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To: goldsnow who wrote (21431)10/12/1998 1:10:00 AM
From: Eashoa' M'sheekha  Respond to of 116753
 
FINANCE AND ECONOMICS

A plummeting dollar comes at an awkward time for policymakers. The dollar's strength has dampened inflation in America; a falling dollar will tend to revive it,

Which will bring on the inflation/deflation debate again.This time mildly rising inflation may be considered a healthy sign.I also think the value of yen rising may encourage the Japanese to spend more now and actually buy more "stuff "
easing the threat of deflation in Japan.I hear they are buying gold in good quantities these days.But we know that has little to do with the POG.Yes?

The dollar

The Tories argue about Europe........America's economy.

HOW are the mighty fallen. Earlier this year most financial folk thought that the dollar could go only one way—up. But in three days, October 6th-8th, it plunged. At one point it touched ¥111, down by a quarter from the year's peak in early August, before bouncing back. The greenback also slumped against the D-mark, to below DM1.60, a 20-month low. What on earth is going on?
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Many think that the dollar's troubles have been caused by the unwinding of positions by hedge funds that had borrowed in cheap yen to finance purchases of higher-yielding dollar assets. There are fears of more to come because of huge positions still to be unwound by the likes of the stricken Long-Term Capital Management (and banks that have made similar bets but pretend they are not hedge funds). Uncertainty has bred illiquidity; already badly burned, many potential buyers of dollars have been deterred.
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If the recent sharp fall in the dollar reflects only such temporary factors, the greenback might soon recover. However, part of the dollar's decline also reflects a shift in perceptions about economic fundamentals. For a start, these moves reflect new optimism that Japan will cure its sick banking system and spur its economy out of recession. The yen's spurt coincided with the submission of bills to Japan's Diet (parliament) that would allow the government to intervene in the operations of “extremely undercapitalised” banks. Whether such optimism is justified is arguable: the government and the opposition are still at loggerheads about the form the package should take. Besides fears that the yen's strength will hurt Japanese exporters the realisation that bank reform is still some way off may explain why, after rising sharply on October 7th, the Japanese stockmarket fell as sharply the following day.
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There is also growing concern that America's economy will slow markedly next year. Economists are slashing their growth forecasts. Lehman Brothers has cut its forecast for growth next year to a mere 0.7%, and expects the Fed funds rate to drop to 3% by the end of next year, from 5.25% currently. J.P. Morgan is now forecasting that the American economy will move into recession next spring.
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Bludgeoned from all sides, bankers attending the annual meetings in Washington of the IMF and the World Bank were in a grim mood. “This is the greatest drying up of liquidity to emerging markets since Moses parted the Red Sea”, said Robert Hormats of Goldman Sachs. The inference was clear: to calm markets—America's among them—politicians should have come up with a grand scheme to save the world economy. When this failed to materialise, one banker complained of the bureaucrats: “these guys are at 100,000 feet, and the crisis is at 3,000 feet”.
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His feet, as usual, firmly on the ground, Alan Greenspan, the chairman of the Federal Reserve, does share some of these concerns. This week he said that the American economy was slowing, and that the Fed needed to be especially alert to risks from forces shaking global markets. At the moment, he said, the main risk comes via the financial system: credit has been tightened since the Russian crisis in the middle of August. Such is their mood at the moment, it is not surprising that the markets seized on these comments as implying that the Fed will cut interest rates again soon.
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Where now for the battered dollar? America's widening current-account deficit should count against it. More importantly, as the premium of American interest rates over Japanese and German rates narrows, the dollar should also weaken. But neither of these, nor a remote sign of courage in Japan, explains the magnitude of this week's drop. For that, blame increased illiquidity in the markets, forced selling by hedge funds—and panic.
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But fear contributes to investment banks' current forecasts of economic armageddon. With luck, these will prove as accurate as their previous predictions of never-ending growth and ever-rising share prices. Transfixed by Mr Greenspan's darker remarks, markets are downplaying his reminders that the American economy still has legs aplenty and, moreover, that although companies are finding it harder to raise fresh capital, a full-blown credit crunch is a long way off. The catch, as Mr Greenspan points out, is that the bad news is always on the front page of newspapers, and the good news buried on article

A plummeting dollar comes at an awkward time for policymakers. The dollar's strength has dampened inflation in America; a falling dollar will tend to revive it, which could make it harder for the Fed to cut interest rates. A strong yen is also the exact opposite of what Japan's recession-bound economy needs right now for it chokes exports, which are just about the only thing that Japan has going for it.



