[PEN-L:172] Re: In Response to Jim Devine's Question

[boddhisatva <kbevans@xxxxxxxxx>]

		To whom...,


	I agree with everything C. Perelman said and I would add that a
Keynesian system also fosters a high degree of cronyism among
industrialists, banks and government.  This further insulates businesses
from economic reality.  Moreover it undermines the development of market
disciplines in the financial sector by discouraging speculative
competition in correctly pricing credit, private agencies and firms that
encourage transparency through pricing credit and rating risk,
transparency itself, and the adoption of new techniques for creating
credit.  In other words, punters with an "in" to the bureaucracy wipe out
punters without an "in" so that arbitrage, swaps and derivatives become
either too risky or superfluous, folks like analysts, Moody's and Standard
and Poors become less necessary and effective since "in's" are more
important than analysis and bureaucratic decisions trump opinions formed
by the financial marketplace, cronyists don't want people to know what's
going on anyway, and there's no reason to develop things like venture
capital when you can just go to the trough if you know the right people.

	Japan's system shows the effects of all these deficits and
distorions Keynesianism creates in capitalism.  It also shows the one
great, even indispensible, benefit of Keynesianism which is original
credit creation.  While having distortions is certainly much less of a
problem than not having a credit system to distort, it doesn't mean that a
return to Keynesianism as such can cure the woes of a Japan or even an
Indonesia or a Russia.  Korea, the one country that has taken the new
finance capitalist doctrines to heart, seems to be showing a glimmer of
a positive divergence from Japan and the rest of East Asia but it is far
too early to call it a success.  The very real question is whether finance
capitalism can re-prime its own pump.  I'm not at all certain it can but I
don't think I would bet against the kind of bull market environment we've
seen in America developing, first in Europe and then in Japan and possibly
other countries in East Asia.