So, most of the world views our economy as comming in for an emergency landing. It might go smoothly, it might go up like a fireball. They're nervous enough to talk of it publicly. Larry Summers did his best to piss of the Europeans who will no doubt reciprocate with some good will of their own. Nothing new was said of the Japanese Yen which Reuters interprets as neutral rather than bearish for the dollar. I'd be bullish on the Yen. I'm bearish on the greenback right now. We're seeing the consequences of failed economic and global foreign policy.

Saturday January 22, 10:58 pm Eastern Time ANALYSIS-G7 bickering mars optimism over outlook By Alan Wheatley

TOKYO, Jan 23 (Reuters) - If the outlook for the world economy is so much brighter, why was there so much back-biting at this weekend's Group of Seven meeting?

Soured by European resentment over lecturing by Washington and disagreements over the role of the International Monetary Fund, the mood music at this G7 was surprisingly unharmonious.

The G7 traditionally serves as a cheerleader for the global economy, and, to be sure, finance ministers and central bank governors from the United States, Japan, Germany, France, Britain, Italy and Canada put a bright gloss on Saturday's talks.

``The good thing about it was that we really had a good discussion that got to the bottom of things,'' Bank of France Governor Jean-Claude Trichet told Reuters. ``It was very positive.''

That reference to a thorough debate could help to explain the surface tension. With mounting imbalances in the global economy springing from America's record-breaking boom, ministers are acutely aware of the risk that a stampede out of Wall Street stocks could expose their optimism as hollow.

And they see no quick or simple solution.

The Europeans made it clear they were counting on Federal Reserve Chairman Alan Greenspan to work his magic and engineer a soft landing. ``Speaking as a central banker, I rely very much of course on the U.S. authorities, particularly the Federal Reserve, to take care of all the risks that are ahead,'' Trichet said.

But for now, Europe and and Japanese ministers agreed, there was no sign that Greenspan was being heeded.

``What is most interesting is that there are no signs of slowdown in the U.S. economy. People are expecting a slowdown sooner or later but it seems to be more later than sooner,'' Italian Treasury Minister Giuliano Amato said.

As Bundesbank President Ernst Welteke noted, the Dow Jones Industrial Average has risen some 70 percent since Greensapn famously warned of irrational exuberance in the stock market.

Although Greenspan had frequently waved a red flag against excessively high stock prices, the colour-blind market had repeatedly seen it as a green light to buy more, bemoaned Japanese Finance Minister Kiichi Miyazawa said. He said he had told Greenspan that Wall Street's rise was a bubble.

SUMMERS UPSETS EUROPEANS

Japan made a fresh commitment to massive deficit spending and to stick to zero interest rates until its economy has fully revived, while European ministers freely acknowledged the urgent need for deep-seated structural reforms.

But what visibly irked European officials was U.S. Treasury Secretary Lawrence Summers' insistence on placing the onus for adjustment squarely on America's partners. In customarily blunt language, Summers told off Japan and Europe for being complacent and for being willing to settle for second-best growth.

German Finance Minister Hans Eichel was having none of this. He said America remained the problem and should put its own economic house in order before lecturing Europe.

``Everybody should get on with their own work. Europe is doing what it can,'' Eichel said sharply. ``I could speak about the United States and its negative savings rates and its current account deficit, but that wouldn't get us very far.''

Washington, perhaps worried by rising imports in an election year, also pressed for a reference in the G7 communique to the need for a stronger euro, Europe's single currency, which has fallen 15 percent since its launch a year ago.

This, too, angered the Europeans, who had no intention of drawing attention to the euro's weakness. They blocked Summers, arguing the euro would rise as Europe's economy gathers steam.

``We have three percent growth for Europe, that is quite significant growth. It has been a long time since we had such dynamism,'' French Finance Minister Christian Sautter said.

Sautter picked another bone with Summers, questioning his proposal for a slimmed-down International Monetary Fund that would concentrate on emergency funding, not long-term lending.

``Emerging countries can finance themselves with private funds. But non-emerging countries, if they want to be upgraded to emerging nations, need public support, including from the IMF.''

Eichel was even more sceptical, saying it was fanciful to imagine the private sector replacing the IMF in financing developing countries. ``For the poorest countries in particular, the IMF will continue to play a decisive role,'' he said.

Eichel also criticised Washington for dragging its heels on developing proposals to ensure private banks do not cut and run from emerging economies in times of crisis. And, for good measure, he hit out at France for refusing to make plain just where it stood on Germany's candidate to head the IMF.

