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

To: Robert Douglas who wrote (5756)	8/21/1998 11:03:00 PM
From: Derrick P.	Read Replies (3) \| Respond to of 9980

Robert, You seem very knowledgeable on the subject of interest rates and the economy and I have very much enjoyed the discussion so far. The following is from Bert Dohmen, a 'market timer' I have watched and at this point greatly respect. I wish I had listened to him more closely in the past. <<<<<<<<<< The U.S. Economy and the Fed Bert Dohmen Editor Dohmen's Wellington Letter Posted on Monday, August 17, 1998 at 11:35 PM The first estimate for second quarter GDP showed a plunge to 1.4% growth,versus 5.4% growth in the first quarter. My prediction of a sharp economic slowdown is coming true. The Asian Contagion is more powerful than most analysts had expected. Many Wall Street economists had said that the Asian crisis would "only" reduce U.S. GDP growth by 1%. Well, a 1% reduction when growth is 1.4%, is huge. I believe there's a good chance of corporate earnings actually declining the second half of this year, contrary to the double-digit growth which Wall Street is still projecting. That's a huge difference. The smart money has been selling since April. The general public will find out right at the bottom of this correction. They will then sell, and the insiders will pick up the stocks at bargain levels. The Fed is responsible for the worsening situation in Asia, along with the IMF. The high interest rates being pursued by the Fed are totally uncalled for in this environment of minuscule inflation and declining economic activity. As a result, the U.S. dollar is soaring, damaging even further the precarious state of the Asian countries. >>>>>>>>>>> My take on this is that these problematic devaluations are occurring relative to what, if not the US dollar. Would not 'some' of the problems be alleviated by a relative decline in the US dollar? It would seem that a reduction in Federal interest rates would help bring about this reduction in the dollar. I am told that the strength of a currency indicates the strength of an economy. If the US economy is so strong what is so problematic about those who are responsible for that strength reaping some of the reward. In that I mean why should not the American worker's income be allowed to increase somewhat if they have produced this amazing economy. 1.5% over the CPI is hardly rewarding <IMHO>. The flip side of this is if the dollar is allowed to continue increasing and interest rates do not decline. If as Dohmen believes that this policy caused/contributed to the Asian crisis, then it seems to be responsible for the suffering of untold millions (billions?) (so far) of people throughout the developing nations. If Latin America succumbs next, as seems likely, the rest of the developed countries can not possibly be left unscathed. Why is the decision so difficult; some small wage increases vs. the suffering and starvation of millions of innocents? BTW Dohmen likens the risk of inflation to that of the risk of a blizzard at his Maui home. Please, since none of us will be present at the next FOMC meeting let us cordially continue this discussion. Best Regards, Derrick