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To: Alex who wrote (17287)	9/2/1998 10:50:00 PM
From: goldsnow	Respond to of 116790

Now I want to know how many heroes are left to buy Dollar and Dollar related instruments (other than Don).. ANALYSIS-G7 urged to rescue faltering global economy 11:18 a.m. Sep 02, 1998 Eastern By Henry Engler LONDON, Sep 2 (Reuters) - The Group of Seven industrialised nations, in an attempt to restore stability on international markets, must express a willingness to ease monetary conditions and combat the threat of deflation, analysts say. The recent turmoil in emerging and developed markets, and the damage inflicted on much of the world's economy, have raised the spectre of a downturn and should diminish any lingering concerns over inflation, they added. ''The time for a coordinated international response may now be at hand,'' said Stephen Roach, chief economist for Morgan Stanley Dean Witter, in a report. ''All major central banks, except Japan, must reduce interest rates.'' Whether expressed jointly in a communique by the group, or individually by G7 authorities, such an initiative might buy a sufficient period of calm on financial markets and allow the battered economies of Asia, Russia and Latin America a chance to put their affairs into some semblance of order. The timing of such an announcement is questionable, however. From the steady stream of comments by G7 officials in recent days, the onus for action would appear to be on those countries most afflicted by the financial turmoil. Continued economic and financial reform is the mantra from policy-makers both in Europe and the United States, with little hint that they are prepared to do anything to restore international confidence. ''If Russia really wants reforms, its efforts cannot fail due to a lack of support,'' said German Finance Minister Theo Waigel on Wednesday, adding that this had been Bonn's position since Russian President Boris Yeltsin first attended a G7 summit in 1992. But analysts say the expectation that countries such as Russia can indefinitely withstand the kind of economic pain witnessed over the past few months is sheer folly. Ultimately, the G7 will be forced to send a signal of global leadership. ''I'm sure there will be further interest rate cuts,'' said John Gray of the London School of Economics. ''There are really very few options. The most alarming thing is not only are politicians so mortgaged to their economic orthodoxy, but I also think the speed of the developments and the scale of risks has just paralysed thought.'' Apart from a greater willingness to open up the monetary tap, analysts say there are two other policy options. One of these -- capital controls -- is considered a drastic step backwards. The other, more long-term and requiring an international consensus, is reform or greater regulation of the world's capital markets. ''There is a crying need for a second Bretton Woods-type exercise, to try to devise new rules aimed at a better functioning of international capital flows,'' said John Llewellyn, chief economist at Lehman Brothers. ''Too strong faith in laissez-faire needs to be tempered by some form of greater responsibility on the part of the G7 for the financial stability of emerging markets.'' Echoing the rising tide of concern over the destabilising forces of free capital movements, Germany's Social Democratic party chairman, Oskar Lafontaine, on Wednesday called for greater supervision of global currency trading. ''The aim is not to neutralise markets, but rather to set pararmeters to ensure that the real economy is the foundation,'' said Lafontaine, who could be Germany's next finance minister. Alternatively, governments may go their own way and impose capital controls, a radical step adopted this week by Malaysia and scorned by western policy-makers. The worry that other battered economies might follow Malaysia's example spread on Wednesday, and analysts said policies aimed at curbing unfettered markets could not be ruled out in some of the world's larger emerging economies. ''I don't think you will see a reversion to past policies in Russia,'' added Gray of the LSE. ''But you will probably find a fundamental repudiation of Western consensus policies.'' ((London newsroom, + 44 171 542 7770, Fax +44 171 542 4939)) Copyright 1998 Reuters Limited.