The first quarter 1999 growth figures are not reliable because they represent the distortion usually occurring at the end of the Japanese fiscal year. The Japanese economy has not begun to recover and the needed structural reform is a long way from being implemented. The Japanese economy has gone through this type of false hope more than once in the last decade. The Japanese are only pretending to be in a hurry. They are playing Washington for time, waiting for the US economy to tank before serious cooperation begins to restructure Asian economic relationships.
Stiglitz and Krugman are both selling snake oil (quoting the Japanese) and are merely doing the "if A does not work, how about B or C or A+C?" They haven't a clue on how to make Asia recover. The fact is Asia will not begin to recover before the US economy stops exporting deflation to feed its own bubble. The beginning of global recovery will come after the US economy crashes. The longer the US bubble hold, the more severe the global pain when it comes. And if the pain is severe enough, neoliberalism may well be the casualty.
Money and credit substitutes proliferation is the main problem on the technical side, but the conceptual flaw of globalization is the real problem. Instead of corporate raiding, neo-liberal globalization has created the game of economy raiding. Instead of destroying companies to create share holder value, we now have the know-how and the markets to destroy whole economies to create financial value.
LTCM was wrong on one thing. It did not figure the West would let Russia default. It was a political miscalculation, not financial. The decision to let Russia default was based on the need to break the Russian's blackmail that the West would not let it go down. So moral hazard and market discipline became the convenient pretext. The fact is that market fundamentalism is built on a manipulated market. That is why the Japanese are criticizing market fundamentalism.
Henry C.K. Liu
JayHecht at aol.com wrote:
> Has anyone been following the recent debate about Japan's latest GDP growth
> numbers.
>
> For example, the not-worth-the-$3 Abelson claims that the +7% rate indicates
> a new beginning for the Nikkei while (in the same issue) Gene Epstein claims
> that the numbers are wrong - HH expenditures were barely up 1% and that the
> latest data reflect a bankrupt "pump priming" attempt by the gov't.
> Interestringly, Epstein cites another "Wallcon" (my name for wall street
> economists) who suggests that the gov't should socialize the non-performing
> bank loans (by floating bonds).
>
> What's the deal? Jordan? Greg? Henry? Doug? Et. Tu?
>
> Jason