This message is in MIME format. Since your mail reader does not understand this format, some or all of this message may not be legible. ------ =_NextPart_000_01BD2BD5.B9E409C0 Jay, You are certainly right in the short term. As far as I can see, the point is that the medium-long term situation is quite different and the dollar just cannot go on as the international currency under these conditions. Thus we get to the question as to what to replace it with. This is a very hard question for the individual but also for the monetary authorities -- there just aren't many currencies out there that look good just now. Yet without a resolution the global financial system will collapse. Are they hoping for the Euro? Dave ---------- Sent: Tuesday, January 27, 1998 10:23 AM To: [EMAIL PROTECTED] Subject: Re: Bear Market? (Formerly Japan's MoF) In a message dated 98-01-26 18:24:22 EST, you write: << Yet what else can they try? At some level of international indebtedness the willingness of speculators to hold dollars will disappear, and it would appear from your chart that that day is fast approaching. At least the low interest rate approach has some hope of saving the U.S. stock market from a true melt down and could provide benefits both domestically and internationally in propping up demand and staving off the global recession (depression?). >> Dave, While I agree that the dollar has been in a "medium-term" decline, for the short term, the "flight to quality" has been unambiguously into dollars. The Yen appears to be in trouble and is exposed in Korea. Nevertheless, the Japanese probably have the deepest pockets of liquidity - assuming they can get at their citizen's postal savings accounts. I don't think the FRB is really ever in control as most people think. Though they can raise short-term rates, they can't go lower than the underlying inflation rate for a prolonged period. The BOJ pushed their 10-year notes to about 2% and can't get the Nikkei above 18,000. Moreover, though we've had the greatest bond rally from 1980-1997, the volatility on the 30-year bond is an ever-present threat (look what happened in 1994). 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