>The two are not in contradiction. Overaccumulation in the metropoles can
>be accompanied by growth in the semiperipheries (Taiwan is doing quite
>well right now, e.g.). Japan and the EU are indeed lending $300 billion --
>er, make that 280 billion euros -- a year to the US, according to the
>Federal Reserve. We continue to run monstrous trade and current accounts
>deficits with the aforesaid economies. All this suggests the dollar has
>nowhere to go but down.
Dennis,
The following is based on my reading of the US newspapers.
Yes, the rate of growth of the US current account deficit is unsustainable. The US allowed it to run up because the rate of accumulation in Japan was so weak that only the US could be the market of last resort to save the Asian economies. Japan's weakness, not strength, has put unbearable pressure on the US--that's why Summers is pushing for expansionary policy in Japan. However, private borrowing for the purposes of capital expansion is drying up in Japan as indebted firms try to pay down their debt; consequently, domestic demand remains weak (though presently stimulated by the huge infusion money into the banks lent back to the govt for the purposes of the artificial stimulus of deficit spending--when it dissipates, the yen could go into a nosedive). Japan must export to the US market and thus must park yen in US denominated assets just to balance the books (and don't forget that Japan also has to pay for access to the US market and the US provision of regional security while also needing dollars simply to buy oil and other commodities; the US current account deficit reflects defacto payment the US receives for such 'services', though I agree that its present growth rate is not sustainable).
You continue to raise the specter of some evil Japanese plot to buy up and control the American economy, forgetting to mention that the last time the Japanese went on a buying spree in America ($77 bn in US property between 1985-91), they were stuck with overpriced, almost unsaleable or unprofitable assets. Strange notes as an example Mitsibushi Bank's $94 bn loans for a shopping center, finally sold for $6 bn when the developer defaulted.
You forget to even mention the other evil plot--Rubin's Treasury putting maximum pressure first on Southeast Asia by refusing emergency loans to Thailand and now on Japan by allowing the yen to rise. The US has successfully forced financial and trade liberalization, new bankruptcy laws, and ownership opportunities. If the US's reliance on Japan's credit ensured the latter's hegemony, what is Japan kowtowing to the US? You must not be counting up the balance of power correctly. The international financial structure favors the US whose finance industry, along the with the UK's, enjoys intl hegemony. If Japan really owned our ass, then why the US success?
In our previous debate, I don't think you were able to show that Japan enjoys any kind of overall monopoly over leading edge technological inputs (James Galbraith's innovative capital goods) into the production process. When it comes to software, microprocessors, semiconductor guidance systems for weapons, biotechnology, CAD for airplanes, etc, the US at the very least doesn't enjoy an overall deficit in technology (indeed the US is the only country that has consisently run a technology surplus since the 1980s, and its high tech has only once gone into deficit according to Scherer).This gives US capital strategic power (in the James Galbraithian sense) that is not reflected in trade deficits run up by importing toys, clothes and DRAMS. This is something most economists with their mercantalist obsessions over trade deficits have been unable to understand.
At the same time, I don't think a downward dollar will give US exporters much relief. It seems that capital goods, which make up an increasing share of US exports, are not that sensitive to exchange rate manipulation. There has to be a real and deep investment boom in Asia in particular to correct the situation and despite talk of an Asian recovery, no such thing is in sight. With elections looming Clinton may in part be allowing Summers to let the dollar drop in order to correct the one blemish--the trade and current account deficits--on his sterling economic record. If the US current account deficit continues to grow (which it will, though perhaps not at the same rate), it will be due to the weakness of the Japanese and European economies, not their hegemony over the hapless US.
Yours, Rakesh