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Non-Tech : Monetary Policy and Standards
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To: Hawkmoon who wrote (24)8/26/1999 11:38:00 AM
From: Frank Sheridan  Read Replies (1) of 29
 
Ron - you raise some good questions. You state that there is no shortage of "tokens" in Japan and China, yet they are suffering from deflation because of "destruction of consumer confidence". This is a good point. Let me counter with some thoughts about Japan and China.

Although on the surface they are very different nations with very different economies, there are also some very striking similarities. For example, although one is a free market democracy and the other is a communist dictatorship, both nations have a strong belief that the government should be heavily involved in the economy. Japan uses MITI and China uses the communist party, but both governments have a heavy hand in dealing with their nations economy. And, both have had their successes and their failures. Remember back in the late 80's when Japan seemed invincible? Pride goeth before a fall and all that. Anyway, the point I am trying to make is that both Japan and China are not really "free market" economies. Japan is surely much more free than China is, yet both have strong governments that have a tendency to tinker with the economy. My question is, does the fact that Japan and China have quasi-centralized economies tend to distort the effect that the supply of tokens will have upon inflation or deflation? In other words, does government intervention in economies result in economic behavior that will screw up classical "models" of economies to a degree that the classical formulas (such as oversupply vs. undersupply of tokens) simply don't work anymore?

Regards.
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