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To: Chip McVickar who wrote (357)	7/14/1998 5:20:00 PM
From: Lee	Read Replies (2) \| Respond to of 3536

Chip, John Makin has an interesting close to his July "Economic Outlook." It follows: "In this environment where, if anything, the Fed will need to ease to aid Asian governments with their deflation while output is slowing in the United States bonds will probably outperform stocks. Even if the Fed eases as an acknowledgement of an increasingly pressing need to reduce the deflationary momentum out of Asia, that easing may be accompanied by a falling stock market. But, then, with the Fed easing and the stock market falling, the American government may get its wish for a stronger yen. Under those circumstances, the Japanese government may well wish to reconsider its acquiescence to that American initiative." The American Initiative: "The Clinton initiative that tied U.S. support for the Japanese yen to immediate and serious efforts to 'fix' Japan's banking problem and stimulate domestic demand put the Japanese in an awkward position." The entire article may be found: aei.org This prompts the question, how much could the Fed tighten without a collapse of the US economy? For example, how about quarters point increase. This strengthens the dollar, helps Japan exports, and maybe slightly cools the US economy? FWIW. Cheers, Lee