[PEN-L:1155] Re: Article on currency speculators
I'd like to agree with Tom Walker, and add that the posted article on currency speculation is misleading in other ways, and points in policy directions that may not be fruitful. It's tempting to blame falling real wages, and the relentless attack on what's left of the welfare state, on a bunch of 25 year-old traders. If only it were so simple. A few quick points before moving along: -- Look at Kindleberger's _Financial History of Western Europe_ if you need convincing that there is nothing new about currency speculation. Rapidly-changing International flows affecting the United States and Latin America, as well as various European countries, can be traced back well into the last century. -- The money that Leeson lost was won by other gamblers; it's not clear to me that the world is much worse off now that Barings is owned by a Dutch bank; the statement "The worldwide fallout [from the Barings collapse] has been estimated at over $40 billion." is so vague as to be meaningless. -- Similarly statements that "About 18% of these [currency] transactions support international trade or investment. ... The other 82% of these transactions, according to the Federal Reserve Board of New York, is speculation, the sole purpose of which is to buy enormous volumes low and sell higher, in order to make a profit." are also misleading. I doubt that's exactly what the NY Fed said; a lot of that volume is simple arbitrage which is by definition not speculative. Moreover slightly different trading systems can produce very different volumes of activity. What's more important is whether there are a lot of open positions, but trading volume tells you nothing about that. But enough quibbling. Buried in a footnote to the posted article is the useful statement that the actors involved "include transnational corporations who demand low-tax environments to locate plants in particular countries and regions." I would humbly suggest that you can get a lot more analytical mileage out of focusing on national conditions of accumulation, and seeing financial openness as simply providing leverage to national capitalists as well as TNCs. The article correctly notes that Mexico suffered a run even though its policies approached neoliberal nirvana, including budget surpluses. The article treats this as somewhat paradoxical, but there's an obvious logic if you look within Mexico: the combination of free currency convertibility and rapid expansion of a liberalized banking system drew resources away from fixed capital investment and into financial assets, and encouraged domestic capitalists to export their gains, once realized, since the macro situation was clearly untenable given the size of the current account deficit. Moreover after a collapse the losses are socialized through inflation and government bailouts. It looks as though Japan may be about to enter into a similar redistribution in order to bail out what seem to be incredible amounts of bad loans. It would be great to get analysis of Japan's financial situation from any Pen-Lers familiar with it. After the Mexican collapse a hue and cry went up about foreign speculators, which is the preferred response of governments because it diverts attention from their own malfeasance, especially if nationalism can be invoked -- e.g. the French government, trying to deflect attention from its anti-labor policies, routinely denounces "Anglo-Saxon speculators" and hints at dark Francophobic cabals whenever it has to raise interest rates to defend the franc. It is also highly convenient for local capitalists to be able to appeal to an impersonal and foreign "market force" as a justification for lower wages and their support for government social service cutbacks. They should not be believed. A recent report by none other than the IMF made clear that the drain on Mexican reserves came mainly from wealthy Mexicans. What should responses be? I would suggest two: 1. Much more critical attention to financial deregulation and the possibility that they may encourage euphoric booms in asset prices, which both produce real-sector misallocation (e.g. excessive construction) and leave governments with very large contingent liabilities. I would support at the least a system of "narrow banking" which sharply limits the kind of assets that any deposit-taking institution can offer and separates it from brokerages etc. Along those lines, and circling back to a point that Tom made about the oversupply of investment capital, I'm surprised to see so little Pen-L attention to the current bubble in U.S. stock prices. Some of this has been fuelled by U.S. banks shilling for mutual funds, and quite likely keeping CD rates down in order to push money into these things. Apparently a lot of people who buy mutual funds through banks think their principal is insured. Particularly given the increasing breadth of participation in mutual funds, the
[PEN-L:1156] Shorter Work-Time Group
There is a U.S. group, as well as the Canadian one mentioned recently. They work together in the North American Network for Shorter Hours of Work (NANSHOW). Shorter Work-Time Group c/o 69 Dover St., #1 Somerville, MA 02144 617-628-5558 Dick Lavine Center for Public Policy Priorities Austin, TX
[PEN-L:1157] stock market bubble?
