Hi Doug, I don't want to sound glib about this. I don't disagree that extrapolation is lousy science. Nor that there is real nervousness in the markets and that pressures for correction will increase. And if it were only private investors involved, private decisions might lead to collective disasters. But because this now depends on central banks, where there is recognition of their structural dependence on the US and where some coordination is possible (NOT inevitable - they too can act individually and screw themselves), the crisis is a collective one, and not just an American one (Poulantzas made this point in the early 70s). So an objectice basis for managing this exists (the technical-social basis I agree is problematic; that's why elites are not complacent; yet...). The bulk of the dollar's collapse has already occured without the major speculative outflow that was expected even though its fall has been predictable for some time. Seems they will be patient a while longer and hedge their bets only via some diversification.
The related question is where will they put the dollars? Japan is desperate - panicked not to be the currency of choice and is by far the main holder of dollars . They can't put it in Europe - Europe is already freaked at the rising Euro and would surely eventually respond - which would frustrate the intent of the shift. They can spend it themselves within Asia but this would involve a most radical shift in each of domestic social relations, regional relations, and a break with the imperial connection to the US - ie the kind of revolution that seems awfully awfully far away. ----- Original Message ----- From: "Doug Henwood" <[EMAIL PROTECTED]> To: <[email protected]> Sent: Monday, January 31, 2005 10:51 AM Subject: Re: [PEN-L] Deficits, the Dollar, and IEDs > Sam Gindin wrote: > >>On the other hand, note that it is not necessary for the US to >>correct the trade deficit to calm financial markets (which are in >>any case not panicking in spite of the nervousness some people are >>expressing). It is only necessary that the deficit stop rising and >>start slowly falling - which IS possible. Moreover, we need to >>recognize that trade deficits mean something distinct in the context >>of empire; in the late 70s people were freaking at any deficit, yet >>almost a quarter century of US trade deficits have now been >>tolerated and accepted because financial markets learned that this >>was possible (re the US). > > Sam, you know I share your skepticism about crises, but you're > underestimating the importance of the financing side of this. The > financial markets learned it was possible because they made it > possible - but today's U.S. c/a deficit isn't being financed by the > markets, it's being financed by the central banks. And there are > signs that the CBs are losing patience: weak presence at the last > bond auction; signs of a shift towards the euro in reserve allocation > in Malaysia, Russia, India, etc.; noises coming out of China that > they're losing some ardor for dollar reserves; etc. Past performance > is no guarantee of future results! > > Doug >