``It would be an advance if we knew exactly what the French position was,'' he said.

It is often said that the G7 pulls together best in a crisis. That being so, a generous interpretation of the weekend's squabbles is that ministers really are confident of the outlook. Financial markets will be hoping that confidence is justified.

Saturday January 22 8:05 PM ET G7 Communique Seen Forestalling Yen Surge By Masayuki Kitano

TOKYO (Reuters) - The Group of Seven nations' weekend statement that they share Japan's concerns about a strong yen broke no new ground, but at least for the near term it is probably enough to keep the yen from surging, analysts say.

``For the time being the dollar will be supported against the yen, but over the longer term I see the yen strengthening again,'' said Mitsumaru Kumagai, senior market analyst for the Industrial Bank of Japan.

``Going into the G7 meeting there had been growing skepticism about whether the G7 would say in its communique that it shared Japan's concerns about yen strength, so the dollar may be boosted initially as players buy back dollars they had sold,'' Kumagai said.

The yen rose to two-week highs near 104.50 to the dollar on Friday, one day before finance ministers and central bankers of the Group of Seven industrialized nations met in Tokyo.

Despite the communique, however, the dollar was likely to have a hard time rising above 106 to 107 yen, dealers said.

Japanese exporters are expected to start selling dollars for hedging purposes around 106 yen, and foreign operators' appetite for yen, whetted by optimism about Japan's economic outlook, is likely to remain strong, they said.

Yen Set To Rise As Foreigners Buy Japan Shares

``Overseas investors are likely to remain active buyers of Japanese stocks,'' said Daisaku Ueno, senior economist for Nomura Research Institute Ltd.

The communique's statement that Japan will set policies ''appropriately'' indicates that fiscal and monetary policy will remain accommodative, Ueno said.

``This suggests that Japan may have pledged more fiscal stimulus and that the Bank of Japan promised to keep its zero interest-rate policy for a while longer, which would be positive for stocks,'' Ueno said.

Regarding exchange rates, the G7 communique said: ``We welcomed the reaffirmation by the Japanese monetary authorities of their intention to conduct policies appropriately in view of their concern, which we share, about the potential impact of yen appreciation for the Japanese economy and the world economy.

``We will continue to monitor developments in exchange markets and cooperate as appropriate,'' it added.

NO PROMISE OF JOINT INTERVENTION The wording differed slightly from the communique issued after the previous G7 finance ministers' meeting in September, apparently putting greater emphasis on Japan's pledge and less emphasis on the G7's concern, analysts said.

Analysts said the change was too small to be read as a sign of waning G7 support for Japan's yen concerns, but it certainly did not indicate stronger support.

``There is no indication that Japan was able to win an agreement from G7 nations for joint intervention,'' said Nomura Research's Ueno.

Because the communique also made no reference to the euro or to concerns about high-flying U.S. stocks, the dollar may end up reaping the most benefit, traders said.

The lack of a reference to the euro suggests the U.S. is comfortable with a strong dollar despite its rising trade deficit with Europe, they said.

In a statement released after the G7 communique, U.S. Treasury Secretary Lawrence Summers said U.S. policy in favor of a strong dollar remained unchanged.

``The United States doesn't have to worry about its trade deficit right now because its economy is strong, unemployment low, and pressure from industry groups is relatively weak as a result,'' said Masaharu Takenaka, a chief manager for the Bank of Tokyo-Mitsubishi.

-- Gordon (g_gecko_69@hotmail.com), January 23, 2000

Answers

Let this be a lesson to us.

No more Southern Democratic Governors for President.

-- JIT (justintime@rightnow.net), January 23, 2000.

Gordon,

Thanx for your continued perspectives.

We've certainly been focusing on the Fireball scenario of the landing on TBTK.

Could you paint the most plausible scenario for a Soft Landing, and how it could conceivably unfold? Just as an exercise in looking at all the possibilities.

-- Chuck (cestin@aa.net), January 23, 2000.

Thanks Gordo. Can you give us any information about bunker oil?

-- Earl (earl.shuholm@worldnet.att.net), January 23, 2000.

Could you paint the most plausible scenario for a Soft Landing, and how it could conceivably unfold? Just as an exercise in looking at all the possibilities.

-- Chuck (cestin@aa.net), January 23, 2000.

