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Politics : Dutch Central Bank Sale Announcement Imminent? -- Ignore unavailable to you. Want to Upgrade?

To: Cage Rattler who wrote (126)	6/13/1998 9:09:00 AM
From: Bill Murphy	Read Replies (2) \| Respond to of 81130

Ted, No economist am I. Obviously, they have to also get their own house in order as Rubin says, but if Japanese buying true, I think it might be a rallying call to the rest of Asia as a way to show their disdain for U.S. and IMF arrogance, in demanding our way is the only way to correct their problems. The gold issue is off the radar screen right now, but it would be a simplistic and very evident statement and way to put the U.S. and investors in the dollar on notice. Bill

To: Cage Rattler who wrote (126)	6/13/1998 11:49:00 AM
From: Bill Murphy	Respond to of 81130

To: THC (13060 ) From: Bill Murphy Saturday, Jun 13 1998 11:44AM ET Reply # of 13071 THC, I asked Frank Veneroso for some thoughts on your currency issue:: He writes: Consider " Two years ago Japanese firms estimated they were competitive at 106 yen/dollar. They increased their competitiveness by moving the labor intensive component of their output to the emerging Asian countries which have now drastically devalued against the dollar. Compare trends in inflation and productivity in tradeables in the U.S. and Japan since the last time we were at 145 yen. Japanese competitiveness is off the charts. When asked about the growing U. S. current account deficit, Greenspan recently said 1) that's Rubin's turf 2) everyone wants to buy dollars now, and 3) in the long run the financing of a wider U. S. current account deficit cannot be sustained. From a long run perspective, trade theory says 145 yen is not sustainable. But today's market care only about momentum, not fundamentals. Policymakers usually care about such fundamentals. The industries they serve usually care about such fundamentals. Rubin is unusual in that he has little concern about such fundamentals. Rubin wants reforms in Japan that favor U. S. business but are deflationary in the short run. Rubin wants more fiscal stimulus in Japan where public sector debt and deficits are already out of control This muddies the outlook for G-7 intervention. There is only one solution for Japan: the government must bury the bad loans from the banks and increase the monetary base enough to generate a yen inflation. It is not an issue of if these two things will happen; it is a matter of when. Japan is moving tentatively towards both. If it continues to move tentatively the crisis will deepen. If it moves decisively, rapid monetary base growth will tend to weaken the yen ( as it is doing already ). Once that is absorbed, getting the banks in a position to function again will be the turning point in dynamic fundamentals. Then the yen is a multiyear buy independent of G-7 intervention". For your platinum info request and Japan CB update, check in on my thread, Dutch Central Bank Sale Announcement Imminent?, early next week. Bill