RE: Re: Re: De Long on NPR
-Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]On Behalf Of Peter Dorman Sent: Friday, February 25, 2000 4:31 To: [EMAIL PROTECTED] Subject: [PEN-L:16646] Re: Re: De Long on NPR Surely I can't be the only one who is nervous about the interlocking tangle of high private indebtedness, the reliance of demand on very high propensities to consume, the massive influx of portfolio investment, and the overvalued stock market (with its wealth effects in goods and credit markets). Doesn't this just lead to increasing fragility over time -- and doesn't the international dimension of the indebtedness mean that we may not have the institutional resources to respond to a sudden change in psychology? (We won't know for sure until it happens...) I've never been a "heighten the contradictions" kind of guy. Peter [snip] I seem to remember reading that Marx was delighted when an economic crisis struck. It could have been 1857 but I'm not sure. I think he was hurt financially - journalism work dried up and/or his wife's inheritance went down the toilet. I think people would be a lot more interested in finding out about good old-fashioned socialism if things took a dramatic turn for the worst. Cheers David McMullen [EMAIL PROTECTED] The Socialism Web Site http://home.vicnet.net.au/~dmcm
Re: Re: Re: Re: De Long on NPR
Brad De Long wrote: No time. I only managed to say a quarter of what I wanted to say. Bob Edwards wanted to talk about self-help. So all my points about how the wealth-to-income ratio is high; how the skewness of the wealth distribution has grown; how we have the seeming paradox of low personal saving with high domestic investment, and so forth got lost... Domestic investment isn't *that* high. Computer investment is high, and is further inflated in "real" terms by that wacky deflator, but other forms of investment - business and residential structures, for example - are actually pretty low. But of course we don't need buildings anymore in the weightless economy. It's the consumption share of GDP that's off the charts. Doug I've been wondering about this for some time. I've been looking at J.P. Morgan, _World Financial Markets_ 2 April 1999, which reports that, through the last quarter of 1998, shipments of non-defense capital goods have approached zero. I'm not quite sure what the scale of this graph is, though. It says % 3m/3m, saar where the information of the scale is. What does this mean? The context of this graph is a discussion / prediction of a U.S. slowdown, and some worrying about the level of private debt. Best Christian
Re: Re: Re: Re: Re: De Long on NPR
On the high wealth-to-income ratio, Al "our Hero" Greenspan seems highly concerned that the ratio has been artificially -- and temporarily -- boosted by the stock market bubble. When the stock market returns to more reasonable levels (or overshoots as a hangover from the current euphoria), the wealth-to-income ratio will collapse, along with personal consumption. Seems very likely... Brad DeLong
Re: Re: Re: De Long on NPR
Brad De Long wrote: No time. I only managed to say a quarter of what I wanted to say. Bob Edwards wanted to talk about self-help. So all my points about how the wealth-to-income ratio is high; how the skewness of the wealth distribution has grown; how we have the seeming paradox of low personal saving with high domestic investment, and so forth got lost... Domestic investment isn't *that* high. Computer investment is high, and is further inflated in "real" terms by that wacky deflator, but other forms of investment - business and residential structures, for example - are actually pretty low. But of course we don't need buildings anymore in the weightless economy. It's the consumption share of GDP that's off the charts. Doug
Re: Re: Re: De Long on NPR
Peter Dorman wrote: Surely I can't be the only one who is nervous about the interlocking tangle of high private indebtedness, the reliance of demand on very high propensities to consume, the massive influx of portfolio investment, and the overvalued stock market (with its wealth effects in goods and credit markets). Doesn't this just lead to increasing fragility over time -- and doesn't the international dimension of the indebtedness mean that we may not have the institutional resources to respond to a sudden change in psychology? (We won't know for sure until it happens...) Look on the bright side, Peter: the high and rising US current-account deficit is acting like a Keynesian fiscal stimulator to the rest of the world, allowing the partial recoveries that have occurred in some countries. Without the US, Japan (for instance) would be much deeper in the tank. The question is how long the debt accumulation will go on before consumers snap back to more normal saving behavior (perhaps due to a stock-market slump), before corporations stop accumulating debt to buy up their equity, before the rest of the world decides it can't stand the US imitation of a drunken sailor (so that the dollar falls precipitously or the Fed raises rates to prevent that occurrence). The problem is that the longer a recession is delayed, the more that debt (of consumers, corporations, and the US as a whole) accumulates, the worse the recession will be, and the more powerless the Fed will be. With private-sector debt, unlike with US government debt, mass bankruptcy is an option, destabilizing the financial system. I've never been a "heighten the contradictions" kind of guy. As for heightening the contradictions, can you say "President Pat Buchanan"? Given the lack of an organized left alternative (unlike the official press, I'm not counting people like Gore and Bradley as "left"), people like Buchanan rise to the top. BTW, has anyone compared US immigration laws to those advocated by Austria's Haider (Buchanan's soul-mate)? Jim Devine [EMAIL PROTECTED] http://liberalarts.lmu.edu/~jdevine
Re: Re: Re: Re: De Long on NPR
Brad De Long wrote: No time. I only managed to say a quarter of what I wanted to say. Bob Edwards wanted to talk about self-help. So all my points about how the wealth-to-income ratio is high; how the skewness of the wealth distribution has grown; how we have the seeming paradox of low personal saving with high domestic investment, and so forth got lost... Doug responds: Domestic investment isn't *that* high. Computer investment is high, and is further inflated in "real" terms by that wacky deflator, but other forms of investment - business and residential structures, for example - are actually pretty low. ... On investment, Dean Baker has a good point: gross investment (and thus GDP) has been boosted by the inclusion of "investment" in software. We really care about is net investment (and thus NDP), but we usually don't write about those since depreciation is so hard to measure. The problem is that software depreciates extremely quickly, which implies that net investment (and NDP) have not risen anywhere as quickly as gross investment (and GDP) as a result of the US Department of Commerce changing of definitions. In fact, it seems like the software industry's main business is to cause the depreciation of software. (Some of Microsoft's software seems to have depreciated already when it's new.) On the high wealth-to-income ratio, Al "our Hero" Greenspan seems highly concerned that the ratio has been artificially -- and temporarily -- boosted by the stock market bubble. When the stock market returns to more reasonable levels (or overshoots as a hangover from the current euphoria), the wealth-to-income ratio will collapse, along with personal consumption. Jim Devine [EMAIL PROTECTED] http://liberalarts.lmu.edu/~jdevine
