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Pastimes : The Naked Truth - Big Kahuna a Myth -- Ignore unavailable to you. Want to Upgrade?

To: Lucretius who wrote (32655)	4/12/1999 11:47:00 AM
From: John Pitera	Read Replies (3) \| Respond to of 86076

An upcoming Chinese yuan devaluation may be coming this summer. I saw several political analysts who could not figure out why the chinese premier came to meet CLinton and why Clinton did not tell the Chinese ahead of time, that they would not get into the WTO. I then received this email from a Capital Markets guy that may explain why the meeting occurred. It was to let Clinton and Rubin know that the devaluation would be coming. Email I received below: At the risk to my credibility (a presumption on my part, I confess), I > will relate to you the contents of a recent correspondence with a > person about whom I have recently spoken, a former college classmate > with whom I have maintained contact for nearly twenty years, now > employed at the St. Louis Federal Reserve. > > According to this person, contrary to the conventional notion that the > the Fed's FOMC members are concerned about inflation and the "heavy > hitters", who hold the most sway over Federal Reserve policymaking, > have changed their bias toward interest rate tightening, the precise > opposite is the case. > > Apparently, the Fed, the Chairman in particular, cannot make a > defensible case for a rate hike without (paraphrasing) "introducing > uncertainty into a global financial market climate still reacting to > forces not seen since the 1930s." > > Furthermore, this person contends that the recent rate cut in Europe > and the Chinese leadership meeting with Clinton is a prelude to a > Chinese currency devaluation before the end of the summer that Group > of Seven (now called the "Trinity", referring to the principals: the > U.S., the Euro with Germany as the dominant economy, and Japan) has > given its tacit approval. > > The apparent "goal" is an "orderly" Chinese devaluation with the > objective of assisting China and Japan (and to a lesser extent Europe) > in their reflation efforts. China is now sliding deeper into a > "deflationary" recession, as is Japan, and there are seemingly no > policy alternatives left, save for devaluations in an attempt to > "maintain current levels of exports" to the U.S. and, yes, Canada...? > > Also, Mexico is in talks with the Treasury, Fed, and IMF, as the > Mexican central bank is prepared to devalue in response to China's > imminent move. > > Moreover, my Fed acquaintance notes that the Latam situation is > currently in the process of unraveling, as Latam institutions are now > resolved to likewise "react" to a Chinese devaluation and a protracted > drought of foreign investment that they had hoped would return to > stablize currencies. It has not. > > Thus, it is increasingly apparent that the Fed is poised to cut rates > to maintain global financial market liquidity to ensure derivatives > positions held by U.S. commercial banks are as liquid as possible, > and, further, to ensure "all means at the central bank's disposal" > (meaning...?) are considered to provide neccesary liquidity to member > institutions in the interest of meeting their "fiduciary commitments" > to domestic and foreign borrowers. > > This suggests that the concerns that arose in response to the SE Asian > crisis, that then spread to Russia, Latam, and now Europe, have not > been satisfactorily resolved and the responsibility for maintaining > the solvency of the system is increasingly falling on the shoulders of > the Fed. > > Fasten your seatbelt... >