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To: Robert Douglas who wrote (1120)	12/24/1998 10:48:00 AM
From: Paul Berliner	Respond to of 3536

Fed's Y2K precautions: Message 6961781

To: Robert Douglas who wrote (1120)	1/8/1999 5:48:00 AM
From: N	Read Replies (1) \| Respond to of 3536

Who wants Yesterday's Crisis....who wants... This August/September, these news items would cause more of a herding instinct. Why not now? See below: (1) Yesterday the Financial Times (FT) reported that China has now acknowledged the possibly of negative output growth, and is financing its deficit stimulus spending with debt.. (2) And this from FT today: Since then, however, the outlook for growth and employment has worsened. This week the DIW predicted that growth in Germany (which accounts for more than one-third of the euro-zone's output) would slow to only 1.4 per cent in 1999. The DIW's figures are part of a pattern of increasing pessimism in the outlook for the whole euro-zone. The consensus of inter-national forecasts now puts euro-zone growth at 2 per cent for next year, with inflation remaining very subdued at little more than 1 per cent. The risk, clearly, is that contraction in Japan, with a sharper- than-expected slowdown in the US could depress euro-zone growth even further, or perhaps even move it towards the edge of a deflationary vortex. This danger may not at present seem high. But a collapse of equity prices, retrenchment by US consumers or an unravelling of the Brazilian rescue package (to name but three possibilities) could rapidly darken the picture. With euro-zone unemployment forecast to remain stubbornly above 11 per cent in 1999, these risks cannot lightly be dismissed. (3) Plus a plethora of forecasts of slower US gnp growth...after the last 3.7 percent increase... (4) A Brazilian provincial government defaulting on debt... (5) Add in Abby Cohen's recent slight tweaking of the New era growth thing... Nancy