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To: Defrocked who wrote (2974)	7/9/1998 6:05:00 PM
From: Cynic 2005	Respond to of 86076

Def, oh my! Dr. Vee, Dr. Gee and Dr. Dee think the same. -g- Now, may be that won't happen at all (a selloff before October.) Here are some quotes from ex Fed Governor Lindsey's article in today's WSJ: interactive.wsj.com Commentary Clinton's Japan Policy: Appeasement or Bribery? By LAWRENCE LINDSEY <<There are two theories currently in circulation. The dominant one is the "China appeasement theory." The Chinese publicly threatened to devalue their currency if the yen continued to fall, a threat that carried some weight since this would have triggered a disastrous new round of competitive devaluations in Asia. The scenario is embellished with rumors that Chinese officials privately told their U.S. counterparts they would embarrass President Clinton by devaluing during his visit.>> <<snip.>> <<At present the government of Prime Minister Ryutaro Hashimoto has a majority only in the lower house of Parliament. This Sunday's upper-house elections could produce a majority for Mr. Hashimoto, but a yen crisis right before the election could kill the electoral chances of the ruling Liberal Democratic Party. So an unspoken deal was struck: Washington would add credibility to Tokyo's manipulation of its own currency by also buying yen. In return, Mr. Hashimoto would, immediately after the election, propose radical banking reform of the sort advocated by the U.S.>> <<snip>> <<The second problem is that the Japanese people may rightly perceive the quid pro quo between their prime minister and the U.S. as outside interference. A little role reversal will illustrate this point. Let's imagine that this October the U.S. stock markets are in free fall. A frightened Mr. Clinton tries a number of policies to stop the decline, but none work. He gets on the phone to other heads of state to ask for help. The Japanese government comes through with a massive, unprecedented purchase of American securities for the account of the Japanese postal-savings system. Japanese officials make clear in interviews with the Tokyo press that they had intervened in the expectation that they would have substantial influence after the November election on America's domestic economic policy. It may surprise the Clinton administration, which apparently received financial help from a foreign government in the last election in an even more direct fashion, but such blatant manipulation during a political campaign does not go over well in a democracy.>> <<snip>> <<As for the efficacy of the U.S.'s foreign-exchange intervention, the markets will render their verdict. I suspect that Mr. Rubin's long-held view that such intervention is useless will once more turn out to be correct. Japan has $10 trillion in household savings that have been artificially bottled up for decades and as a consequence earns less than 0.5% return. To expect that money to stay in Japan is like expecting water to flow uphill. There is not enough money in the world's central banks and finance ministries to stop this outflow from putting downward pressure on the yen. In fact, the more quickly the yen falls, the sooner this global asset reallocation will be over, and the sooner the resulting disruption to markets will end. It's a sad comment on Clinton administration policy toward Asia that everyone interprets its intervention to prop up the yen as some combination of appeasing adversaries and bribing allies.>> <<snip>>