by Ernest O'Neill

Life on earth has a way of clarifying reality in human minds. So this current chaos in the Asian stock-markets highlights the danger and significance of deflation for the world's economies.

At first sight, the problem appears to be the looseness and inefficiency of Asian banking and currency systems. Protection and artificial alliances between government, business, and currencies seems to be the current evils that the international free market will wring out of the Asian tigers. But in the course of the wringing out, one hopes that each producer will not have fire-sales of consumer goods - out of sheer desperation. This could produce a deflationary price spiral that would destroy all before it.

Suddenly, we are driven back from the attractively simple ideal of capitalism as free competition. One begins to realise that some beneficent control and restraint is needed by governments, if financial stability is to be maintained and markets are to remain viable. It seems that the middle road between protectionism and free trade lies, once again, through good will.

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