[TinyRedLeaf]

Originally Posted by willx

The historically weak Yen (and Yuan for that matter) and the export driven nature of the Asian economies have to led to startling growth.

I believe there is generally too much emphasis on the impact of exchange rates on trade and growth. Exchange rates are, after all, double-edged tools. For developing economies that had very little capital to begin with to acquire the resources they needed to upgrade their export industries, a weak currency was likely as harmful as it was useful. Whatever the exchange rate was at any given moment in time, its effect on an economy would very likely balance out in the long run.

To me, it's more important to look beyond the exchange rates and focus on the exports that an economy is producing. The most salient feature of the growth achieved by the Asian tiger economies, and by China in the past 20 years, is that their export industries steadily progressed up the value chain. Starting with cheap textiles, these economies very quickly invested their accumulated earnings on the technologies needed to move on to the next stage. Taiwanese companies, for example, moved on to OEM production of computer parts, and eventually became leading producers of branded laptops. Hong Kong and Singapore moved from heavy industry into a heavier reliance on services that provide more "value add" per dollar spent. South Korea has long since overtaken Japan as the leading producer of consumer electronics in the region.

These, to me, are the more important reasons for the startling growth of many East Asian economies, not currency or exchange rate manipulation.

Originally Posted by willx

This growth of course will naturally slow down due to the law of large numbers, but my point overall is that being "export dependent" in the long-term is a bad thing, just as much as being "export consuming" over the long-term is.

When you're looking at city-state economies like Singapore or Hong Kong's, I don't see how we have any choice but to be export-oriented. Our domestic economies are simply too small to sustain long-term economic growth.

Originally Posted by willx

The consequence of an export driven economy with a weak currency is an impediment to domestic consumption - it hurts consumers' purchasing power. This results in an increase in the domestic savings rate. See: Japan, Germany and China. Saving isn't necessarily a bad thing, in fact, in contrast to many western countries it's seen as a good thing. Problem is an excess of savings is an economic imbalance as much as excess debt is.

I broadly agree with you in principle. In practice, however, it's very difficult to balance savings and debt. There are a huge range of factors involved, from taxation to fiscal policy to social-political expectations that have to be met. In the end, between savings and debt, I would much rather have more savings than more debt, and I will never understand nor wholeheartedly accept the Western addiction to credit-driven consumption growth.