Alex Izurieta wrote, >Less unlikely, but not highly probable either, would be a sort of >worldwide coordinated reflation. But _given the alternatives_ doesn't the normal improbability of such a response take on at least a more intense hue of possibility? The institutional skeleton is there, serving for the present the perverse purpose of "structural adjustment." Given the role and position of the US dollar, the US cannot adjust its CAD either through deflation or devaluation. The logical alternative then is that everyone else adjust upward and the US rides in the caboose. The turnabout would of course have to be presented as a temporary response to an emergency. But once begun it would be awful hard to stop. The 1998-2000 bubble was the last best shot at stoking the US locomotive. Given that this time the contagion is emanating directly from the US and that it is a consequence of the build-up of "tolerance" to the last fix, it seems hard to imagine that the same magic could work again without an inflationary risk that would make the 1970s look like a bankers' picnic. We know one thing: business as usual ain't going to cut it. The probable is no longer possible. Whatever happens next is bound to be "improbable". Tom Walker Bowen Island, BC 604 947 2213
