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Re: Dollar, Euro, ...



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Augustin,

You raise several challenging questions and I do not presume to have all
the answers.
But here are a few comments, anyway:

You wrote:


> Could it be worse for Europe and the Euro than it is right now?  The
> dollar is weaker, stock markets and financial institutions aren't
> trusted that well any more and the differences between the several
> european interest rates is growing instead of getting nearer.

I was under the impression that the hedge funds were long the bonds and
currencies of coutnries that would have to lower rates and short those
whose rates would have to rise before the end of 1998.  Is this no longer
true?  Was it never true?

> You also ask:
>

> Is it better for America to get a strong commercial partner, or are we
> in an economic war, where hypocrisy tends to hide some political and
> economic decisions in order to get weaker competitors?

Until last week I was assuming that the US position that was that European
growth was necessary for US prosperity, with  serious recession or
depression widespread in Asia and likely soon in Latin America.  Then I
was surprised (how naive) when Clinton announced that the fall of the
dollar would be good for US exports and Rubin immediately issued a
statement saying that the US supports a strong dollar.  Presumably,
Clinton -- always the politician -- was trying to make the dollar's drop
palatable to the US public.  But he may also have tipped off a go-it-alone
strategy for this country, which Rubin's comment tried to conceal.  I
don't know which it is, but think that it would be absurd for the US to
try to go-it-alone economically when the world economy is so weak.
On the other hand, I find it hard to believe that Greenspan believed that,
by lowerin grates, he would not also be weakening the US dollar.

Perhaps the best interpretation is that the US administration lacks a
consistent policy on the dollar right now.  But if I had to choose, I'd
say that Rubin is the smartest one of the bunch and PERHAPS he was telling
the truth about desiring a strong dollar.

Best wishes,

Fred

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