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To: Moneysmith who wrote (72373)	10/15/1998 6:25:00 PM
From: Chuzzlewit	Read Replies (2) \| Respond to of 176387

Ken, I think that your misunderstanding of the dynamics of interest rates is showing. Historically, interest rates hover around 2% over the inflation rate. Inflation is currently a non-issue. But if the interest rate is too high lending domestic by banks is cut off and we have a liquidity problem. Second, with abnormally high interest rates we get a net transfer of funds over here from countries experiencing a shortage of capital. That was one of the major points that Greenspan made in a recent speech. In other words, a liquidity crisis. Repatriation of funds to Asian and Latin American countries is in our best long-term interest even if it spurs a small amount of inflation. TTFN, CTC

To: Moneysmith who wrote (72373)	10/15/1998 6:39:00 PM
From: FR1	Respond to of 176387

I think the Fed is still trying to help the banks and hedge funds. You mean the congress. What a great play! They tell the IMF that we will give 16B if and only if they jack up the interest rates and shorten the payment period for loans. In fairness, congress says the reason is that IMF's low interest rates and long terms caused the Russian bankers to gamble away the zillions of dollars we gave them on currency speculation instead of giving it out in loans. I can't understand it. I think Mandella had it right. He said loans to 3rd world is kind of crazy because the poor nations have no way to repay. You give Russia a zillion dollars and our banks are standing there the second they get the money asking for payments. Money goes directly from uncle sam to CitiBank. Meanwhile the IMF just jacked up interest rates, shortened payment periods and the Russian banks have a nation of pennyless borrowers from whom they are suppose to make a big profit. It's Alice in wonderland. It makes the mad hatter's tea party look organized.

To: Moneysmith who wrote (72373)	10/16/1998 12:20:00 AM
From: jim kelley	Read Replies (1) \| Respond to of 176387

Ken, Japan's 20-year bond has a rate of 1.364%. I would love to borrow a couple of million dollars from them at that rate and invest it here in US 30 year bonds at 4.95%. I promise to pay them on time and to be grateful. Russia does not count as a G-7 nation. Japan will have to raise its interest rates a little and the rest of the world will need to lower its rates as much as they can. Japan can not raise its interest rates a lot because it might cause bankruptcies among a lot of their businesses. Japan needs to fix its business model rather than trying to export it way out of its mess as they are wont to do. Thus the dollar at 116 Y is not the real problem. China would have devalued if the dollar exceeded 150 yen. This would have caused further instability.