from: http://www.aci.net/kalliste/ Click Here: <A HREF="http://www.aci.net/kalliste/">The Home Page of J. Orlin Grabbe</A> ----- Welcome to the Home Page of J. Orlin Grabbe . . . inspecting the global underbelly: privacy, money laundering, espionage. "What forbids us to tell the truth, laughingly?"--Horace, Satires, I.24 Today's News Articles Interest Rates Up, Up, and Away! Fed Funds rate headed to 7.5 percent. WASHINGTON - With the U.S. economy continuing to boom despite five Federal Reserve Board increases in the key interest rate, many financial analysts recently have increased their estimates of how high rates eventually will have to go to slow the economy's headlong rush. The new predictions run as high as 7.5 percent, a percentage point and a half higher than the current 6 percent target for the federal funds rate, the interest rate financial institutions charge one another on overnight loans. Only a few weeks ago, many observers were debating whether the Fed could stop at 6.25 percent or 6.5 percent. But now a large majority expect the Fed to lift the target Tuesday by half a percentage point rather than its usual quarter-point. Policymakers are not expected to be swayed by a Labor Department report Friday that producer prices fell 0.3 percent in April, the first decline in more than a year. The so-called core rate, which excludes volatile food and energy prices, rose 0.1 percent. Part of the shift in expectations on rate increases has come from the sheer strength of recent economic news. A more subtle reason comes from the growing realization that when the economy's efficiency is increasing rapidly, it may take a higher level of inflation-adjusted interest rates - or ''real'' interest rates - to provide much braking power. When the Fed's top policymaking group, the Federal Open Market Committee, raised the target to 5.75 percent on Feb. 2, the panel was acting, according to minutes of the meeting, ''to avert rising inflationary pressures in the economy.'' ''Relatively high real interest rates would be required to accomplish this objective, given the effects of increasing productivity and profits on the demand for capital goods and, through the wealth effect, on consumption spending,'' the minutes said. A lot of attention has been given to the latter point. Alan Greenspan, the Fed chairman, has argued that large gains in stock market wealth and home equity values have encouraged rapid increases in consumer spending and helped keep the economy operating at levels that sooner or later are likely to cause inflation to get worse. But more recently, Fed officials have been saying in speeches, congressional testimony and interviews that the accelerating growth of productivity - the amount of goods and services produced for each hour worked - has also lifted the bar for interest rates. International Herald Tribune, May 13, 2000 Currency Markets China's Foreign Exchange Chief Murdered Thrown out of a hospital window. (Hint: sell the renminbi.) The official in charge of China's $156.8bn in foreign exchange reserves committed suicide this week by jumping from the seventh storey of a hospital in Beijing, official sources said on Friday. The death of Li Fuxiang, a reformist proteg� of Zhu Rongji, the prime minister, fuelled speculation in financial circles as to what prompted him to take his own life. He had checked into hospital number 304, an elite military facility, on Monday seeking treatment for diabetes. He leapt to his death on Wednesday and was taken into the hospital morgue said the official, who declined to be identified. People who met him recently said that Mr Li, 47, a former currency dealer who worked at the Bank of China's branch in New York and spoke rapid-fire English with a slight Brooklyn accent, did not appear unwell. Chinese language Hong Kong newspapers cited speculation that Mr Li's suicide may have been related to "inappropriate activities" at his office or stress at work. This could not be independently confirmed. Nevertheless, his mysterious death has focused attention on some of the unanswered questions that have swirled around the management of China's foreign reserves, entrusted to the State Administration of Foreign Exchange (SAFE) - the body that Mr Li had headed since November 1998. The most glaring question has been why the growth of China's reserves has failed to keep pace with healthy inflows of foreign investment and large trade surpluses. In 1999, foreign reserves climbed by just under $10bn, while the combined total of foreign investment and the trade surplus was $76bn. Officials have put some of the discrepancies down to capital flight from the country, an abuse which SAFE has launched a public campaign to halt. Financial officials said that in fact municipal and provincial offices of SAFE have been approving letters of credit to facilitate imports by rings of government-backed smugglers mainly in south-eastern China. "The local offices of SAFE have actually been aiding illegal activities that have exacerbated capital flight," said one Chinese official. There have also been questions over the deployment of China's reserves, the details of which are kept as a state secret. Chinese bankers and officials have, however, confirmed that SAFE has extended funds from the reserves as policy loans to troubled Chinese institutions. Mr Li insisted last year that SAFE maintained stringent internal controls and keeps its foreign exchange investments on international markets in high quality and high liquidity portfolios. But foreign observers noted that the suicide of Mr Li, who was personally acquainted with the managers of some US hedge funds, comes shortly after significant corrections on US equity markets. Some financial industry officials in Beijing linked Mr Li's demise to another high profile but unresolved case; that of Zhu Xiaohua, Mr Li's boss at SAFE in the mid-1990s who resigned his post as the head of China Everbright Bank last year without giving any reasons. The Financial Times, May 13, 2000 ----- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, All My Relations. Omnia Bona Bonis, Adieu, Adios, Aloha. Amen. Roads End <A HREF="http://www.ctrl.org/">www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. 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