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Strategies & Market Trends : Asia Forum

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To: Investor2 who wrote (4982)	7/1/1998 1:55:00 PM
From: Lee	Read Replies (1) of 9980

re: Economic Outlook The most recent economic outlook. aei.org Mr. Makin again stresses that investment led recoveries rarely end well. He notes investment in the US grew at one of the faster rates in the US 8 year expandsion in Q1, with domestic GDP up 6.4% if one excludes exports/imports. Europe continues apace. But Asia, Asia, Asia, Mr. Makin may be one economist tiring of the cry "Asia must reflate and deregulate!" It does fall on deaf ears. A few quotes follow. Regards, Lee " Climbing real wages support current consumption while an upward stock market makes households feel that they are saving more because of their foresight in buying stocks, not because of the need to cut spending. Such serendipity gives central banks nightmares." "The U.S. government could aid the reflation effort in Asia by giving up its absurd efforts to push for "permanent" tax cuts in Japan. There is no possibility of permanent tax cuts or tax cuts that will be spent by households in a nation with one of the world's highest debt-to-GDP ratios and a deficit running close to 7 percent of GDP. Because Japan's rapidly aging population knows that taxes must go up, any tax cuts will be saved in anticipation of future tax increases. Tax reform and deregulation should be emphasized, after the acute deflation problem has been successfully addressed." "The recent G-8 summit in Birmingham ended with bland statements about fighting international crime and helping poor countries. Entirely missing was any mention of the most important need for today's world economy: a call for aggressive reflationary measures in Asia, beginning in Japan. "

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