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To: ahhaha who wrote (12997)	6/12/1998 9:02:00 PM
From: PaulM	Read Replies (2) \| Respond to of 116795

"The Japanese banking system has no real problems." Could you elaborate on that? The fact that banks lend in accordance with the law doesn't mean they are lending based on reality (i.e., based on the markets ability to pay, that is, pay the REAL equivalent of what was lent). Witness taxpayer bailouts every 10 years ro so. When debt levels--corporate, consumer, govt-- reach the levels we see today, it suggests to me that both lenders and borrowers have an exteremely distorted view of reality. When the expected real growth inherent in all this doesn't materialize--and it can't--the choice is either lots of defaults (bankruptcies) or money creation (via massive bailouts). And probably both, ala Asia. I disagree that the FED is making a "mistake." I also don't think Japan is making a mistake. Both ultimately face the same choice: a cascading series of bankrutpcies or a destroyed currency. Which would we prefer? Your point about the world having no significant economic problems as long as cheap labor exists is, I suppose, true insofar as its always true that the real economy tends to grow and people tend to progress. However, no question in my mind that allocation of resources and expectations are exteremly distorted globally--and that implies a future reallocation. Or "depression" if you prefer.