Germany. Keynes, proscribed and interred, was let back in through two windows rather than one. A belated application of his arguments against reparations from the defeated that reached back to the Treaty of Versailles was united with a recognition of the useful¬ness of enhanced government spending during recessions. The one-to-one exchange of Westmarks for Eastmarks was a gift to the East Germans, but the bonanza was spent largely for West German products such as automobiles that provided a much-needed boost to the West German economy.

The Bundesbank finally contrived a less generous exchange rate for translating Eastern German savings and pensions.

The FDR was also stricken by the collapse of the Eastern European Common Market (CMEA) due to the requirement that all international transactions be conducted in hard currency. The advantage of such a union as the CMEA, on the contrary could have continued if trade between member countries had gone on in local currencies. Had this been respected, the deflationary collapse throughout the region could have been attenuated. Instead of low interest rates, the former GDR was suddenly afflicted with high-rate Bundesbank policy. Maier fails to mention the negative effects of the obligatory military spending imposed on the GDR by Moscow. After 1977 when President Carter urged NATO countries to increase their military spending by 3%, Moscow responded with a 4% increase for its allies. Gorbachev, however, realized that the Soviet bloc was not up to continuing the arms race, especially when the proceeds from oil exports declined. Instead the Soviets cut back their subsidized delivery of crude to their allies. The high interest rates of the Bundesbank did the rest. Meanwhile, as though to keep in line, the older Western regimes like the FGR are reducing their social expenditures. And this is institutionalized in the restriction against deficits and "inflation" in the EU. Only France shows signs of falling out of step.

Without this lamentable background, the blood-drenched tragedy of Yugoslavia would probably not have happened.

The preponderance of the lone surviving superpower, the United States, has become so great that the balancing defences of lesser countries, and particularly the emerging and ex-colonial countries are falling under the mantra of Globalization and Deregulation (G&D). Not only is the world economy segmented; it has become severely multi-tiered.

Alan Greenspan, chairman of, the US Federal Reserve, has smashed the legendary champagne bottle on the bow of the trireme that the world economy has become. In the hold, shackled to their benches, the slaves work the oars.

There in the real economy inflation has not only been licked, but deflation has long since set in. But on the top deck the passengers until recently wallowed in every luxury while speeding to an uncertain destination. Ask no longer whether we have inflation or deflation. In the best of all worlds we have both, properly ordered. One in fact feeds on the other.

"In a speech at Stanford University, Mr. Greenspan noted the `extraordinary rise' in the stock market, but avoided anything resembling his warning about `irrational exuberance' issued in December, 1996. The Fed said the Chairman] focuses primarily on the prices of products and not of assets such a stocks and real estate" (WSJ, 8/9/97). Yet, ever the wily survivor, he did slip in a bit of hedging with the remark that in the last 1980s Japan demonstrated that 'soaring asset prices' can undermine an economy even if prices of goods and services are stable. When he had delivered himself of the "irrational exuberance remark" Wall St. types minced no words in telling him to concern himself wholly with product inflation (WSJ, 5/12/96). Mr. Greenspan is cunning enough to recognize that the banks, combining their powers of money creation with the new deregulation, have taken over brokerage houses and much else to become the preeminent makers and shakers in the world of financial mega-deals. Today they move and quack like brokerage firms rather than banks. And in this brave new world where everything stands on its head, the central bank, founded to keep the banks in line, has been reduced by its own doing to taking their orders.

So the Fed hesitated to raise rates because it would have pricked the hot air balloon that the stock market and the economy as a whole have become. Since winnings from stock trading can be spent like any other currency, they are in fact an inflationary expansion of the money supply. Yet this does not disturb the central bank. Monetarism, proclaimed the official Fed line in the late seventies, holds that the money supply alone determines the price level and just about everything else in the economy. But even within the Fed it has long ago been abandoned as a bad joke. With deregulation it is even impossible to say what the money supply, might be. For example, credit cards are still not included in quantifying it, though they make up a main asset of many banks. But it is one of the charms of central banks, that they never need acknowledge or learn from their mistakes. They merely go on to their next infallible dogma.