Tom Lehman
Rakesh Bhandari wrote:
> >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