In the depths of Argentina's financial crisis in 2001, US economist David Hale suggested Buenos Aires would get Washington to bail it out if it could only persuade the American military to set up a base on its soil.
Hale was only half-joking.
One of the distinguishing features of all modern financial crises, he wrote, is that the United States intervenes aggressively when it has military ties with the stricken country.
Thus South Korea won US help during the 1997/98 Asian crisis, but Thailand and Indonesia did not.
Two years on, Washington's conduct of economic policy in the aftermath of the Iraq war seems to be buttressing Hale's theory, most strikingly in the way Treasury Secretary John Snow has endorsed massive dollar purchases by ally Japan to prevent a rise in the yen that would damage its vital export industries.
China, by contrast, which unlike Japan withheld its support for the war, is under pressure from Snow, lawmakers and Federal Reserve Chairman Alan Greenspan to revalue its currency to shrink its $US103 billion trade surplus with the United States.
"The high politics of diplomacy is clearly more important than the low politics of economics," said Richard Jerram, chief economist with ING Financial Markets in Tokyo.
"It seems fairly clear that anybody who's helping America is an untouchable friend."
Friends get help
Mired in deflation and drowning in bad loans, Japan is in such difficulty that economists agree a sharp rise in the yen would snuff out recent signs of a modest pick-up in growth.
Still, Snow's carte blanche to Tokyo to press on with record-breaking yen-selling intervention, which totalled $US59 billion in the first half of the year, has raised eyebrows.
"My personal view is that they would not be as sympathetic to these problems if Japan were allied with Germany and France in opposing the war with Iraq," said Marshall Gittler, a currency strategist with Deutsche Bank in Tokyo.
Snow said on Friday that, while currency intervention should be kept to a minimum, Japan was grappling with tough problems. "As they deal with these things we're not going to be critical at all of them for their actions," the Treasury chief said.
Washington has not been shy about linking geopolitics and economic policy. While pursuing a free-trade pact with Australia, which sent troops to Iraq, it has pointedly snubbed a similar request from New Zealand, which opposed the invasion.
Asked last month whether the United States used free trade talks to reward allies, Trade Representative Robert Zoellick told Reuters: "Clearly on the non-economic side it helps to have a positive and friendly relationship."
[From Reuters. The rest is at: ]
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