> Indeed if
> Krugman's mad advice were taken to inflate Japan out of its liquidity
> trap, the devalued yen would be sure to sink the peripheries and probably
> induce China to commence yen devaluations which could have the most
> horrific impact.
Why would it do that? Sure, some Chinese punters and Nikkei bubblers (if there are any left) would take a hit, especially Hong Kong real estate artists who are praying that the currency peg holds (which it won't), but these are for the most part industrial economies, which make their living by exporting to us rich, decadent Americans and the even richer but not quite as decadent Europeans. Krugman's advice is pretty incoherent -- he talks about inflation as if all you needed was a US-style credit bubble to make things right again, when the point is that global demand has been strangulated by neoliberalism. Let's not forget who the real paymasters of the world economy are: if Southeast Asian currencies tank futher, all that'll mean is that the Japanese-European bailout of their credit system will be slightly larger. Today LTCM, tomorrow Malaysia!