Great excercise, one that all investors should think through. Several things will need to happen in order to effect a soft landing. First and foremost Wall Street must be reined in and slowed down without implosion. This is perhaps the most tricky. Second, the US must do something to slow down the moves occuring on the currency fronts. Pissing people off at the G7 ain't gonna cut it. Third, the US must find a way to make peace with the Sauds. Givem some extra arms or something, or create a fake threat from Mohamar or Saddy. Then save the day without starting ww3?

Ya see, a soft landing at this point is a very complicated endeavor. We've made a few bad moves in the global chess game which are gonna hinder us. It's pretty close to endgame and we're not looking like Kasparov or Big Blue, but rather more like Big Blew!

Let's start with the Street. Greedspin needs to slow these folks down without imploding their bubble. The only way I can see that happening is telgraphing interest rate moves over the next few months combined with behind the scenes hits on high fliers. So in other words, take'em out and shootem five at a time. Gradually you will erode the gains on the Nasdaq, but it's better than a big old stone drop like we're headed for. Also, I'd meet with the Street behind the scenes and let'em know we're really close to FUBAR and that if they don't play nice they're gonna get spanked and hard. Al's gonna also need to make nicey nice with the bond folks. He will need to squeeze a fifty pointer in the next move after this one. That's a plausible scenario for starters. People can deal with it. He goes 25 on the upcomming move, demonstrates that the economy is still rolling to hard then does fifty on the next move. That should take some starch out.

As far as the currency situation, I'm not certain how that will play. I don't know enough about it to have a definitive viewpoint, but here's my best guess. The dollar's declining, so let it decline slowly. Fighting it will only point out the inequities on a global basis. Play Ho Chi Min with the US dollar. Attack where you're enemy is weak. Run from where he is strong. Look the Asians got hammered hard for a long time. They then absorbed the pain of the Asian Contagion. Don't look for sympathy there. It doesn't exist. Rather, put up an annoying low key fight. Wear them down. A direct frontal assualt here probably wouldn't work.

As far as the oil goes, it's high time we started thinking strategically about oil. For God's sake encourage developement in the GOM. Strengthen the relationship with Canada. Those boys have crude for us and they've got it right over the border. Many new pipeline's have been reconfigured recently to supply PADDII with crude. Shit givem special incentives. Same thing for developement in the GOM. Stop fucking around like someone wants to protect the GOM for deep sea diving. Screw that, drill the shit out of it. Reduce our dependence on foreign oil ASAP. Also make nice with Mexico. We blew it when those guys started joining the OPEC party last year. We should have seen that comming.

Anyway, these are just some silly ideas for thought. If I was president you could be damn certain I would be devoting some serious shit to the foreign dependence.

-- Gordon (g_gecko_69@hotmail.com), January 23, 2000.

Thanks, Gordon, for the info. Easier for the casual observer to understand than most posts.

-- morgan (bitbybit@eoni.com), January 23, 2000.

Well done, Gordon. I appreciate your shared thoughts. It seems like the Feds are trying to do the first piece, but are doing rather poorly at the 2nd and 3rd ones (IMHO).

Does that mean that the chances of pulling it off are close to nil without doing all three, in your opinion?

Would be interesting for doing some serious scenario work on this one. That's my business now, and this one's ripe for it. Wonder if that kind of thinking is being done at all by TPTB.

-- Chuck (cestin@aa.net), January 23, 2000.

NO more Aliens in the White House. Go with a lizard you know.

*GO* Gordon *GO*
[This Ad sponsored by The Gecko2000 committee]

-- Possible Impact (posim@hotmail.com), January 23, 2000.

fix italics

-- Possible Impact (posim@hotmail.com), January 23, 2000.

Has anyone thought about if there is a need for concerted action that the Robert Rubin that isn't just might be the caustic straw that prevents the magic G-7 bailouts that we have seen in the past?

-- Squid (ItsDark@down.here), January 23, 2000.

Gordon-

Please excuse an Ignore-a-moose:

GOM?????????

C

-- Chuck, a night driver (rienzoo@en.com), January 23, 2000.

Chuck,
Its Gulf of M,/b>exico.(Gulf of Texas,IMHO)

-- Possible Impact (posim@hotmail.com), January 23, 2000.

Oops, Gulf of Mexico.

-- Possible Impact (posim@hotmail.com), January 24, 2000.

Sorry to disagree on your recom.

While it would be good to push local, our "friends" in the middle east would take this as threat that the US is off the reservation. They would not sit idly by and allow the big old uncle money-bucks and international 911 service to ease demand without a huge political fight and possible new supply squeeze. My humble opinion.

-- Squid (ItsDark@down.here), January 24, 2000.