Krugman: A dollar crisis?

Rakesh Bhandari bhandari at phoenix.Princeton.EDU
Tue Aug 3 08:32:04 PDT 1999

>Rakesh, you're sounding like a Keynesian, or a supply sider or

Unlike other leftists, I am proud to be an American because America is strong and powerful (as wojtek's friend once put it!)...Really now I just think American imperial power/economic hegemony should not be underestimated at this point; the major feature of the global economy is the power of American capital to relieve its own supply side constraints on profitability and export global depression through unequal terms of trade on the basis of a strong dollar as reserve currency. How's Peter Gowan's study of the rise of Wall Street-Treasury hegemony on the basis of that strong dollar (does Gowan also pay attention to US leads in critical techs, as David Mowery has emphasized in the two analyses I partially downloaded here?) Seth has already mentioned it.

>You really think there's no limit to U.S. foreign
>indebtedness? Don't you believe in Stein's law (if something can't go
>on forever, it won't)?

Nobody disagrees the US has more latitude to run current account deficits because it enjoys imperial privilige of being the reserve center (and I don't know what to make of Solomon's data but the point is that Krugman did not consider the empirical problems of what Max Corden has called the old view on the relationship between rising cad and currency devaluations). Yet just because the US has secured relative hegemony (my assertion contested by both Arrighi and Brenner) doesn't mean the US stock market is still not wildly overvalued and due for a major correction which will tank the entire world economy. That profit expectations built into the 10,000++Dow will not be met in the US, though they are relatively best there due to unequal exchange, does not mean that profit expectations from further accumulation are not even dimmer elsewhere.

>The Bank of Japan buying scads of bonds, forcing down long-term interest rates.

Which could lead to just lead to runaway inflation without much stimulus of accumulation. The unpleasant truth is that the only escape route for Japanese capital is not macroeconomic tinkering, which is what Krugman's so called radical proposals amount to, but unbridled class war: bankruptcy, centralisation, unemployment, speed up, intensification.

It's time to take the red flags out from the moth ball drawers and send them to the dry cleaners.

YRTR, rakesh

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