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Strategies & Market Trends : Asia Forum
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To: Jay Scott who wrote (6533)9/21/1998 9:42:00 AM
From: Henry Volquardsen  Read Replies (2) of 9980
 
Jay,

I don't believe Greenspan has pursued deflationary policies and he certainly bears no major responsibility for the devastation in Asia.

The Fed has been trying to walk a fine line between accommodating the overseas economies and containing strong US growth. Until very recently US indicators were flashing inflationary warnings. The labor market has shown signs of being very tight. What good would it do the world economy to aid Asia by creating an asset bubble in the US that would be even more devastating when it collapsed. Remember Greenspan's irrational exuberance comments? Now that the US economy is beginning to show some softness, the Fed has made it clear it would act appropriately.

The Fed makes an easy target. But in this case I believe they have been doing a good job of trying to deal with a very complex issues. The causes of the Asian economic crisis go back a long way and are more structural than short term monetary conditions. FWIW th Fed, among several western central banks, has been pretty vocal about structural problems in the Asian banking system and if their advice had been followed the problem would not have gotten this severe.

IMF policies certainly have contributed to economic difficulties in numerous cases. But I am not against the idea of the west providing economic aid to developing nations but it has to be in the context of significant structural reform, both economic and legal. The real culprit in the Asian crisis has been, as many on this forum have pointed out, the unique ways of doing business in Asia. The continuing circus surrounding Japanese banking reform is much more damaging than anything the Fed has done.

Henry
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