The Data

Abstract

The essential problem faced by this monograph is that buoyant financial markets have the inherent capacity to feed a potentially unstable disequilibrium condition until markets collapse under the ever-growing weight. Financial markets can lock themselves into a position in which an accumulated overhang can threaten their stability and can end in financial crisis. The stock-market bubble in the United States in the late 1990s and the baht crisis in Thailand in 1997 are clear examples.¹ Such problems can be solved by confrontation by alert policymakers, but confrontation by policymakers can require the implementation of policies, which damage their personal reputations. Countermeasures can be suppressed for political reasons in the hope that the overhang will dissolve itself or that the crisis will not come until the policymaker is immune from the probable reaction of the electorate (political agency). Failure to identify and to eliminate the potentially disequilibrium financial condition will create distortions in the “real” economy so that the real economy must undergo substantial change in the output mix.