The $

Brad Mayer bradley.mayer at ebay.sun.com
Mon Aug 20 15:58:00 PDT 2001


At 07:16 AM 8/20/01 -0400, you wrote:
>Stephen King and Peter Oppenheimer at HSBC Global markets say that,
>while a modest decline in the dollar against the euro could be good
>for Europe and the United States, the currency must not be allowed to
>weaken against the yen, because that would pile more pressure on the
>recession-hit Japanese economy.
>
>If the dollar collapsed: "It would be bad for Europe and disastrous
>for Japan," they say. "The Japanese economy would be dragged further
>into a deflationary spiral resulting in a renewed profit collapse."
....and

>To prevent a meltdown, HSBC says the Japanese authorities must cut

>their borrowing so that Japanese savers are forced to look abroad for

>investment opportunities.

>Washington and Tokyo must be prepared to step into the markets to >cap the yen's rise, and perhaps to maintain the euro's appreciation

>against the dollar.

Speaking 'in terms of capital', this view is interesting. While there are certainly 'downsides' to Japan's export sector trade with the US, hasn't one of the problems been the siphoning off of Japanese savings overseas, when it hasn't been absorbed by government borrowing (and then mis-invested in a classic rendition of Keynes' "holes in the ground"). Isn't the problem to reverse the deflationary spiral _already_ underway in Japan, despite the ongoing trade surplus with the US (which is a tapped-out vein for Japan in any case, see: http://www.census.gov/foreign-trade/balance/c5880.html )?

What good will shifting savings to Euroland do? Shouldn't these savings be injected into, say the residential real estate market in Japan, to jump-start reflation? And what of the yen falling relative to other East Asian currencies? Singapore and Taiwan (and perhaps Hong Kong), already in the soup, would be hit further unless their currencies also fall.

None of this makes much sense in terms of the "neoliberal" program that the international community of capital has argued upon hapless Tokyo and that has appeared in the form of Koizumi. It has a whiff of panic. It is all starting to sound like Third Period Stalinism: First, Keynesian spending at all costs! Then, Neoliberal Reform! Now, reverse course once again!

-Brad Mayer



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