On 7/30/06, Jim Devine <[EMAIL PROTECTED]> wrote:
me:
> > US active policy has not been very successful.
Yoshie:
> I've read claims that the US Central Bank has been better at managing
> bubbles than the Japanese Central Bank. We'll see how it will handle
> the deflation of the housing market here.
The Fed's policy is to let bubbles happen. It simply responds to their
bursting (e.g., the Fed's rapid and repeated interest-rate cuts in
2001 and after). To respond to the housing bubble's bursting would
involve a reversal of its current policy.
I would guess that it's not that the Fed is better than the BoJ but
that the bubble that burst in Japan was much larger. The Japanese
bubble involved not just stocks but housing, whereas the US has
"enjoyed" serial bubbles, first stocks, then housing.
The main claim I heard is that the central bank in Japan was too slow
to raise interest rates in the late 80s and tightened too fast in the
early 90s, in comparison to the way the Fed has managed things here.
Don't know if that's true, and don't know if a different policy could
have made for a different outcome.
--
Yoshie
<http://montages.blogspot.com/>
<http://mrzine.org>
<http://monthlyreview.org/>
