On 7/2/2021 10:39 PM, Michael Meeropol wrote:
Dear Comrades --- I was very skeptical of what Roubini wrote --- so I
checked in with Dean Baker...
Here is his short response: "doesn't really have much of a case. If
you pull out food energy there is little inflation anywhere other than
the U.S." ...
On Fri, Jul 2, 2021 at 8:43 AM Louis Proyect <[email protected]
<mailto:[email protected]>> wrote:
By Nouriel Roubini
In April, I warned that today’s extremely loose monetary and
fiscal policies
Fair enough, I always trust Dean (who during college recruited me to
DSA's predecessor DSOC 41 years ago), on the matter of real-sector price
pressures.
In South Africa we've also not witnessed serious inflationary pressures
- as had existed from around 1981-98 - aside from poor people's access
to food and energy (a 7.1% price increase
<https://pmbejd.org.za/wp-content/uploads/2021/06/PMBEJD_June-2021_Media-Statement-30062021.pdf>
in the food basket alone over just the last ten months, as against CPI
of closer to 3%, so the pain is acute given Covid's job massacre).
However, the more general dilemma remains how to interpret capitalism's
displacement of crisis into /financial-asset inflation/, especially the
implications of devalorization when such bubbles burst.
Whether stock market mania, real estate speculation (e.g. Blackrock's
current invasion of residential real estate), or other sites of
out-of-control fictitious capital formation (cybercurrencies are
especially prone), the volatility is extreme. Consider the
roller-coaster from January 2020 through the April 2020 collapse,
followed by the unbelievable revalorization of financial assets thanks
to renewed QE since then. *
*
One compelling data point is the Buffett Indicator: stock market share
valuation over (the highly-flawed measure of) GDP. The World Bank
provides out-of-date data: for South Africa December 2020 but for the
U.S. and world, December 2019. The latter two sites were already at
historic record levels before the 2020 QE kicked in. (There are a few
outliers ahead of SA's 350%, such as Hong Kong which when conjoined with
China falls below SA, and Belgium and Iran had quirky spikes last year,
too.)
Volatility here is crazy. Helping to explain why the Johannesburg Stock
Exchange stands out in the graphic below, my future pension is heavily
exposed to the biggest Asian corporation, Pony Ma's Tencent, which a
South African firm (Naspers/Prosus) bought a third of for just $35
million in 2001 (lucky bet!) but which soared to $750 billion recently.
Yet Trump wiped off $54 bn in one day last August with his Sinophobia,
and the Chinese Communist Party has the potential to do the same (in
2018 reducing valuation by 20% by prohibiting import of new mind-bending
Japanese video games).
Since two years' work as a "regulator" - haha - at the Federal Reserve
during the Third World Debt Crisis, I've been more chicken-littleish
than even Roubini. But I do think it's useful to continually point out
the insane delinking between the real and financial sectors, of which
the Buffett Indicator is just one reflection. /Kapital Volume 3 /still
has much more to offer on this (from my vantagepoint
<https://www.springerprofessional.de/en/capital-volume-iii-gaps-seen-from-south-africa-marx-s-crisis-the/15644454>),
as does a critical rereading
<https://www.cadtm.org/Learning-from-Hilferding-s-Finance-Capital-Money-banking-and-crisis-tendencies>
of Hilferding's /Finanz Kapital, /where he downplays the dangers implied
by financialization.
So, when /should /we cry wolf?
**
*Buffett Indicator (market capitalization/GDP: South Africa, U.S. and
world, 1980-2020)*
https://data.worldbank.org/indicator/CM.MKT.LCAP.GD.ZS?end=2020&locations=ZA-US-1W&most_recent_year_desc=true&start=1980
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