Political underpinnings: the US–Japan axis
in Mad Money
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This chapter presents a brief analytical survey of the political underpinnings of cooperation and how they have changed for the worse. Two key political relationships that might affect the international financial system are between the United States and Japan and between France and Germany. The chapter provides information on the US-Japan relationship. There was built up a connection between the two deficits, the fiscal deficit between US savings and taxes and government spending, and the trade deficit between US exports and imports. By the end of 1995, the US economy had finally climbed out of recession, while the Japanese economy had not. The politically significant change was that financing the US fiscal deficit depended not on private capital inflows from Japan but on official ones. And meanwhile the US strategy of talking down the dollar had unintentionally done the Japanese bureaucracy a good turn.

Mad Money

With an introduction by Benjamin J. Cohen


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