Mike Cohen Saturday Sept 19,98 writes: "On the other hand, rates can be lowered and in this case I think the boom will continue. Despite Propaganda on globalization, the European and American economies are largely self--contained, more so than before WWII. A panic in SE Asia and Russia doesn't mean a panic here."
Doyle The problem with your view here has to do with the recent reports out Washington about Clintons' proposal to have coordinated lowering of interest rates by the g7. The bundesbank didn't want to go along because they still fear inflation. Maybe lowering interest rates could keep things going at an even keel comparatively for awhile in the U.S. but the Europeans can see the opportunity to use their Euro to gain ground at U.S. expense. The U.S. is dependent upon the dollar as the dominant currency in the world. When the dollar can't pull its weight then schemes to mitigate the effects of external deflations in many developing economies aren't so insulated from the U.S. itself.
Doyle For instance lowering interest rates weakens the dollar. Hence trying to get Europe to go along with such a proposal foundered as reported by Greenspan. In comparison the Euro might attract a lot of money if the U.S. lowers interest rates unilaterally, and this could upset the apple cart for the U.S. mightily. Since the Euro is coming on line now, one could easily imagine a great deal of continental power competition which the U.S. hasn't had in a long time. And this in turn might make the globalization clearer to everyone.
Doyle I'm also not convinced that the Japanese are being as stupid as the U.S. would like us to believe. It isn't clear to me that a three way competition for influence couldn't be heating up. I'm especially suspicious of "fortress America thinking" which says globalization hasn't affected the U.S. Why is the fed so focused upon South America? Again the press reported that the Asian currency crisis was mainly U.S. and European banks manipulating funds to their profitable advantage. What is to stop these players doing this to each other? Expecially if Europe is going to be stronger than the U.S. and giving the U.S. a training lesson in humble pie will tell the world who is dominant. regards, Doyle