pms wrote:
> >For many years, some economists have touted the myth of the
> >indispensability of fixed exchange rates for small economies heavily
>
> Gee, I was hoping on some comments on the Big Picture. Doug. I mean
> STRATFOR's statements about Japan's problems coming from the long-term
> avoidance of recessions, seems like a marxist kinda thing to say. No pain,
> no gain. And yet when I read something like Grant on the Euro, those
> technical things, far removed from a simple lack of exploitation of the
> masses, sound like pretty important stuff. Course the guy was indicateing
> a buy on Russia in '96. I myself, have been eyeballing Warburg Pincus Japan
> Small Cap.
>
> STRATFOR'S analysis is marxist econ-lite, combined with Imperialism, no?
>
> >dependent on external trade, like Hong Kong, or large free-trade
> >economies facing high inflation, like Brazil.
> >The inertia of the status quo and the lack of hard data on the uncertain
> >effects of depegging have permitted this myth to assume the
> >characteristics of indisputable truth.
>
> Well Henry, if pegging the real to the dollar brought inflation from 3000%
> to the current figure, which Investors Bus. Daily (trial sub) says was
> 1.8%, expected at 6% in '99, then how can you say it didn't work? I'm sure
> it wasn't all they did, but it may have helped.
>
It worked to bring inflation under control, but the penalty on other parts of th economic ballon is very high, such as 70% interest rates, high unemployment, etc. Laul Volcker did that to us in the 80s. Inflation, within limits, is good for the poor and bad for capital. In mamaging an economy, ther is no free lunch, as they say. In all a matter of who pays and when. When the Central Bank fights inflation when overvalued currency and high interest rates, the poor pay more than the rich. Very simple and straight forward. Both Hayek and Freidman will tell you its not so, but they also say that being poor is the poor's own fault.
Henry