>>>Dollar hegemony has resulted in savage deflationary
>>>pressures in theworld economy outside the US.
>>...
>What does 'truly globalised'mean in this context?
It means that there is actually such a thing as a world market for most
commodities and that the prices in national and world markets are very close
and move in the same directions. If this is true, then what we're discussing
lower is irrelevant because whatever happens the prices in non-dollar
economies would rise as the result of arbitrage when the dollar rises.
>Surely there 2 (at least) strong deflationary consequences of the
>strong dollar: 1 is that is induces a tidal wave of dollars hoarded
>elsewhere to flow back to the US to buy bonds and even assets,
>reducing available pool of capital elsehwere and 2, you're righ, a
>strong dollar puts inflationary pressure on weaker countries which
>they precisely countreact by strong *deflationary* internal social
>anf=d fiscal policies, to keep their own currency strong.
1 - I don't think it's relevant. Hoarded money doesn't have much influence on
real economies and money flows doesn't affect pools of nonfinancial capital. If
there was a currency exchange at some point, you could argue about the
effects on exchange rates, but here you're talking of dollars only.
2 - There, I follow you. This is very plausible, but not mechanic. Some
countries will let their currency fall and not play the dealtionary game (current
example: Europe, which actually seems to get out of a deflationary situation
thanks to the weak euro).
>> I do
>> think that the US has been the engine of the world economy lately.
>
>That's surely been a deflationary factor elsewhere, since most of the
>dollar profits have not been retained or have been using to invest in
>maquilador type operations which actually may not benefit local
>ecopnomies are counteract internal deflationary forces.
Actually, there is a simpler issue than what is done with profits and investment.
This is important when you're out of a crisis. The trouble now is that we have
been in one lately if not since 15 or more years. Look at the prices of
commodities (except oil, but even this is a recent development). Look at the
unused capacity and unemployment everywhere. We have become used to
this but those are normally the symtom of a crisis. Don't you think that the
problem was indebtment, excessive dependance on the world markets, and a
lack of demand? The US demand was the only strong one on the world
market, and was driving the whole thing IMO.
Anyway, these investment flows issues in practice come down to whether the
country of which money flows out accepts its currency to fall or not. If the
government accepts it, the flows will not be deflationary and if it refuses the fall
they will.
>>>The huge increase in
>>>income and wealth inequality this has produced *is the immediate
>>>result of fundamental constraints on the capitalist growth model', in
>>>particular, energy-shortage.
>>...
>This is hard to grasp only if you do not grasp the estent to which
>there has been no true market-set price for oil for a very long time
>(maybe not since the 1890s).
If the oil price has not been the product of a market, so what? Many prices are
not the product of an unrigged market. How can the nature of the market and
not the price of the commodity be the cause of poverty, inequality, etc.?
>> Anyway, all these problems are the results of policies as
>> much as if not more than energy availability. F.ex., how do you explain
>> Algeria with your theories?
>
>What about Algeria? It's been a 'high absorber' affliicted by low oil
>and gas prices for its principal exports for a while now.
Algeria is a mess but it has plentiful energy. Not so long ago this country
exported no fossil fuel and was probably in a better state then and in some
time it will probably export none again. If it's the low prices which caused it's
problems one wonders how it will even survive when their oil will run out. But
compare this country with neighboring countries afflicted by zero fossil fuel
exports which do nevertheless survive. There seems to be an issue about
how it uses the rent, isn't it? You see my point?
>> Another point as to the importance of policies: Seen the
>> spread between
>> Malaysian vs. US/EU bond rates? Not much financial weakness
>> there, it
>> seems.
>
>Don't get this. What about Thailand, Hiong Kong and Japan again?
I mean: the interest rate on the debt of the Malaysian government is close to
the one on the debt of most western governments. This is not indicative of
financial weakness (in the contrary). As to Thailand and HK I don't know but
they are certainly lots of countries in the region which don't enjoy the stability of
Malaysia despite having the same "energy profile" a Malaysia. As to Japan,
it's debt has a abnormaly low interest rate which is not exactly a sign of
extreme financial stability but rather the consequence of a governmental fiat. In
other words the Japanese debt market is rigged and not dependent on
foreign capital. Krugman and Keynes would say it's the consequence of a
"liquidity trap". Hope that answers your vague question.
>> First, stop to use that index. Why not use the S&P or the
>> Wilshire?
>
>Why?
Because the Dow Jones Industrial Average is a selection of 30 stocks which
are not very representative. Because the DJIA is not price-weighted so that
the movements are not representative of the market capitalisation but of the
value of individual shares (which is not important at all). And because the DJIA
is not good for historical comparaisons (like the S&P for that matter) because
the stocks go in and out of it in an arbitrary fashion. The S&P500 is a broader
and price-weighted index. The Wilshire is broad enough so that it doesn't
matter which stocks are in or out and so that it's really representative of the
whole market but the disadvantage is that it's not reported everywhere like the
Dow or the S&P. Please stock-market maniacs correct me if my memory is
playing tricks on me.
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