Michael Perelman wrote:
> I glanced at the Dark Matter paper briefly. Palley's description seems
> fairly accurate.
> I never cease to be amazed at the ability of economists to rationalize
> anything.
If I understand them correctly, Hausmann and Sturzenegger offer one
and only one reason why the accumulation of 'dark matter' by the U.S.
exploded from the 1980s to the present (while it was nowhere to be
seen prior to that):
(1 and Only) 'Dark matter' is mostly the capitalization of the returns
on financial know-how (seignorage and the intrinsic virtues of U.S.
debt are secondary) and financial know-how became a hot U.S. export
item only in the last 25 years ('globalization'): "Globalization has
made the flows of dark matter a very significant part of the story and
the traditional measures of current account balances paint a very
distorted picture of reality."
But, if this financial know-how is embedded institutionally in the
U.S. financial markets and the rest of the world cannot easily
replicate it, how come it only became apparent since the 1980s?
Hasn't Wall Street been financial wisdom incarnate since earlier
times?
More curious, perhaps, is that the countries that have craved and
imported U.S. 'dark matter' have been... Russia, Ireland, France,
Singapore, and Saudi Arabia. Does the story sound convincing? Do
these countries have significant trade surpluses with Japan or China?
I thought most of the U.S. financial assets abroad were held by the
central banks in Japan and China. Saudi Arabia is third in the list
and that certainly overlaps, but how about Japan and China? Aren't
*these* the countries the U.S. needs to import and continuously pay
for the 'dark matter'?
And, assuming -- without conceding -- that their theory of what
happened is convincing, does the recent (globalizing) financial
know-how sound like a stable (excludable) asset looking forward? Is
it really that hard to envision the, in their words, "unprecedented
deterioration of the value of dark matter to even approximate the net
asset position that today worries analysts"? (If Napster wasn't
quickly eating the 'dark matter' of the music industry, how come the
industry so urgently pooled resources and litigated Napster to
effective death?)
And if the dark matter is the political hegemony of the U.S. with
another name (an asset that apparently didn't start to pay off until
the 1980s), then how stable is it looking forward? Isn't that a
political question? Doesn't the relatively recent history of the
European colonial powers show that 'assets' of this kind can vanish
quickly without prior notice?
Julio
