good old American optimism

Charles Brown CharlesB at
Mon Apr 3 09:59:50 PDT 2000

>>> Rakesh Bhandari <bhandari at Princeton.EDU> 04/03/00 10:26AM >>>

>Making the biggest splash however, at least from a scholarly
>perspective, is Robert J. Shiller, a distinguished economist from
>Yale University. His book Irrational Exuberance is a wonderful
>history and analysis of market booms and busts.

I think Schiller does not pay sufficient attention to the objective strenghtening of the US relative position after the end of the Cold War. Schiller seems to think it's all a matter of subjective triumphalism. This is absurd. E.g., consider US' refusal to any longer countenance protection in its rivals' markets (Gilpin has an excellent treatment of US' unilateral efforts to open up Japan) and reduction of military spending from 6 to 3% of GNP--which as Wallis noted means the peace dividend is about equal to the saving of interest payments on the national debt. The relative disadvantages the Cold War put on the US are being removed. This seems to me to give something of a more objective foundation to the US bull market than Japan enjoyed ten years ago. The rise in the Nikkei resulted mostly from emergency cheap money policy after the endara--the forced upward revaluation of the yen. Perhaps the US bull market reduces to this as well, and I would like to be convinced. But it seems to me that bears are completely missing the world historical significance of the end of the Cold War and the relative lead this is allowing the US to widen in terms of the most profitable parts of the leading new industries. A lead that technology expert Nathan Rosenberg has called unprecedented (quoted in WSJ sometime in December).


CB: Yes, especially when you throw in the windfall $$$$$$$$ ripped out of the former SU and Eastern Europe while they were still dizzy with the illusion that they now had "democracy", the end of the Cold War seems a big part (the whole ?) of the explanation of the extra long boom this time in the cycle. Not to mention that a lot of Non-aligned countries had to open up with no SU to play off against the US


I don't deny that there will be a lot of these internet companies will run out of cash as their stocks suffer major corrections, but this just may strengthen the position of the survivors. Even if the gains that have already been achieved are halved, the US is still sitting pretty.

Yours, Rakesh

More information about the lbo-talk mailing list