The newswires are abuzz with the news of the Japanese Central Bank intervention.  Some commentators realize that the ancient term for "dollar mercantilism", "neo-mercantilism", or "competitive depreciation" is simply "beggar thy neighbor" (see Chapters 19). The Economist Magazine has an interesting take on the issue. IF the Japanese intervention floods the market with dollars and IF this would lead to inflation in Japan – the effect might actually be positive for all!

Extra Credit: How would you use the large open economy Mundell Fleming Model (Chapter 19) to explain how the massive sale of yen by the Japanese Central Bank could benefit not only Japan but also the US (and other countries).  Hint: Think Liquidity Trap, and The Paradox of Thrift…

Solution: Combine 1, 2, for an alternative view (see 3, which is the "great vacation" view of the great recession. I contrasted these views before…).