Twister Logic

We're not in Kansas any more, Toto.

Anyone still laboring under the illusion that there is such a thing as a homegrown economy need look no farther than the twister illustration at our right.

The homeboy from Washington, D.C., Robert Rubin, tag-teamed with that shy samurai, Ryutaro Hashimoto, to wrestle Japan's monstrous economic problems to the ground.

Mr. Rubin reached for his wallet - make that "our" wallet - and pledged money from the United States Treasury as part of a plan to plug the leaky vessel that is Japan's economy.

And since we're on such a desperate mission to mix our metaphors ... the whole thing has the feel of a professional wrestling match. Hammer locks, anguished facial contortions, and body slams that would fell a redwood.

But if you'll look through Jim Tyson's article, you'll get the sense this patch-up plan for Japan is still mostly show.

But even "show" is good. Without Japan, the rest of East Asia gets pinned to the mat.

Jump to the Michael Switow story on the outlook for Hong Kong's market and economy.

It notes that the economic dynamics of Hong Kong - perhaps the world's greatest free market - just don't matter that much. As long as Japan's in a crunch, Hong Kong's in a pinch, and so are all their neighbors.

So as long as Rubin and Hashimoto can keep the Japanese tempest contained in a teapot, the rest of the world can continue munching finger sandwiches.

And lest we think that this rescue philosophy is one sided, let's go back to those hazy days of yesteryear, mid-1980s, when the US was a global "also ran."

Detroit still hadn't figured out that Americans wanted cars that ran like Toyotas, not cars that looked like Mercedes.

Not only was American industry no match for Japan, but the yen was really weak - which meant that Toyotas were not just better, they were cheaper.

And that put American manufacturing companies in a ferocious headlock.

Japan agreed to help by strengthening the yen and weakening the dollar, which raised prices on Toyotas and such.

The curious thing about the current situation is that Wall Street seems convinced that the appearance of fixing Japan works as well as really fixing it.

The Hashimoto-Rubin plan is in doubt after this weekend's Japanese election put Hashimoto's party in danger of losing power. Yet all the major US stock market measures, except the Dow Jones Industrial Average, have hit record highs since it was announced.

East Asia's problems will almost certainly take a greater toll on the US.

A survey of 55 economists last week by The Wall Street Journal found that most see the brunt of the Asian damage still to come for the US economy.

Companies like Applied Materials Inc., which makes machines that make computer chips, have seen their sales in Asia dry up.

So what keeps the US markets so buoyant?

It's the fact that the US economy is everything Asian economies are not.

The combination of record employment, low inflation, cheap prices, record low interest rates, and economic growth mean that Asia's problems, unless they get dramatically worse, can only nibble around the edges of the this powerhouse.

* E-mail comments to: mccormickl@csps.com