> Except that the EU barely exists as a political entity - they can barely
> choose the head of their central bank (and, by the way, the lucky Dutchman
> who will, Wim Duisenberg, thinks the Fed's practice of publishing highly
> sanitized minutes of their policy meetings is too open!). The U.S. can do
> what it damn well pleases right now too. What other country could run $200
> billion current account deficits in its own currency?
Not forever. Sooner or later (usually later, given the wondrous flexibility of credit markets and the incessant state bailouts which accompany them) that currency will come under pressure from value-minded investors. The craze for US T-bills could very easily become a craze for EU E-bills. Also, note that Duisenberg was forced to basically agree to step down after 4 years, allowing Trichet, our man Jospin's finance honcho, to apply for the job at that point. The German press sez this was a slap in the face of Tietmayer, hypermonetarist Uebercashier of the Buba. Suddenly, the European Central Bank is now a political football, as it was all along, and Eurorentiers were heard to bleat worried noises about the sanctity of central banking into the receptive ear of the financial press. Whatever the politics of euro turn out to be, they aren't going to be the monopoly of the central bankers/Eurocrats for long.
> Speaking of political cohesion, what is it with the Japanese ruling class?
The Japanese elites have long cultivated the gentle art of appearing braindead in front of foreign emissaries, while working overtime to push their own economic agenda. What you see is not what you get. The LDP has engineered one giant stimulus package after another in the 1990s, maybe $300 billion from 1993-95 alone; not enough to start a boom, but plenty to keep the Pacific Rim hopping and Japanese firms afloat. Interest rates were cut to nothing, bailing out half the credit system; and now a big banking bailout, to the tune of some $250 billion in public funds, is underway. This, plus the $125 billion stimulus package, plus innumerable loan bailouts for the other Asian countries, has basically prevented a global credit deflation, for now. I suspect Asia will mark time until Japan discovers the magic bullet of multinational Keynesianism.
-- Dennis