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-----Original Message-----
From: bruceb@xxxxxxxxxxxxx [mailto:bruceb@xxxxxxxxxxxxx]
Sent: Wednesday, August 12, 1998 10:35 AM
To: Omega List
Subject: RE: DEFLATION CRISIS & Asia
> HBernst963@xxxxxxx wrote:
>
> > If it so easy to get out of a deflation, why haven't the
> Japanese and Asian
> > tigers (now pussycats) pumped their money supply to get out of it?
> >
> > Howard
>
On the subject of deflation, Asia and Japan are facing different problems.
Asia as a whole is facing severe inflation right now, therefore printing
money would only make things worse. You also have to remember that these
countries are holding a lot of debt denominated in dollars, so weakening
their currency would only make their interest payments even higher.
The reason printing money would work for the US is because we're in an
unusual situation where we're "flirting" with deflation, and yet our
currency has been soaring. It's the high value of the dollar that would
allow us to solve our deflation problem without "repercussions" by printing
money.
As for Japan, there has been an economist (I want to say Paul Krugman, but
I'm not sure that's right) who has been advocating that Japan start printing
money and induce inflation for several months now. It probably would've
worked if they had done it at the beginning of the year, but unfortunately,
their window of opportunity has expired. The Yen has fallen so low now that
printing more would cause a panic.
There's only one way to "solve" the Asian problem fairly quickly, and the US
has the ability to do it UNILATERALLY. The fact that our leadership has
chosen not to is just further evidence in my mind that they know the
so-called Asian crisis actually does more good for the US than harm...
Bruce
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