U.S. prospects

[Rakesh Bhandari]

Though the Louvre Agreement in 1987 (?) was meant to stabilize the dollar
at a lower level, it still went into a free fall, right? That forced the
US to raise interest rates=> Wall Street into a nosedive. The fear now is
that a Wall Street correction this time from higher interest rates
(to reattract capital and/or stem inflation after a deep fall in the
dollar) would have greater effects on the real economies of the US and the
world. Perhaps, perhaps not. The stock market recovered last time within a
year, correct?; and with a devalued dollar, US debtors were in a better
position vis a vis their international creditors. It seems that the US
came out ahead despite a little intervening turbulence. 

I just don't see the dollar going into a free fall for a prolonged
period or US debt being denominated in anything but dollars or a severe
credit cut off; that's all checked by the greater relative hegemony of the
the US today than in the mid80s--that was the meaning of the Mowery
analysis on the recovery of US technological leadership that I downloaded
months ago.  

Sure, the rate of growth in the current account deficit needs
to be stemmed but that requires a real upturn in Japan and Europe (also
required to absorb more of the imports from the now "emerging recovering" 
markets). So collapse of Japan or Germany still brings the whole thang
down. And it is possible that not only will the expansionary policy
Summers is pushing for fail to work, it may well exacerbate the breakdown
tendency. We'll all be Marxists then. 

At any, the US is not going to have a bad name because though a badly 
indebted whore it's married George Washington into respectability. 

 
> You're right. But what else can you do in this economics game, but 
> look for analogies and precedent. There are no reagents, as the man 
> said.

Marx did not replace reagents with econometrics  but a thought experiment
as Paul Mattick, Jr argued in that paper of his you loved!


> Not really. It's because of takeovers and buybacks, the buybacks to 
> please the shareholders and because they've got nothing better to do 
> with the money (you know, insufficient profitability).

There was that book by Medoff and someone The Indebted Society. From a
debt financed buy back, the shareholders get greater value while the firm
deducts interest payments from the profit on which it is charged taxes.
Something like that. At any rate, US corporate share of taxes is down to
19% from 22% or some such reduction I read in the NYT, no? 


> That it is! But George Friedman of Stratfor says we're still early in 
> the American Millennium!

But the Frankfurt School is dead, and will remain dead.  And if he
wrongly thought he was entering a growth market last time, he could be
wrong this time too. If only he had written The Political Philosophy of
Josef Schumpeter in the early 80s--then I would have trusted him. 

Yours, Rakesh