What Institutional Change?

[John Gelles <jjgelles@xxxxxxxx>]

	     On April 25, Ric Holt referred to an item in the 	
	paper crediting the Secretary of the Treasury with
	sense enough not to be obsessed with the current
	price of the Yen in Dollars:

	     "It's good to know we have a Treasury Secretary
	who has his priorities correct. You focus first on the
	institutional structure and then you worry about the
	exchange rate or the price. -Ric Holt"

	     A clever guy on TV wants the US to issue ten year
	notes indexed to the Yen on maturity as protection
	against inflation (indexing to be void if Yen moves the
	other way).
	          According to this guy, this feature would
	result in lower interest costs for US taxpayers during
	the ten years the bonds are outstanding.
	          At maturity, if the bonds had to be refunded
	with higher dollar borrowings than otherwise, it would
	be "no problem", because the higher Yen would have
	favored US exports and reduced the trade deficit.
	          I'm sure he would have no objection to
	including the DMark in the protective clause, to lower
	interest costs even more.

	     Is this the kind of "institutional" change you
 	favor, Ric, or is it some kind of multinational reserve
	drawing rights you have in mind?  Or do you just want
	to see a balanced budget and higher productivity
	achieved in the US?

	     In all events, it would be nice to hear from many
	Pkters what institutional changes are necessary to
	prevent the US from damaging its domestic economy in
	reaction to the pricey Yen -- they might spell out the
	full domestic picture that supports their recommended
	change(s).

	John Gelles