Fed and so the Fed allows a gradual policy shift and is increasing the money supply at (what they consider) a reasonably fast pace. But, there is a market psychology (that US is the safe haven for parking wealth) that the Fed has to overcome gradually. I believe the Fed thinks the US$ should go down soon, given the policy actions and pronouncements, but they are afraid of a rocky landing. Greenspan's comment on very rapid depreciation of asset values could be related to the fear that the Fed might even move more abruptly than they have done so far. Selling the gold reserve to buy yen is a logical move to weaken US$; like other CBs have done to buy US$. I would not be surprised if the Fed did this. Actually, I like your questions and they are at the heart of what I have been thinking. I am sorry that my answer was not satisfactory the first time. Sankar