Two months is forever. I wonder now about the tension between providing liquidity to equity markets and the now questionable "safe-haven" overhang of the dollar. The only way that an ongoing Fed liquidity bailout of equity markets can avoid devaluing the dollar is with an equally sustained, internationally co-ordinated reflation, which presumably would have quite different financial and political effects on the economies of the countries involved. Not to mention the differential effects of inflation on creditors and debtors. Obviously, we're not talking about a one-day wonder when the New York markets re-open next week. Aren't we looking at a new regime of financial flows, terms of trade, exchange rate instabilities, crisis interventions and controls? Rhetorically, we are already hearing demands from the U.S. for solidarity from its allies in its declared war against terrorism. Realistically, one can expect such demands -- and responses to them -- to lap over onto agendas that are not unambigously connected. Meanwhile, I presume the rest of the world -- Turkey, Argentina, Brazil -- are taking the day off while the U.S.A. sorts this one out. > From: Tom Walker > Subject: RE: the almighty dollar (& the crisis of democracy) > Date: Thu, 19 Jul 2001 07:22:48 -0700 > > > I would concur with just about everything Ellen says except for 6(c) -- "a > left wing political victory in the U.S." You can have all sorts of political > destabilization short of a "left wing victory". Further, it shouldn't be too > controversial to note that the political stability that has reigned in the > US over the past quarter century has been purchased at the cost of excluding > important sectors, interests and voices from the political process. This was > the declared and implemented intention of policies aimed at curbing what > Crozier, Huntington and Watnuki diagnosed in the 1970s as an "excess of > democracy". > > If you think of the "moderation of democracy" in the U.S. as its > "tri-lateralization", it makes a perfect complement to the international > ruling class's preference for holding U.S. dollars. The little matter of the > 2000 presidential election, the Florida vote count and the Supreme Court > decision has disappeared from the radar screen. But I would maintain that it > constituted the apogee of the courtly "political stability" in the U.S.A. > > Ellen Frank wrote, > > (6) Threats to the dollar and ability of the US to finance its deficit > could arise from three sources: > (a) the emergence of a new superpower whose global corporations do > not rapidly become Americanized. Not so very long ago > everyone thought Japan and the yen would take this role, but Japanese > MNC's just merged and forged partnerships with US MNCs. This might > be because the US provides Japan's national "defense" > (b) foreign governments are somehow able to compel their > wealthy to bring the wealth home. This could occur through left wing > coups -- siezing assets; or right-wing coups -- fascistic alliances between > national governments and domestic businesses to rebuild the nation-state. > (c) a left wing political victory in the US. A Nader victory would > have tumbled the dollar. > > All three of these seem pretty unlikely to me, at least in the next > few years. Tom Walker Bowen Island, BC 604 947 2213
