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To: Les H who wrote (177418)	7/4/2002 3:25:58 PM
From: Les H	Read Replies (1) \| Respond to of 436258

The current lax monetary policy led by the Fed has conformed to standard practices applied since the stock market crash of 1987 and the US savings and loans crisis, Courtis said. "Since then, each time the system is shaken, they come to the rescue with a very aggressive monetary policy, which amounts to putting off the repayments." But, he added: "Fundamental problems are not addressed, particularly over-consumption in the United States financed from abroad, mainly Japan." The unstoppable rise in US current account deficits, moving towards 5 per cent of the gross domestic product, is a major symptom of this. The key issue is knowing if needed adjustments could be made without imposing a brutal recession on the US economy. In such a scenario, said Courtis, "the United States would cease being an imports machine, and East Asian countries which did not implement necessary reforms would suffer from the crisis at the core of the system." The alternative scenario would see a resurgence of inflation in the United States on such a massive scale it would mean abandoning the policy of disinflation that has been the dogma of central banks since 1979, when Paul Volcker took the helm at the Fed. To this end, said Courtis, despite US officials' insistence, "the strong dollar policy has changed." So far, countries exporting industrial products, Asia in particular, have been the main beneficiaries of the decades old deflationary process, while raw material producers have been the large losers. If inflation returns, the terms of trade would switch to benefit the major producers of raw materials and commodities - Russia, Australia, Canada, South Africa, the Gulf countries and the United States itself. www1.chinadaily.com.cn