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To: Hawkmoon who wrote (25180)	12/31/1998 11:55:00 PM
From: PaulM	Respond to of 116779

Ron, as I see it, dollar appreciation against Euro aint happening from this point forward. (Unless Europe suffers some economic disaster). After years of trade deficits and monetary reserve supremacy, there is--for all intents and purposes--a virtually unlimited international supply of dollars. Without unlimited international demand, the dollar has only one way to go. Even were reserve re-allocation limited to the 11 Euro countries--that event alone would still imply a significant dollar depreciation (because the Euro CB's and institutions are no longer in a position to soak up dollars, and in fact, must decide what to do with their excess reserves). Ron, I think Europe (and for that matter Japan) have always had the ability to crush the dollar at will. The question has always been, at what cost? Japan's economy is built around selling to America. And only recently, the Soviet threat meant that Europe was dependent upon American military protection. Europe was also more dependent on American trade in the past. All that's changed now, as the Euro countries have been preparing for the consequences of moving away from the dollar for some time (witness the "Banana War" and American displeasure with Euro defense initiatives outside NATO. There will be much more of this type of thing to come). I am unpersuaded by the reasons typically given for further dollar appreciation--e.g., strong military, developed financial markets, etc. These factors have existed for decades, but have not prevented the dollar from consistently depreciating against the Yen and Mark. The trouble with the average analyst is that their entire world view is determined by the events of the past three years. I do enjoy reading your posts however.