Jim D. writes:
I don't think people should worry about the creditworthiness of the US government: after all, the government's debt to GDP level was much much higher at the end of WW2.
================================ True, but there wasn't any question about the strength of the US economy, or of the dollar as the global reserve currency, or of US dependence on foreign capital and foreign oil then as there is now. Unlike in 1945, America today needs foreign capital and cheaper oil, and there is less confidence in the strength of the dollar, which is integral to both. The US ruling class is conscious of its greater vulnerability.
There is already concern about the steady diversification out of the USD by foreign central banks and investors and the potential for a deeper run and the further erosion of its reserve currency status if the budget deficit balloons to pay for a bailout and the costs of a recession. If the fiscal deficit, as Jim notes, is not an issue working people should worry about, it is something which troubles the conservative wing of the US bourgeoisie which wants to hike interest rates to protect the dollar and to encourage foreign portfolio and direct investment, and will press even harder for such action to accompany a multi-billion dollar government bailout. American corporate liberals worry less about the USD and inflation and foreign investment in US bonds and stocks than about the deflationary effect of tight money on the real economy. This tug of war will ultimately be settled, as it usually is, by the depth of the downturn and the degree of countervailing pressure from below against the inevitable Wall Street/Washington impulse to cut social spending to meet the fiscal "emergency". A new Obama administration could be faced with the same conflicting pressures from above and below as was the early New Deal administration, and would similarly try to steer its way between them as the crisis evolved. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
