Saturday, April 4, 2009

The Japan Precedent

Much of the debate over how well - or poorly - the administration and Fed are dealing with the financial crisis centers on comparisons to the Japanese crisis of the 1990's. In the latest iteration of that debate, The Economist's Free Exchange frets that we are repeating Japan's mistakes (as does Krugman), but James Surowiecki continues to think the comparison is strained.

2 comments:

Anonymous said...

The strength of the greenback vs. the Yen recently has been caused how? I would think that the future expectations to release more money and buy toxic assets would increase the supply and devalue the greenback?

Bill C said...

Hmmm... it depends on what you mean by "recently". While it is true the dollar has risen vs. the yen since January, its still quite a bit lower than it was two years ago. You're right that, ceteris paribus, US monetary and fiscal policy ought to be sending the dollar into a real plunge, but the increased demand for US Treasuries as a global safe haven seems to be operating significantly in the other direction.