Colin Danby writes I'm surprised to see so little Pen-L attention to the current bubble in U.S. stock prices. Some of this has been fuelled by U.S. banks shilling for mutual funds, and quite likely keeping CD rates down in order to push money into these things. Apparently a lot of people who buy mutual funds through banks think their principal is insured. Particularly given the increasing breadth of participation in mutual funds, the knock-on effects from a "correction" in stock prices are rather frightening. It's quite possible that the stock market (SM) is suffering from a self-contained speculative bubble. But it's also possible that its boom could reflect a "bubble" of the economy as a whole (of the sort I see happening in the late 1920s: see my 1983 RRPE article and my 1994 article in RESEARCH IN POLITICAL ECONOMY). The US economy is going through a period (as in the late 1920s) when the rate of profit is booming (mostly due to rising profit margins, a rising share of property income). This means that there's a real-economy basis for high stock prices. Also, the redistribution of income to the rich gives money to those with a higher propensity to speculate on the SM, fueling the boom. The trouble is that this kind of economic growth (see, e.g., in the recently released GDP stats) is hard to sustain, since it's based on volatile investment growth and luxury spending rather than on the relatively stable base of working-class consumer demand. Investment growth also produces increases in the capacity to produce, which become harder and harder to match with demand growth. With the federal and other governments moving in the contractionary direction, a recession becomes more likely. The Fed also sees inflation as the main enemy. If the economy goes into recession, the SM boom will be hard to sustain. I doubt we'll see a replay of the 1930s, though, since the world has changed drastically... in pen-l solidarity, Jim Devine [EMAIL PROTECTED] Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA 310/338-2948 (daytime, during workweek); FAX: 310/338-1950 "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- K. Marx, paraphrasing Dante A.
[PEN-L:1158] Si cago, voy (humour)
A while ago, Doug Henwood told an anecdote about how the Latin Americans associated the Chicago boys with the expression "si cago, voy" (if I screw up, I go). However, he pointed out, the Chicago boys *did* screw up but they never left. Well, I've been puzzling about this ever since and I think I've come up with the answer. Think of the Chicago boy as a ventriloquist's dummy. (Come to think of it, Milton Friedman *does* look a bit like Charlie McCarthy.) Think of the ventriloquist as the archetypal, 1890s editorial cartoon money bags capitalist, complete with top hat and cigar. Psychologically and linguistically, the Chicago boy experiences what is known as "subjectivity shifting" -- alternating back and forth between the neo-liberal economist and the money-bags. (Technically speaking, the neo-liberal economist _has_ no "personality", but is a projection of the money-bag's ideological desire). When the Chicago boy speaks in the first person, sometimes he is referring to the dummy, sometimes to the ventriloquist. So we may best understand the expression as: "if I (the dummy) screw up, then I (the money) scram." The Mexican peso crisis seems to confirm this interpretation. Regards, Tom Walker knoW Ware Communications [EMAIL PROTECTED] http://mindlink.net/knoWWare/
[PEN-L:1159] AFL-CIO and Gingrich
Looks like progress is being made: -- Forwarded message -- From: [EMAIL PROTECTED] (Reuters) Newsgroups: clari.news.labor,clari.news.usa.gov.personalities Distribution: clari.reuters Subject: Gingrich calls AFL-CIO election potential disaster Date: Fri, 27 Oct 1995 14:10:19 PDT WASHINGTON (Reuter) - House Speaker Newt Gingrich Friday called the election of John Sweeney as president of the AFL-CIO union federation a potential disaster. Sweeney, an insurgent calling for a more militant approach in union dealings with management, was elected Wednesday in the 78-union federation's first contested election in its 40-year history. ``The union elections this week were potentially a disaster,'' Gingrich told a group of investment executives. ``We do not need a more confrontational, more hostile, more divisive union leadership.'' Gingrich added: ``We need a union leadership that understands the world market and understands that improving the work ethic, and improving the efficiency of labor and getting people to be productive in competition with the world is the only way to create jobs in America in the long run. ``And that is exactly the opposite attitude that was evidenced this week in the AFL-CIO election,'' he said. Paul Zarembka ([EMAIL PROTECTED]) State University of New York at Buffalo
[PEN-L:1160] Multiple choice q?
I need to deflate the followings in national income accounts. Please indicate which is the most appropriate index to get real values and why (briefly, please)? 1. Deflating corporate profits by a) producer price index b) consumer price index c) GDP implicit price deflator d) other (please specify) 2. Net interests by a) producer price index b) consumer price index c) GDP implicit price deflator d) other (please specify) 3. Proprietors' income by a) producer price index b) consumer price index c) GDP implicit price deflator d) other (please specify) 4. Wages and salary disbursements by a) producer price index b) consumer price index c) GDP implicit price deflator d) other (please specify) 5. FORTUNE 500 LARGEST INDUSTRIAL COMPANIES' combined assets and profits a) producer price index b) consumer price index c) GDP implicit price deflator d) other (please specify) Your help is much appreciated. Fikret Ceyhun Dept. of Economics e-mail: [EMAIL PROTECTED] Univ. of North Dakota voice: (701)777-3348 office University Station, Box 8369(701)772-5135 home Grand Forks, ND 58202 fax:(701)777-5099
