Call for Rapid Recovery Is Bubble All Its Own

July 27 (Bloomberg) -- Hats off to officials in Seoul.

South Korea’s ability to expand at the fastest pace in almost six years is some of the best news Asia has had in a long while. It’s a sign that even with the $14 trillion U.S. economy in chaos, Asia is beating the odds and holding its own.

For now, at least. The region can’t be complacent for two reasons. One, increased spending and low interest rates are fine for the moment, yet they don’t replace a return of global demand. Two, loose policies may be doing more to fuel bubbles that merely provide the illusion of economic recovery, leaving Asia even more vulnerable to further problems in markets.

The 2.3 percent growth Korea generated in the second quarter dovetails with optimism that East Asia’s rebound from the global crisis may be “V-shaped,” not U-shaped or W-shaped. The Asian Development Bank said just that in a report last week. It recommended that central bankers retain expansionary monetary policies even as risks to recovery dissipate.

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