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Dogs and DemonsUncontrolled bank lending in the 1980s (the Bubble) could be seen as an early attempt to inflate the domestic money supply without bringing the dollars home. We have seen what the effects of the Bubble were. In the 1990s, the government tried another approach: pumping money into the economy through public works, paid for with a burgeoning national debt. This, too, cannot go on forever. Another crash may be coming, and this one could drag Japan down – and with it the entire world economy. It might seem incongruous that while a great sword hangs over the world's head in the form of Japan's external dollars, its domestic markets are becoming irrelevant. The paradox, however, lies in the fact that each is the complement of the other: Japan's external reserves exist only because domestic markets, in order to preserve MOF's system, are cut off from the world. The most vivid demonstration of the irrelevance of domestic markets to world finance is the collapse of the Tokyo Stock Exchange's foreign section, launched in the late 1970s in a bid to make Tokyo an international capital market ...» |
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