To: goldsnow who wrote (21431)10/12/1998 1:46:00 PM
From: Alex  Read Replies (3) | Respond to of 116753
 
NEW SPECULATION ABOUT YELTSIN'S HEALTH...
Yeltsin appeared fatigued upon his arrival in Tashkent on 11 October (see below). He was described as "pale and unsteady" by Russian media, and Uzbek President Islam Karimov reportedly helped support Yeltsin as the two were reviewing the Uzbek presidential guard. Russian presidential spokesman Dmitrii Yakushkin said Yeltsin was suffering from a cold and was coughing after "a rough [three-and- a-half-hour] flight" from Moscow. Shortly after Yeltsin's arrival in Kazakhstan on 12 October, it was announced the president is cutting short his visit to that country by one day. BP

...AS CALLS FOR RESIGNATION MULTIPLY
According to Ekho Moskvy, Russian television stations did not show Karimov assisting Yeltsin as they walked. However, NTV carried coverage of Yeltsin's health, commenting on the dramatic narrowing of his base of support and questioning whether he will be "allowed" to remain in office another two years. "Nezavisimaya gazeta" declared that the issue of Yeltsin's resignation has become a key question of Russian political life. While earlier that subject was discussed only by the opposition, "the taboo has finally been lifted." The newspaper concluded that the opposition, "having gained support from the street and from regional elections," needs only "to come to an understanding with the remnants of the oligarchs." Together, they may arrange for some special agreement to be signed between the executive and legislative that would severely limit Yeltsin's powers for the duration of his term. NTV is owned by Vladimir Guzinskii's Media-Most holding company, and "Nezavisimaya gazeta" receives financial support from Boris Berezovskii's LogoVAZ group. JAC

RUSSIA ASKS EU FOR HUMANITARIAN AID
As the Russian delegation to the IMF/World Bank talks returned to Moscow having received only a promise to conduct more negotiations, Prime Minister Yevgenii Primakov concluded talks on 9 October with European Commission Chairman Jacques Santer without any pledge of new loans. Santer told journalists that new loans were not discussed because Russia needs to draft its economic plan without "any outside interference." Reuters reported that Primakov asked Santer for food aid to be provided on a humanitarian basis and that Santer is examining the proposal. According to Interfax on 10 October, U.S. Secretary of Agriculture Dan Glickman said that the U.S. will resume exports of grain and meat to Russia, despite an unpaid debt of $50 million, and begin extending humanitarian assistance. JAC

RUSSIA CONTINUES TO WARN NATO
Russian policymakers continue to voice fears about a second Cold War in connection with possible NATO air strikes against Yugoslavia (see "RFE/RL Newsline," 9 October 1998). Foreign Minister Igor Ivanov told Russian Public Television on 11 October that "by taking one reckless step" in Kosova, "we may destroy irrevocably everything we have been building with great effort for the last few decades." However, Ivanov ruled out the possibility of a "forcible reply" from Russia. The previous day, NTV reported that Defense Ministry representatives announced they will resume weapons sales to Yugoslavia in the event of a NATO attack. The newscast concluded that "we should not discount the possibility that as soon as a bomb falls on Yugoslavia, the Serbs will receive anti-aircraft missiles from Russia on credit. These will most likely be modern S-300 [air defense] missiles." JAC

