Follow-Up On Bubbles

["Gunnar Tomasson" <tomasson@xxxxxxxx>]

The following are questions-answers relating to my earlier PKT Forum SMB
postings:

> You raise two questions:
>
> Why don't you think loose fiscal and monetary policies wont keep a
> > recession quick and easy?  You mention monetary arrangements... If we
take
> > Minsky's view that its the confidence of economic agents that decides
> > economic growth, and further if we can agree that money is endogenous
then
> > wont the monetary system appear to repair at precisely the same rate
that
> > econ agents need it too?
>
> Other things being equal, I agree that "loose fiscal and monetary
policies"
> can move most economies out of run-of-the-mill recessions.
>
> It is otherwise when, as in the case of Japan in recent years, an
economy's
> banking and financial system has been destabilized.
>
> How might Minsky have explained the failure of traditional expansionary
> financial policies to get the Japanese economy going again?
>
> As for post-Bretton Woods world monetary arrangements, I construe the
> succession of financial crises during the past quarter century - Third
World
> Debt, U.S. S&L Scandal, World-wide Commercial Bank Debt Writeoffs, Japan,
> Asian "tiger" Economies, Russia, etc. - as evidence of their on-going
> structural disintegration.
>
> In this respect, the performance of the Euro - brain-child of Europe's
best
> and brightest central banker minds - suggests that the process of
structural
> disintegration may be accelerating and moving into its terminal phase.
>
> If this be so, then the powers that be at the U.S. Treasury, the Federal
> Reserve, and the IMF will have guided the world economy into uncharted and
> dangerous waters.
>
>
> Gunnar