Brenner on dollar devaluation

Doug Henwood dhenwood at
Mon Mar 1 13:58:39 PST 1999

Rakesh Bhandari quoted:

>the conventional GNP model would attribute 57 percent of the
>increase in exports to dollar depreciation and 33 percent to world GNP
>growth, while 10 percent would be left unexplained. In contrast, the
>investment model would attribute less of the increase to dollar
>depreciation (48 percent) and more to world investment demand (54 percent),
>leaving less unexplained (-2 percent).

48% is still pretty significant, isn't it? And it's not *that* much less than 57%. Anyway, Jack Welch says it's important, so it must be.

Rakesh himself wrote:

>Of course it is the collapse in world investment demand that itself
>explains the temporary formation of the US stock market bubble (the US
>absorbed 4x more capital in 1998 than 1994).

That's the case for sure, though I see only 2x, not 4x, in the flow of funds numbers. It also looks like $100-200 billion a year in excess of balance of payments financing needs has been pouring into the U.S., which has no doubt helped the U.S. markets run riot. Net foreign claims on the U.S. increased by $1 trillion between 1995 and 1998.


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