ECONOMIC PLAN TO EVOLVE PIECEMEAL?
State Duma Budget Committee head Aleksandr Zhukov told Ekho Moskvy on 9 October that the emergency budget for the fourth quarter does not need to be approved by the Duma. The previous day, Vadim Gustov, first deputy prime minister, told reporters that the government will submit its draft budget by the 14 or 15 October. "Kommersant- Daily" published one draft version, which envisioned a budget deficit of 103.3 billion rubles ($6.5 billion) in the worst case and 34.4 billion rubles in the best. Finance Minister Mikhail Zadornov told Russian Television on 11 October that the nation's economic problems are so complex that the government is having difficulties drawing up a comprehensive program to tackle them. He admitted that a long-term program may require three months to complete. JAC

COAL STRIKE ENDS
Coal miners in the city of Vorkuta ended a three-month long strike on 11 October, according to Interfax. Miners at the Vorgashorskaya mine resumed shipping coal to their customers, after 44 million rubles ($2.8 billion) in back wages were transferred and ownership of the mine changed hands. The Primakov government has made the payment of back wages a centerpiece of its economic policies. A spokesman for the Communist Party's Moscow City Committee told Interfax that miners who had been picketing a government building in Moscow had left the city because the police had forcibly removed them and dropped them off at a railway station. JAC

US-RUSSIA STEEL BATTLE BREWING
U.S. steel companies petitioned the U.S. Commerce Department and U.S. International Trade Commission to impose duties on steel from Russia, Russian Television reported on 10 October. According to the television station, the nation's metal exports are its "last hope" because of the decline of world oil and gas prices. ITAR-TASS reported that Russian steel exporters could face an increase in tariffs of up to 200 percent. Mikhail Tarasenko, head of the Russian Metallurgical Union told reporters on 9 October that the U.S. does not have grounds to impose anti-dumping tariffs on the import of Russian metals since the prices on exported metals are higher than on the Russian domestic market. The "Moscow Times" reported on 7 October that Russian steel sells for about $263 per ton, compared with the U.S. price, which dropped from $480 per ton last year to $320 in July. JAC

CHUBAIS TO RETURN?
A last-minute meeting between Prime Minister Yevgenii Primakov and Anatolii Chubais, former presidential envoy to international financial institutions, unleashed speculation in the Russian press on 8 October that Chubais will be invited to return to the government. The press went on to comment that the Russian government delegation that conducted talks with the IMF and World Bank must have failed miserably (see "RFE/RL Newsline," 8 and 9 October 1998). "Kommersant-Daily" proposed on 10 October that Primakov will wait to invite Chubais until a default on the foreign debt appears inevitable, thus eroding likely Duma opposition. After his meeting with Primakov, Chubais denied that he has been offered a political post. JAC

VOTERS SELECT MAYORS
Yurii Lebedev, former presidential representative to Nizhnii Novgorod, and Alexander Korobeinikov, incumbent chairman of the Lipetsk City Council, have been declared winners of mayoral elections in their respective cities, according to preliminary results of mayoral elections held on 11 October throughout Russia. ITAR-TASS reported the next day that elections in Kaliningrad and Sovetsk attracted the requisite minimum number of voters and were declared valid. Yurii Savenko, acting city administration head and Anatolii Khlopetskii, director-general of the Transrailwest Company, will compete in run-off election in Kaliningrad, while Vyacheslav Svetlov, deputy chairman of the city council, and Nikolai Nikolaev, director of the Sandorgaz Company, will compete in Sovetsk. A second round will be held in those cities on 25 October. JAC

CHURCH ELICITS POLITICIANS' PROMISE
Patriarch Aleksii II of Moscow and All Russia hosted a forum for top Russian politicians on 9 October at which they pledged to start working together to ease the nation's economic crisis. According to Interfax, forum participants included State Duma chairman Gennadii Seleznev, Federation Council chairman Yegor Stroev, First Deputy Prime Minister Vadim Gustov, Moscow Mayor Yurii Luzhkov, armed forces chief of staff Colonel-General Anatolii Kvashnin, a number of regional governors including Kemerovo head Aman Tuleev, and Duma faction leaders such as Communist Party head Gennadii Zyuganov. JAC

12-10-98

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