What if Japanese and Chinese currencies decline further?

["John Gelles" <jjgelles@xxxxxxxx>]

	If decline of Japanese and Chinese currencies
	makes their exports cheaper, what will happen
	to employment and minimum standards of living
	in both countries?  In the countries they send
	their exports to?

	That will depend on domestic and export demand
	for goods and services -- everywhere.  And it
	will depend, in the end, on government actions --
	everywhere.

	In a downward spiral of currency devaluations,
	exports keep getting cheaper.  Domestic products
	should get more expensive, as imported components
	cost more and competition from finished goods
	imports declines.

	So domestic savers should be spending more to
	avoid loss in purchasing power by waiting.  But
	countervailing forces will also encourage more
	saving, as incomes are threatened and paper
	profits decline.

	Why are we "sweating" Japanese and Chinese
	currency declines against the dollar?

	The effect here of cheaper imports will be to
	reduce corporate profits and stock prices.
	This will, over time, reduce jobs and pay here
	unless government picks up the slack.

	If slack in employment in China, the US and Japan
	is removed by government contracts in all three
	nations to fix the environment, etc., the whole threat
	of recession will disappear.  In its place would be the
	threat of inflation if too many people leave jobs
	producing goods and services for the market in
	order to clean the water, etc.

	All the above means there is no self-correcting
	market, global or otherwise, that will keep us fully
	employed with rising minimum standards of living.
	Governments must act to employ the jobless and
	aim the economy away from inflation toward sensible
	continuous economic growth.

	Krugman in Slate presents the liquidity trap.  He
	gets out of it with planned inflation.  I think planned
	full employment is the better approach.  Not just
	planned, but enforced by a policy of government
	as lender of last resort as necessary -- to both
	employers and self-employers.

	John Gelles