You write:
> I don't disagree with that at all. I was just objecting to your claims
> about the present fiscal situation of the U.S., which is actually quite
> sound by conventional measures.
The US is a mammoth debtor nation and consumer debt is spiralling (witness bankruptcy rates and credit card defaults). Stock market prices are at unprecedented p/e ratios (27) partly because people are borrowing more of their investment monies than ever, itself partly because savings are historically low and people are desperate to educate their kids and fund their own retirements. Another reason the stock prices are so high might have to do with low investment in capital equipment (the historically low prices of which are an indicator), which might just have something to do with declining profits in these post-commie times of excess capacity.
Add to that the advent of new information technologies and you might just have unfolding productivity rises not unlike those attending the advent of electricity in the assembly lines of the late twenties. Then, increased productivity was initially soaked up by workers' consumption. Wages didn't increase, and underconsumption came along to help 1929 become 1930.
The above is all pretty conventional stuff - and much it was worrying our betters too, three weeks ago. Now all is well, the crisis is averted. But not a word about any of the above being turned around!
I don't say a healthy Wall St tank wouldn't do the economy as is some good - it'd have to go down by nearly 2/3 just to get to October 1987 levels, and a few more of those 25-basis-point Greenspanisms wouldn't hurt trade projections or bond markets - but I do say conventional measures do not present all that sound a scenario.
If there was a crisis in August, there's one now. If there hasn't been one then or now, debt, declining profits and excess capacity can't be very important variables, can they?
That being the case, neither Samuelson nor Marx, from their respective sides, have much of relevance to tell us, do they?
As for Patrick's apposite note, 'temporal displacement' only works while lenders and producers project healthy accumulation numbers for the future. And 'spatial displacement' needs an integrating China that can be relied upon not to default, a Russia that can be relied upon simply to stay in existence as a viable political economy, and an erstwhile commie bloc as a whole that can be relied upon to start demanding at least the value of what it produces.
Are there any conventional measures that might lead us to believe such confidence is well-placed?
To non-economists like me, the thing about credit is that it confounds inch-perfect predictions. A non-viable way of doing things can hide its shortcomings right up to the moment the credit stops - and that's purely a function of sentiment - and then the magnitude of the cataclysm might well be a function of how much credit was relied upon during the crisis.
I notice commercial capital rates are rising in Oz just now, even while there's talk, as yet without fruit, of our Fed cutting theirs. Are we exceptional in this?
Yours confused but concerned, Rob.