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To: puborectalis who wrote (4590)	10/8/1998 1:53:00 PM
From: jeffbas	Read Replies (2) \| Respond to of 6317

Steve, I agree with you. It is unusual, but I am not surprised. We had plenty of advance warning when virtually zero interest rates did nothing for Japan. Patroller, see prior paragraph. I am not real sure that reducing interest rates will help a lot. I also regard the kind of actions that would be desirable worldwide that you describe as difficult to get accomplished on a timely basis and possibly not enough. For example, the Japanese have been sitting on their asses for years.

To: puborectalis who wrote (4590)	10/8/1998 5:11:00 PM
From: Sam	Respond to of 6317

Stephen, Actually, with inflation at about 1.5% measured by the CPI, and probably lower in reality, as the CPI probably exagerates things, until the latest move down, REAL rates have been extremely high. The inflation premium of roughly 3 1/2-4% is far higher than rates have historically been, especially on the short end, but even on the high end. To go back to rough historical norms, I think short rates (the 3 and 6 month bills) would have to go to about 2 to 2 1/2%, the long bond to about 3 1/2 to 4%. A flat yield curve tends to be deadly to the market as well, and we have had a very flat curve. It is finally getting a little steeper in the past couple of days, which is a good thing, but rates have lots of room to come down even if inflation ticks up a little from here.