Dear ATCA Colleagues

[Please note that the views presented by individual contributors are not necessarily representative of the views of ATCA, which is neutral. ATCA conducts collective Socratic dialogue on global opportunities and threats.]

We are grateful to:

. The ATCA Editorial Team based in Canary Wharf, London, UK, for "Market Convulsions;"
. Bill Emmott, Director, UK-Japan 21st Century Group, based in London and Somerset, UK, for "Japan's Strong Yen;" and
. Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA for "Federal Reserve's Changed Focus."
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Dear DK and Colleagues

Re: Market Convulsions

If last week was a few unwelcome flutters for financial markets, this week has been a series of traumatic downs and ups with convulsions. Major Central banks (except the Bank of England) have continued to pump liquidity into the money markets. Equity markets have been spooked by even the gentlest whisper of untoward news.

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Best wishes

ATCA Editorial Team
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Bill Emmott was the Editor-in-Chief of The Economist, the world's leading weekly magazine on current affairs and business, from 1993 until March 31st 2006. He is now an independent writer, speaker and consultant. After studying politics, philosophy and economics at Magdalen College, Oxford, he moved to Nuffield College to do postgraduate research into the French Communist party's spell in government in 1944-47. Bill has written four books on Japan -- The Sun Also Sets: the limits to Japan's economic power, Japan's Global Reach: the influence, strategies and weaknesses of Japan's multinational corporations, both of which were best-sellers, and Kanryo no Taizai (The bureaucrats' deadly sins), published only in Japanese. Most recently, he wrote a book version of an extended essay, published in The Economist in October 2005 and called "The Sun also Rises" to echo his 1989 book. This longer, book version was published in Japanese translation under that same title (Hiwa Mata Noboru) by Soshisha in January 2006. In February 2003 he published a book about the global issues of our times called "20:21 Vision - 20th century lessons for the 21st century". Bill writes a column on international affairs for a Japanese monthly magazine, Ushio. He is currently working on a new book, about the rivalry between Japan, China and India. Bill a member of the executive committee of the Trilateral Commission, a member of the BBC World Service Governors' Consultative Committee, a director of Development Consultants International, a Dublin-based company, a member of the Swiss Re Chairman's Advisory Panel, a director of the UK-Japan 21st Century Group, and co-chairman (with The Hon Roy MacLaren) of the Canada-Europe Roundtable for Business. He was a director of The Economist Group from 1993 until 2006. He has honorary degrees from Warwick and City Universities, and is an honorary fellow of Magdalen College, Oxford. He writes:

Dear DK and Colleagues

Re: Japan's Strong Yen

Is this a drama, is it a crisis, or might the analysis have become a little over-wrought? Of course, we won't know for sure until afterwards. But my current leaning is towards the idea that it is somewhat overwrought.

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There is currently no sign of either of these happening.

Best wishes

Bill Emmott
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Dr Harald Malmgren is Chief Executive of Malmgren Global and also currently the Chairman of the Cordell Hull Institute in Washington, DC, a private, not-for-profit "think tank" which he co-founded with Lawrence Eagleburger, former US Secretary of State. He is an internationally recognised expert on world trade and investment flows who has worked for four US Presidents. His extensive personal global network among governments, central banks, financial institutions, and corporations provides a highly informed basis for his assessments of global markets. At Yale University, he was a Scholar of the House and Research Assistant to Nobel Laureate Thomas Schelling, graduating BA summa cum laude in 1957. At Oxford University, he studied under Nobel Laureate Sir John Hicks, and wrote several widely referenced scholarly articles while earning a DPhil in Economics in 1961. His theoretical works on information theory and business organization have continued to be cited by academics over the last 45 years. After Oxford, he began his academic career in the Galen Stone Chair in Mathematical Economics at Cornell University. He writes:

Dear DK and Colleagues

Re: The Federal Reserve's Changed Focus

The Federal Reserve's abrupt announcement of a 50 basis point reduction in its discount rate marks a distinct change in Fed thinking. The decision was taken unanimously. The Federal Open Market Committee (FOMC) statement declares that "the downside risks to growth have increased appreciably. The Committee is monitoring the situation and is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions to markets." These latter words clearly suggest that further action is likely in the coming days and weeks.

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What today's discount rate decision represents is a major shift in focus from the threats of inflation to the dangers of credit market contraction and the consequent threat to economic growth. What the markets should now consider is whether further interest rate cuts by the FOMC -- including cuts in the basic target rate starting on September 18 (the date of the next FOMC meeting) or even sooner -- would be sufficient to stabilize the credit markets, or whether the pervasive process of deleveraging and re-pricing of risk will continue even alongside declining rates of interest set by the Fed.

Harald Malmgren

Dr Harald Malmgren commenced his career in government service under President John F Kennedy, working with the Pentagon in revamping the Defense Department's military and procurement strategies. When President Lyndon B Johnson took office, Dr Malmgren was asked to join the newly organised office of the US Trade Representative in the President's staff, where he had broad negotiating responsibility as the first Assistant US Trade Representative. He left government service in 1969, to direct research at the Overseas Development Council, and to act as trade adviser to the US Senate Finance Committee. At that time, he authored International Economic Peacekeeping, which many trade experts believe provided the blueprint for global trade liberalisation in the Tokyo Round of the 1970s and the Uruguay Round of the 1980s. In 1971-72 he also served as principal adviser to the OECD Wise Men's Group on opening world markets, under the chairmanship of Jean Rey, and he served as a senior adviser to President Richard M Nixon on foreign economic policies. President Nixon then appointed him to be the principal Deputy US Trade Representative, with the rank of Ambassador. In this role he served Presidents Nixon and Ford as the American government's chief trade negotiator in dealing with all nations. While in USTR, he became known in Congress as the father of "fast track" trade negotiating authority, which he first introduced into the historically innovative Trade Act of 1974. He was the first official of any government to call for global negotiations on liberalisation of financial services, and he was the first US official to call for the establishment of an Asian-Pacific Economic Cooperation arrangement, known in more recent years as APEC.

In 1975 Dr Malmgren left government service, and was appointed Woodrow Wilson Fellow at the Smithsonian Institution. From the late 1970s he managed an international consulting business, providing advice to many corporations, banks, investment banks, and asset management institutions, as well as to Finance Ministers and Prime Ministers of many governments on financial markets, trade, and currencies. He has also been an adviser to subsequent US Presidents, as well as to a number of prominent American politicians of both parties. Over the years, he has continued writing many publications both in economic theory and in public policy and markets.

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