Jess,
One of many great posts. You have been "bookmarked."
One addition to your list. Lester Thurow had an article on the "Asian Mess" in the New York Review of Books a few weeks ago. He suggested there that one of the root causes of this whole thing is that the Asian countries all adopted the Japanese model of export driven economies as the Road to Riches. They did not build up their own internal economies, and have a rational economy based on their own needs. Rather (and here I am extrapolating a little, I think), they were frequently more focused on building a few huge fortunes for the power elite, selling this idea to the masses with Republican "trickle down" promises. This worked for Japan, as they were the first, and built up their financial wealth with their enormous trading surpluses. It even worked for awhile for the others. But it can't possibly work for everyone in the long run, as the markets that they are exporting to can't possibly soak up so many exports.
Of course, there are differences between the countries and the extent to which each of them did this. Singapore and India have deeper internal markets; Indonesia is at the other extreme. And of course it gets more complicated since, for example, Japan didn't finance their expansion to same degree with debt that say, Korea and Indonesia did. But the general idea, I think, holds. And it means, I think, that unless they change their whole economic and political philosophy, they will continue to have problems, and will possibly export those problems to the rest of us, especially if we continue to think that we can bail them out by continuing to lend them more money so that they can keep their economies afloat by exporting more. This, if taken too far, will in the end just export deflation to the rest of the world, with Big Kahuna consequences. The countries that are in the deepest trouble were all trying to get rich the "quick" way, without building their own internal market infrastructures (I mean "market" here in a very broad sense, not just financial).
Thurow also suggested that the real problems for the world and US economies may come if the EMU becomes a reality, and if it is accepted as an alternative to the US$ as a reserve currency; then the dollar gets hit, and the dire consequences of the US trade imbalances will come home to roost. |
