>I see your 3 and raise you 2. But seriously, I read with interest your
>editorial in The Nation, "The Bull's Sour 16". I have a dumb question: who
>does the U.S. owe $1.8 trillion? Japan, mostly? Couldn't they call in their
>chits in order to help themselves out of the mire? The U.N.? Don't we ignore
>them anyway?
Japan, China, Taiwan, and other countries like that with big reserves hold them mainly in U.S. Treasury paper. Also, if offshore hedge funds take a position in U.S Treasury bonds, this shows up as a foreign claim on the U.S. even though the hedge fund managers may physically be in the U.S. The Treasury has numbers on who buys the bonds initially, but if they sell them (as they usually do - the average holding period on a long-term T-bond is about a month), it's hard to tell where they end up.
Actually, Japan's holding of Treasury paper my increase as their markets are deregulated. Why keep money at home in a depressed economy with interest rates flirting with 0 when you can get 5.5% on U.S. Treasuries? Of course, if the dollar reverses trend and starts sinking, the 5.5% may look like a bad joke.
>What do you think of Cockburn/Brenner's analysis that the boom has depended
>partly upon a decade-long devaluation of the dollar against the yen and
>deutsche mark? Anybody else?
I haven't read Brenner's piece yet. There's probably some truth to the dollar thesis, and if it's true, we should start seeing the U.S. "boom" unravel. Virtually every currency in the world has been losting value against the $ lately. GE boss Jack Welch says the revival in U.S. manufacturing is largely a product of a weak dollar in the late 1980s and early 1990s.
I'm persuaded by Anwar Shaikh's argument that in the long run, currency values are determined by relative productivity growth. The long post-WW II decline in the dollar's value can be explained by rapid Japanese and Western European productivity growth, as they closed the gap in absolute productivity levels with the U.S. A devaluation that merely reflects weak productivity growth is a pretty dubious stimulus. According to the IMF, U.S. productivity growth from 1990-99 (obviously the 1998 and 1999 numbers are estimates) will average 3.0%, twice Japan's 1.5%, but still behind Germany's 4.6%, France's 4.0%, and "other advanced economies" (rich industrial countries other than the G-7) at 3.6%. The EU's average of 3.4% is also ahead of the U.S. So it seems that while the days of the U.S. coming in near the bottom of the productivity sweepstakes are past, neither is the U.S. on top of the world as you might think from reading the papers.
The IMF productivity measures differ wildly from those published by the U.S. Bureau of Labor Statistics. Inquiries to both the IMF and the BLS about why this is have gone unanswered.
Doug