Rob Schaap rws at comserver.canberra.edu.au
Sat Aug 28 22:16:37 PDT 1999

Thanks for passing on Kudlow's conforting words, Doug. These blokes have been feeding us all sorts of glib world-defying platitudes for decades, and now that everything they drove down our lug-holes has been exposed as the load of old bollocks it was, they suddenly assure us that everything in the world is to be understood according to to the fact (for they no longer use the word 'theory') of long-wave technology cycles (for which, read 'internet').

How very 1929 of them.

Kudlow reckons the interest rate hikes are over - but the recently published Fed minutes indicate they're still very much concerned with 'labour markets', inflation, and the current account - consumer spending, much of it on imports, now constitutes 65% of economic activity in the US economy.

>Consider all the good news: Treasury bond rates have peaked

I thought this was an indicator that a significant proportion of 'investors' suspect equities are due a fall?

>Consumer price inflation is running at only 1.7% annually year-to-date,
>excluding the temporary oil shock. This is considerably less than
>last year's 2.4% pace.

Dirt-cheap imports from economies with toilet-paper currencies? And why not mention credit-card exposure and the CAD in this connection?

>Technology investment is growing at a
>phenomenal 40% annual pace, expanding the economy's long-run

That depends on the technology, no? I don't do anything with the nifty Power Mac 7300/wide screen/NT that adorns my desk that I didn't do with the old LCll.

>Industrial production has risen 3.6% in the past year, while
>factories' capacity to produce is growing at a 4.1% rate. So the
>supply side of the economy is expanding rapidly, leaving plenty of
>room for future growth without straining resources.

Keynes (never mind Marx) would point to the currently decisive role of demand in all this and just mebbe investigate its structure at the global level.

>Why all the good news? Because the Internet is more important than
>the Fed. Easily accessible, low-cost information and increased
>competition, the hallmarks of Internet economics, will contribute
>substantially more growth with significantly lower prices.

The internet is soon gonna require some considerable overhaul (address capacity is already a problem, apparently); competition has the potential to produce competing/incompatible standards and cut into the projections of a lot of the NASDAQ trail-blazers; poor physical networks in much of the world constitute a significant growth blockage, Doug's always quoting Murdoch on the question of job-replacement; blah blah

>Over the
>past year computer production has increased 41.5%, while computer
>prices have fallen 30%. Think of it as deflationary growth, a classic
>consequence of long-wave technology cycles.

Or think of it as incipient sectoral excess capacity and falling profits, a classic consequence of hysterical marketing in particular and capitalist relations in general.

>Venture capital is the lifeblood of the new economy. New ventures
>require seed capital in order to be commercialized and then brought
>to the mass market.

And more traditional sectors are copping a thrashing as said capital deserts it in search of likely geeks.

>These record venture-capital flows, undoubtedly
>bolstered by the recent decline in the federal tax rate on capital
>gains, point toward even faster technological innovation in the next

Even more selective innovation, too - and a lot of that'll have to be in marketing, as we shall need to be convinced that all this hard- and soft-ware updating is really necessary. And, anyway, 'even faster technological innovation' has been de rigeur for three centuries now. Centuries choc-a-bloc full of depressions and conflagrations.

>Growth is the intellectual dividing line in American politics. Free
>market supply-siders embrace it; it makes orthodox economists
>nervous. Slumps born of austerity policies open the door for economic
>planners and bigger government influence. Prosperity from
>free-enterprise growth has no need for government targets and
>controls. The market itself is the most effective regulator of

Seeing as how Kudlow bases his utopia on a publicly planned and financed technology (the net), the exchange of an unnatural commodity which depends entirely on IP controls (information), record venture capital (which depends on roaring equity markets and thus reliably low inflation), an unproblematic attitude to demand (which actually depends not only on the low interest rates that attend only low inflation, but also on a wider world that is currently doing it very tough indeed), this is a rather tendentious simplification, eh?

>Standing behind the Net is the political power of well over 100 million
>>investors and asset owners.

About twelve of whom matter, and that only while they agree on stuff - which the other 99 999 988 never do, anyway - something we only don't know because half of 'em don't vote, which is what you'd expect in what Benn once called a one-party state with two parties.

>Believe it or not, the Internet is more important than the Fed.

He might yet come to wish this wasn't so.

Cheers, Rob.

More information about the lbo-talk mailing list