> Also, Japan doesn't really need US markets as much as
>you might think; Asia is the biggest trading region for Japanese firms,
It needs the US market a lot more now that growth rates in Asia as a whole have cooled off. With a Chinese devaluation on the horizon, the Asia market may yet again implode.
>The USA has the Bubble; the EU and Japan have the banking assets. We'll
>see which is a better long-term strategy, won't we?
The US has the bubble because being relatively stronger, it has attracted the world's capital, leading to a speculative mania. If the bubble bursts--and indeed it will--it will be because the US was so much relatively stronger than its stagnant rivals its stock exchange was driven into the stratosphere as a result. That's why that Microsoft dude is trying to calm things down. Japanese banks are sitting on mounds of idle reserves despite interest rates being driven into the ground. That should also have Barro and all the neo classical idiot savants sink their own heads into the ground in shame. It had Uchitelle contemplating the revival of a radical Keynes some time ago in the New York Times.
Well at least things are getting interesting. Consider here also Krugman's honest reflections on the Return of Depression Economics. Poor old Hayek and Schumpeter about to be buried again. One of the followers of the former (Gray?) seems to have become a self proclaimed prophet of globalisation doom and the followers of the latter are achieving their own irrelevance with ever more boring 'evolutionary' models of learning and innovation and other buzzwords.
Sure, former metropoles can continue
>to excel in specific niches
The US doesn't just occupy any specific niches. It has a commanding overall technological lead and monopolies in the most advanced inputs into the production process. My assessment is derived from Mowery, Rosenberg, Galbraith and Scherer. The US is not having the same troubles the UK did on the leading edges of high tech a century ago--there used to be a lot of talk of a breakthrough illusion: inability to apply innovations to the production process. Galbraith's review seems to be of such a book. Yet today the US is in ever greater debt because its greater relative accumulation strength--not weakness--has made it the site of speculative excess.
Yours, Rakesh