Yes...Re Japan and Europe part of the problem has been that the US 'needed' them to stimulate but couldn't enforce it because the empire still works through states with their own social forces. A revival of Japan (the latest numbers do look better, but?) and Europe and an increase in their internal demand should stabilize the global economy, not threaten it as long as Europe doesn't raise interest rates dramatically and force the US to do the same to attract capital.
----- Original Message ----- From: "Doug Henwood" <[EMAIL PROTECTED]> To: <[email protected]> Sent: Monday, January 31, 2005 12:40 PM Subject: Re: [PEN-L] Deficits, the Dollar, and IEDs > Sam Gindin wrote: > >>Agree. Not sustainable forever (though deficits do mean something >>different >>for the US than for others). > > Yes, that's why we've been able to run them for decades without the > IMF banging on our door. > >> Question is whether there is a manageable >>transtion. > > It could be. An engineered recession in the U.S. might be one strategy. > > Consumption is now at or just over 70% of U.S. GDP, a gain of about 4 > percentage points over the last several years. It would make great > orthodox sense to knock that back to the 66% range (where it was for > years), which would boost the personal savings rate to 4-5%, from > 0-1%. And that would greatly improve the foreign balance. But it's > pretty hard to imagine that happening as the result of conscious > policy. > >> Diversification does means 'problems' but perhaps not crisis. > > I agree. In general, left economists frequently exaggerate a problem > into a crisis, a very bad habit. > >>Don't however think analogy to Japan is valid. > > My only analogy to Japan was the "weight of the money" argument to > justify a bull market. > >> Holding on to treasuries when >>the dollar has already likely gone through the bulk of its decline, > > The mystery is what assets were sold to drive the dollar down. > Neither the bond nor stock markets are showing signs of significant > exit. So it could be that traders were bidding the dollar down in > anticipation of asset liquidation that hasn't happened yet. With the > Fed raising rates, something could start crunching. It usually does > in a tightening phase. > >> which >>pay interest, and support exports, and when the US economy is still >>looking >>strong relative to Japan and Europe is not irrational and not a Ponzi >>scheme >>IF it the imbalances seem to have peaked. > > There's a lot of buzz about how Europe is gathering steam, and I just > got an email this morning reporting on Merrill Lynch's conversations > with clients on how they're all upbeat on Japan. So the relative > strength of the U.S. may be - *may* be - yesterday's news. > > Doug >
