Tom Sekine told me something similar to the Ohmae article that Jim posted
earlier, that Japanese money may soon return home. The Wall Street
Journal has an article today about the revival of speculation in
technology stocks. If supply shock inflation threatens
to begin there may be calls for higher interest rates.
I cannot see how the Fed can chart a clear course in such choppy waters.
On Thu, May 17, 2001 at 03:11:06PM -0700, Jim Devine wrote:
> The Bush administration may be committed to a "strong dollar," but
> Greenspan's rate cuts (compared to those of other central banks) encourage
> the opposite. Maybe the talk about the strong dollar is aimed at
> discouraging a sudden fall in the dollar exchange rate? A sudden fall would
> eventually stimulate the US economy (after the J-curve effect) while ending
> the US role as the world consumer of last resort, encouraging world
> recession. It would also encourage inflation in the US, which would
> discourage further anti-recession efforts.
>
> The funds inflow that produced the high dollar has allowed the US private
> sector to borrow like crazy, while hurting US net exports and allowing an
> amazing accumulation of external debt. One reason why there's talk about
> keeping it high is that if the dollar falls, it means a capital loss for
> those who want to be paid in Yen or Pounds or Euros. Suddenly some of their
> assets would lose value.
>
> Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
>
--
Michael Perelman
Economics Department
California State University
Chico, CA 95929
Tel. 530-898-5321
E-Mail [EMAIL PROTECTED]
