> It looks to me like interest rates are important vis a vis the business
>cycle witness Volker's rate hike in the early 80's which had profound
>effects on the U.S. and world economy
>
>Sam Pawlett
I agree that this sort of action can tighten the money supply and create a
recession. But I am referring to the opposite problem, one in which
lowering of interest rates can not end a recession. When Japan's interest
rates are zero, this did not have any effect on the business cycle. Unless
I am missing something about Keynsian economics, this seems to invalidate
it just as much as the second "crash" during the mid-1930s did. For all of
the happy talk in the bourgeois press about the East Asian recovery, here
is an item from the Toronto Star from Feb. 26 that casts a doubt:
TOKYO (Reuters) - Japan said a drop in consumer prices showed the threat of
deflation still hangs over the fragile economy, giving the central bank
little hope of ending its unprecedented zero interest-rate policy anytime
soon.
''Japan is not in deflation, but if we make mistakes in fiscal and monetary
policy there are fears that the economy could slip into deflation,"
economic planning minister Taichi Sakaiya told a news conference yesterday.
Sakaiya's remarks followed the release of government data showing consumer
prices fell 0.9 per cent in January from a year earlier and 0.3 per cent
from December, which he acknowledged were ''very large drops."
Louis Proyect
(The Marxism mailing list: http://www.marxmail.org)
