Forum Archive Index - July 2001

["hugh webber" <hugh.webber@clear.net.nz>]

Ends? I'd take it with some large grains of salt. I'd suggest that if
the author is an economist (and I suspect that again he is a journalist
with a smattering of quotes without any integrating understanding) then
he's not a very good one. Comparisons with 1929 are out of court; Western
governments and central banks and economics itself (see Keynesian) have
come a long way since then. His data is also out of date - perhaps he
hasn't
seen the latest upturn in the Australian economy incl the upsurge in 
building activity.
The Japanese quote is interesting - they haven't tried everything. There is
a 
very simple answer from Keynes - the Government should be spending up 
large on public works, housing, roads and financing the deficit by
borrowing
from their central bank for say 200 year periods at zero percent interest.
Japan has deflation and a large balance of payments surplus so they could
easily do it. Conservative attitudes and institutional rigidities are
causing 
them to crucify themselves. A Western government would be more flexible
and imaginative. 
 
Quoting a figure for a trade deficit means nothing in isolation - what is
the 
proportion to GDP? What he quotes is just visible trade, I suspect the US 
has a large surplus on invisibles - services and investment income.
In any case it doesn't matter that much compared to a smaller country 
because the US dollar is the world reserve currency. Gold is flogging a 
dead horse - governments and international institutions have spent the last
two decades cutting the link between gold and international settlements,
its demonetised and its price relates to industrial usage for jewellery &
apart from a few 3rd world countries who haven't woken up yet.

The mention of competitive devaluations is interesting. The NZ media 
are still hung up on some simple minded shibboleth they got from
somewhere that "high NZ dollar good, low NZ dollar bad" - probably
relates to their annual holiday In Paris. You may have noticed that
NZ has just recorded its highest ever monthly visible trade surplus and its

first overall balance of payments surplus on current account for 7
years. That's mostly from a lower NZ dollar on a sustained basis.

The US shows no sign of a competitive downwards devaluation, thank
God, but allows the market to set the dollar value and these days
international capital flows are very much larger than trade flows.
Germany, since WW2, has followed a different route successfully,
of improvements in productivity to allow it to compete internationally
while the higher deutschemark has kept inflation tame at home.
Japan has followed the other route of trying to keep the yen as low
as possible allied with government directives but its superstructure
is creaking badly and needs overhauls, deregulation and more use 
of the market.

cheers,
Hugh


----------------------------------------------------------------------------
http://www.sharechat.co.nz/          New Zealand's home for market investors
----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/forum.shtml.