George,
I've thought recently (and esp. after reading "One World Ready or Not by William Grieder) that the major danger for the world economy is deflation and overproduction. I agree with your clipping of Business Week...there has been grumbling about how the World Bank and IMF are handling the SEA situation---bank policies that encourage deflation. Deflation has been building for many years. Just like the commodity boom of the 50s-70s (that peaked around '75), every little country saw commodity production as it's solution. (resulting in long-term price decline in same) So, today, we have had decades of the Japan Model of industrial growth...all the SEA NICs were doing it...nontariff barriers and directed capital flows to favored export industries. Then the Chinese jumped in the game. Everybody wanting to produce, no gov't/elites wanting to be someone else's market. Result: price spiral--down. Competitive devaluations. So...we reflate, the central banks lower interest rates and start printing money to inject cash into the global economy (same process followed '87, I believe)...so, won't securities markets utterly explode? It was easy money from Japan and the Fed that started the current bull...wouldn't it be a bit like dumping gas on the fire? (Even with a 25% decline in the market..) Wouldn't the bubble expand enormously? Wouldn't it eventually have to be ah, "dealt" with? And who's going to serve as the customer for all the goods? The Chinese public? Anyway, dont' take the questions as though I don't believe an orchestrated reflation is in the works (amazing how closely these central banks are working together...the Global Govt. exists today, eh?). I presume we will experience a sharp bout of deflation to pop the markets...a bit more drop in gold, etc. before reflation?
Pete |
